Incumbents, Competitors Dispute Plan to Cap USF Subsidies

OPASTCO, which represents incumbent rural carriers, said it “strongly supports” the cap and “urges the Commission to adopt it without modification.” The CETC cap plan is “the most logical and equitable way in which to rein in the rapid growth of the High-Cost universal service program while the Joint Board and the FCC contemplate long-term reforms,” OPASTCO said. The Telecom Assn. of Mich., a predominantly wireline group, said “virtually all of the growth in the Fund is attributable to the demands of competitive” ETCs, so the cap should be limited to them.

Blackfoot Telecom Group, a Missoula, Mont.-based provider, said: “CETCs are the sole source of the current explosive growth in the high cost program,” so the cap should be directed toward them. “Failure to cap the growth in CETC funding places the entire USF in jeopardy by making it unsustainable,” Blackfoot said. The “explosive” growth in CETC support isn’t even based on CETCs’ costs or even a “forward-looking model,” it said. Instead, it’s based on incumbents’ costs which are higher than costs borne by CETCs and represents a “give-away,” the company said.

USTelecom said it “fully endorses” the joint board proposal to cap CETC subsidies, because “the increasing number of competitive ETCs seeking universal service support results in an ever-increasing fund demand and poses an immediate threat to the universal service program.” USTelecom said “numerous carriers, particularly wireless carries, are seeking ETC status [and] much of this funding does little to serve core universal service goals as it simply directs more funds to areas already subsidized today.” Likewise Verizon “strongly” urged the FCC to adopt the limited cap: “CETCs’ support has spiraled from $1.5 million in 2000 to about $1 billion in 2006,” said Verizon Senior Vp Susanne Guyer. “Unless the cap is put in place, it will skyrocket to $2.5 billion by 2009, driving up customers’ USF charges.”

Limiting a cap to CETCs is a “discriminatory and anticompetitive” plan that indicates the joint board “misconstrued the underlying problem,” Sprint Nextel told the FCC. “It ignores the many factors contributing to the federal high-cost fund’s precarious financial position [and] must be rejected.” Corr Wireless said a cap may be a good interim measure but it has to be applied across the board or it’s discriminatory. Unless the recommendation is modified, it will “seriously disadvantage one segment of a competitive industry,” Corr said. Applying a cap only to wireless service is a “'blinders-on’ approach” that ignores the fact that most high-cost USF money goes to wireline LECs, Corr said: “It is actually the bloated parties soaking up the vast majority of the funding who should bear the greatest responsibility for overtaxing the system.”

Limiting the cap to wireless carriers “violates well- established Commission and court precedent mandating competitive neutrality,” said Alltel. It’s also “anti- consumer, depriving rural areas of access to services comparable to those available in urban areas,” said Alltel, which operates as a CETC in many rural areas. The Joint Board proposal would harm consumers because they “reap major benefits from a competitively neutral universal service program,” Alltel said.

The Navajo Nation registered opposition because it “depends on wireless telecommunications services” in its hard-to-serve territory. “The 27,000 square miles of Navajo lands cannot, in the near future, be hardwired to accommodate the growth of its communities,” the nation said. “Our schools need wireless distance learning capabilities, our hospitals need telehealth capabilities, the safety of our communities requires E911 capabilities.” The FCC believes in competitive neutrality so it should treat incumbents and competitors alike in giving out subsidies, said CompTel. “The arbitrary and anti-competitive policy proposed by the Joint Board -- with its obvious favoritism toward incumbency -- blatantly violates this principle,” CompTel said.

The N.Y. Dept. of Public Service recommended extending the caps to incumbent LECs. The state regulators said they supported the CETC cap regardless but thought it would be fairer to those who contribute to the USF to cap subsidies to other recipients as well: “It would be inappropriate to allow one set of ETCs to enjoy the benefits of increased support, while denying those same benefits to their competitors.” -- Edie Herman

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The FCC should reject Joint Board recommendations to cap Universal Service Fund (USF) payments to rural wireless carriers, Sen. Snowe (R-Me.) said in a letter to Chmn. Martin Mon. A cap on funding for rural wireless service expansion would reduce her state’s ability to lure economic development and deliver basic safety services, Snowe said, calling the recommendation “short-sighted.” It would curtail investment in the wireless infrastructure “so desperately needed in rural America,” Snowe said: “If belt-tightening is truly warranted, it should be done in a manner that equally affects all segments of the industry and regions of the country, not imposed solely on wireless carriers who serve rural customers.”