House USF Bill Being Readied for Introduction

Boucher and Terry want to strike a balance between the Bells’ and small rural companies’ “divergent views” on the bill, particularly the USF cap, Boucher said. Bells back a USF cap; rural phone companies are more skeptical, Boucher and Terry said. The cap appears to be a key requirement for Bells’ support, Boucher said. But it’s also “caused concern by rural carriers… about how the cap is structured,” Boucher told rural House members, calling the bill “a work in progress.” The cap, seen as a way to ease concern about the rising cost of universal service, would be offset by other measures reducing the need for more USF money, he said.

The bill is “in the final stretch” as it circulates among members, Boucher said. Staff is wading through inches of industry comments, only a few likely to trigger “tweaks” and most of those having to do with the cap provision, he said. “We hope for the endorsement of the Rural Caucus,” he told rural House members at the session: “We will need your support.” In answer to a question from Rep. Gutknecht (R- Minn.), Terry said the bill has been “vetted” with House Commerce Committee Chmn. Barton (R-Tex.), who has indicated he “will allow the will of the Committee” even though he’s “personally opposed” to continuing the USF program. Action this year remains possible, he said: “We've been placed right behind the BITS bill, placed on the agenda” for committee consideration. BITS is the committee’s draft telecom bill.

The bill mainly aims to widen the universal service program to cover broadband buildout, which sponsors called essential to rural growth. USF payments now must be used mainly for voice service. “This bill may be the answer to rolling out ubiquitous broadband to America… which is absolutely necessary,” said Terry. Terry pictured the rollout as being “DSL mainly,” although he noted the bill would be technologically neutral. As Congress looks for ways to encourage broadband deployment, it has “grappled with many models” such as tax credits,” Terry said. However, USF is already in place and well able to serve that purpose, he said.

Boucher said the bill not only would allow use of the USF for broadband but after 5 years would require phone companies to have broadband facilities to get USF funding for any purpose. The bill emphasizes that all carriers and network providers, including VoIP and even BPL, must contribute to the USF. Cable contributes based on a percent of its telephony service, but its cable modem service isn’t considered, Boucher said. The bill would set more requirements for eligibility for USF payments. For example, recipients would “have to be able to survive emergencies,” Boucher said.

Another provision would base USF payments to competitive rural companies on actual cost, not wireline incumbent costs, as is done now. Boucher said incumbent wireline carriers’ costs exceed those of new entrants employing less-expensive technology. This change, backed by rural companies, has been opposed by rural entrants such as wireless companies.

The bill would make it easier for the Bells to get universal service payments by basing eligibility on the cost of providing service to individual exchanges, rather than to a state as a whole. Boucher said the Bells rarely are eligible for universal service for rural areas because they're judged by their costs across entire states. He said the bill would eliminate the “parent trap” that deters the Bells from selling exchanges to rural telecom companies. If an exchange ineligible for USF payments because it’s owned by the Bells is sold to an eligible rural company, the exchange still isn’t eligible because “it carries the genes of the parent and is forever denied,” Boucher said.

The session with Boucher and Terry preceded an industry panel that included Shirley Bloomfield, vp of the National Telecom Co-op Assn., who said rural telcos support much of the bill, except the cap. “A cap by its very nature means a carrier will not receive the support it is due and thus is antithetical to the very goal of universal service and is a disincentive to network investment,” she said.