Joint Board Expected to Recommend 2-Year Cap on USF Payments
A state-federal regulatory board is expected to recommend a 2-year cap on the subsidies some rural carriers get from the Universal Service Fund (USF), sources said Thurs. The cap, which could be announced in a week or 2, probably will be applied only to competitive rural carriers, with incumbent landline rural telecom companies not subjected to the limit on subsidy growth, knowledgeable industry sources said. The so-called competitive eligible telecom carriers (CETCs) are mostly wireless.
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The Federal-State Joint Board on Universal Service plans a conference call Sun. where the issue probably will be discussed and possibly voted on, an industry lawyer said. The FCC must act on joint board recommendations within one year. The temporary measure would be portrayed as giving the FCC more time to devise a permanent way to stem the growth of the USF’s “High-Cost” program that subsidizes rural carriers. Broader USF reform proposals made by Verizon, AT&T and others probably would be put out for comment as soon as the cap was instituted, said another industry source.
The cap reportedly would be applied at the state level, meaning total USF disbursements to CETCs in each state would be frozen. Theoretically, that means there could be some change in payments to CETCs within a state, but the total couldn’t change. Other options would be to apply a cap nationwide or on a local wire center basis, a telecom expert said. Another source said the statewide cap would discourage states from approving new CETCs.
Targeting CETCs makes sense because most of the growth in the High-Cost fund has been caused by the proliferation of CETCs, said a lawyer who represents wireline incumbents. The negative effect of wireless ETCs receiving funds is often overstated, retorted a wireless carrier official. The FCC is reluctant to take on the LECs that get USF dollars, the wireless source said: “Whether it’s an overt goal or a covert goal of the USF program to make sure rural landline carriers stay in business at all costs, it’s never going to be competitively neutral.”
The FCC actually is examining both a cap and a freeze, most likely on CETCs without specifically mentioning wireless, said a wireless carrier source. “In this case the terms [cap and freeze] are interchangeable,” the source said: “It says things would stay at 2006 levels, something like that, and you can’t grow beyond that.” Applying the cap to CETCs is the same as targeting wireless carriers because the effect is the same, the source said: “Ninety percentage of CETCs are wireless carriers.” A cap on CETCs is inherently negative for the wireless sector, said another wireless source: “We're concerned it would not be competitively neutral.”
Members of the Joint Board, including FCC Comr. Tate, who is co-chmn., didn’t comment on plans, though Tate has repeatedly emphasized, publicly and privately, that some kind of temporary measure is needed to stop the USF’s burgeoning growth.