The telecom industry voiced mixed feelings about an Iowa Telecom ...

some said the FCC shouldn’t let Iowa Telecom “game” the system and AT&T said it sympathizes with Iowa Telecom but thinks the FCC should reform the process rather than make a special concession. Iowa Telecom sought the special treatment because the nonrural program is based on forward- looking economic costs (FLEC), rather than the embedded costs used in the rural program. Under FLEC, the company could get Universal Service Fund (USF) support; under the embedded cost standard, it can’t. Iowa Telecom’s former owner invested very little in the network, making Iowa Telecom’s embedded costs so low it can’t get USF support under the rural mechanism, the company told the FCC. In comments filed July 3, Embarq urged that Iowa Telecom’s petition be granted because the company is in an unfair position due partly by outdated universal service rules. “Ten years have passed since the Commission first acknowledged that FLEC was the proper costing approach to be used when calculating explicit federal support” and yet it still calculates rural costs on an embedded cost methodology, Embarq said. The Independent Telephone & Telecom Alliance (ITTA) said “by historical accident… Iowa Telecom appears to be caught in a trap in which its federal and state wholesale and retail pricing mechanisms… do not align with the method by which rural carriers become eligible for high-cost loop support.” ITTA said Iowa Telecom “should not be penalized either for the low inherited book value of its assets or for the more generalized concerns about the application of FLEC to rural carriers.” AT&T agreed Iowa Telecom is in “an untenable position” but said the better route would be for the FCC to act in a pending proceeding aimed at reforming the high cost support mechanisms. “Iowa Telecom’s petition exemplifies the irrationality of the Commission’s existing mechanisms and the need for comprehensive universal service reform,” AT&T said: “Without such support, Iowa Telecom faces the Hobson’s choice of imposing significant rate increases or foregoing network investment necessary to provide advanced services to its customers.” But the National Assn. of State Utility Consumer Advocates (NASUCA) said “no company should be able to game the Universal Service Fund… to maximize its ’take’ under the fund.” Iowa Telecom “is a rural carrier and is limited to the support allowed under the USF for rural carriers.” Sprint Nextel accused Iowa Telecom of trying to gain a “windfall” of “ineligible” USF support. Sprint Nextel said Iowa Telecom already got some relief by gaining forbearance from access charge rules “ostensibly so the Iowa Telecom can fund its infrastructure upgrades.” It’s not necessary for the FCC to grant the company “an additional exemption,” Sprint Nextel said.