Reply Comments Show Minds Set on USF Cap Proposal

Competitive rural carriers’ growth, and that of their subsidies, has “strained” the Universal Service Fund, said the Florida Public Service Commission, backing an interim cap. “High cost” USF subsidies go to rural carriers to keep in such areas affordable. But “current high-cost distribution methods have failed to balance the needs of those receiving support with those that ultimately have to pay for such support,” said the PSC. “Escalation of the fund’s size threatens the affordability that the program is intended to safeguard.”

Comments so far in this proceeding show the proposed cap “has two central flaws,” said General Communications Inc., a competitive LEC operating in Alaska that would be subject to the cap. “Most importantly, the comments demonstrate that the proposed cap will deny service to those consumers and areas that need it most, including tribal lands and Alaskan Native regions,” GCI said. “While commenters supporting the cap ignore this difficult issue, both industry and state comments reveal that the proposed cap will block planned service deployment to unserved and underserved areas,” GCI said. GCI has proposed excluding from the cap service to tribal areas.

Oklahoma lawmakers urged the FCC to impose the cap “as quickly as possible” because USF growth “has been exponential, notably due to funding for wireless and other competitive carriers, which has grown at over 100% for each of the last several years, while funding for incumbent carriers has remained flat since 2003.” Similar letters were submitted by 3 members of the Oklahoma House of Representatives and State Senate Co-President Pro Tempore Glenn Coffee.

The Independent Telephone and Telecommunications Alliance (ITTA) said the interim cap marks “a sensible temporary action that can provide stability while long-term solutions are developed.” ITTA scored CTIA for opposing the cap while its largest members, AT&T and Verizon, back it. “This discord leaves open the question of precisely which carriers CTIA represents in its comments,” ITTA said. “An answer to this inquiry would enable a more rational determination of the… matter, because it would assist in evaluating more accurately the claimed effects of the proposed interim cap.” ITTA said the fact that mobile providers may be most affected “is simply a result of the manner in which the CETC market has developed and encouraged mobile providers to advantage themselves of support.”

Wireless carriers serving rural America offered no surprises as they urged the FCC to reject the interim cap recommended by the Federal-State Joint Board on Universal Service. The Rural Cellular Association and the Alliance of Rural CMRS Carriers said the proposal to cap only competitive eligible telecommunications carriers (CETCs) is “deeply flawed” and must be rejected by the FCC. “The unnecessary and unwarranted proposal, which the Joint Board failed to support with any credible data or evidence, would attempt to ’solve’ an unproven problem, would be harmful to consumers in rural America, would unfairly discriminate against CETCs, and would undercut the Commission’s critical task of adopting long-term universal service reform,” the groups said. “The magnitude of the shortcomings in the Joint Board’s proposal is revealed by the fact that some proponents of the CETC cap encourage the Commission to invoke what they characterize as the agency’s ‘wide latitude’ to take interim action in the case. Their apparent objective is to enable the Commission to skirt issues relating to the failure of the proposed cap to comply with statutory requirements, judicial precedent, and the Commission’s own rules and policies.”

Alltel, one of the carriers that has been the most active in opposing a CETC cap, cited the “striking” level of opposition to the cap that has been expressed. “Public officials have expressed concerns that a CETC-only funding cap would (1) make it more difficult to achieve fundamental reform of the high-cost funding system, (2) harm consumers by depressing incentives for deployment of wireless networks in rural areas, and (3) unfairly skew the marketplace in an unfair and discriminatory manner,” Alltel said. Alltel cited in detail concerns expressed by public officials from FCC Commissioner Michael Copps to Republicans and Democrats in the Senate and House. Alltel said the Joint Board based its recommendation on a faulty assumption there is a crisis in the Universal Service Fund program. “There is no fund growth ‘emergency’ that would justify the CETC-only cap proposal, which would violate established law and over a decade of unbroken precedents,” the carrier said; “In fact, by reducing the deployment of wireless networks in rural areas, the proposed cap on wireless support may create more true emergencies than it resolves.”

Similarly, United States Cellular Corp. and Rural Cellular Corp. told the FCC there is no emergency that must be addressed ahead of more far reaching reform. “No explanation has been presented by the Joint Board in support of its apparent view that the high-cost fund cannot be sustained between now and the completion of work on universal service reform by the end of next year,” the carriers said: “The recent two percentage point increase in the contribution factor, upon which the Joint Board relies as support for its recommended CETC cap, has very little to do with increased levels of overall high-cost support and even less to do with increased levels of CETC support.” Sprint Nextel and T-Mobile, the major non-Bell affiliated wireless carriers, also opposed a CETC cap. T-Mobile noted that unlike many commenters it is not a CETC: “A high-cost support cap applied only to CETCs, which are predominantly wireless carriers, may merely insulate wireline inefficiencies from wireless competition and not advance the goal of the fund to deploy services to consumers in need.”