Wireline Companies Oppose Cingular USF Request
The FCC should deny a Cingular request for Universal Service Fund (USF) subsidies in Va., wireline companies said, arguing the big wireless company doesn’t need USF subsidies. Letting Cingular draw on the USF could sap the subsidy program, Verizon said in an opposition filed late Mon. USF subsidies should be used where telecom service otherwise isn’t financially feasible, Embarq said. “It should not be wasted on uneconomic arbitrage,” said the company, a spinoff of Sprint’s wireline operations.
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Cingular asked to be deemed an eligible telecom carrier (ETC), qualifying for USF subsidies. Wireless carriers usually file such petitions with states but can ask the FCC if a state doesn’t assert jurisdiction over wireless carriers for ETC purposes. Cingular wants ETC designation through much of Va.; its petition asks for ETC status in 47 “Verizon wire centers” and 8 “rural study area codes.” The company “provides all of the services and functionalities supported by the federal universal service programs” such as voice- grade access to the public switched network, local service, access to emergency services and others, it said.
Cingular’s request is seen as noteworthy because ETC status generally is sought by smaller wireless carriers competing with rural ILECs. Cingular’s Nov. 7 request is moving quickly through the FCC, with reply comments due Dec. 11. Opponents said Cingular’s petition signals a need to reform USF distribution, perhaps through an auction system.
“Cingular’s decision to seek federal subsidies to continue offering service and expand its reach in Virginia, an existing Cingular service area, demonstrates the urgent need for reform of the [USF) High Cost Fund,” Verizon said. The FCC should defer action “until a system of competitive bidding for high cost support is in place,” the Bell said: “Funding Cingular in Virginia (and potentially elsewhere) would encourage more ETC filings by wireless providers and other competitive carriers, further straining the fund and increasing the duplicative support paid out in areas where one or more ETCs are already subsidized.” The solution is to act “promptly” to stop USF growth via competitive bidding, Verizon said: “Reverse auctions can work to distribute high cost subsidies to the most efficient carrier capable of providing supported services for the lowest amount of subsidy.”
Accusing Cingular of “cream skimming,” Embarq said Cingular is turning USF policy “on its head” by filing the petition. The FCC should “suspend its consideration” of Cingular’s petition until it acts on a pending review of USF funding. “Cingular seeks… to divert high-cost support away from its intended purpose -- supporting the cost of providing carrier-of-last-resort service to customers that wouldn’t otherwise have access to telecommunications,” Embarq said in an opposition filing: “Rather than support true carrier-of- last-resort services, Cingular appears interested in using federal universal service support to benefit a comparatively small number of wireless subscribers that already have other options.”
The Independent Telephone & Telecom Alliance (ITTA) said the petition should be weighed “in the context of the larger proceeding on universal service reform,” especially the reverse auction issue. “The Cingular petition, filed in the midst of an active proceeding on universal service reform, presents… to the Commission an opportunity to assess its public interest policies in the ETC designation process,” said ITTA, which filed jointly with the Western Telecom Alliance.
Wireless industry sources said Tues. the Cingular proposal reflects a trend among wireless carriers seeking ETC status. Among large carriers, Alltel and Verizon Wireless also have sought such status, sparking criticisms about rising pressure on the USF program.
“Wireless carriers have been naturally reluctant to qualify for ETC status just because they pay so much into the fund and are hesitant about growing the fund, but many if not all of them have determined they're eligible under the rules with wireless and they want to take advantage of it so they can compete and build out their service in these rural markets,” a wireless industry source said: “It’s not the first time we've seen something like this happen… It’s a very competitive business and they're competing against companies who are qualifying for ETC and as a result are able to provide better service in these markets.”
Large carriers also feel pressure because they increasingly offer one-rate plans and prices are driven down by competition in the largest markets, the source said: “Universal service becomes very important if you're going to have the kind of buildout of wireless services that customers expect and policymakers created the universal service fund for.”
A 2nd wireless industry source said large carriers will feel pressure to seek ETC support in various states. “Wireless carriers are watching the Cingular example and if Cingular is successful you're going to inevitably see more carriers coming in with similar filings,” the source said: “Without universal service support you're not going to see as high of level of rural buildout by the national carriers.”