FCC Approves Alltel Privatization with USF Cap
The FCC late Friday approved purchase and privatization of Alltel by TPG Capital and Goldman Sachs Capital with a condition that concerned some commissioners. The order contains language capping Universal Service Fund payments to Alltel at 2007 levels, unless Alltel files cost data showing its per-line costs are less than the capped funding level or immediate compliance with the E-911 public safety answering point (PSAP) location accuracy standard.
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Several commissioners voiced deep concern about the USF provision and its effect on FCC adoption of an industry-wide cap, according to statements accompanying the order. Commissioner Michael Copps issued a partial dissent.
“ETC support is not raised or discussed in the record of this proceeding,” said Commissioner Robert McDowell. “Furthermore, the condition prejudices the Commission’s open docket considering universal service support distribution. I also question whether we have thought about how the actions today may skew future treatment of similarly-situated parties.”
The FCC has not even released a Sept. 11 order imposing tough new E-911 location rules, McDowell said. “E-911 is not discussed at all in this proceeding,” he said. “Just as with universal service, introducing E-911 mandates into this distinct proceeding will surely impact future treatment of similarly-situated parties.” The conditions imposed today raise more questions than they answer, McDowell said. “Given the ongoing nature of the universal service and E-911 proceedings, I wonder whether this is an attempt to bind future Commission action, and dictate or bind government policy,” he added.
“The condition being imposed in today’s merger is even more piecemeal than what the Joint Board recommended in May,” Copps said. “I fear that the condition will be an even greater hindrance to rational, comprehensive USF reform. Additionally, it is disappointing to me that the Commission imposes this condition when the Joint Board currently is working hard to provide the Commission a recommendation on broader reform.”
Commissioner Jonathan Adelstein called the E-911 provision a “'jack in the box’ surprise” and an “illogical afterthought” to the order. “It is unclear to me how Alltel might fulfill this condition given that the Commission currently has an open proceeding addressing the details of how carriers must implement PSAP-level accuracy,” he said.
A wireless industry source voiced hope that a cap won’t derail industry talks on USF reform. “We've been looking for long term reform and we would be concerned if long term reform is off,” the source said.
“Rural carriers with pending applications for new or extended ETC status would be harmed by a cap as of any arbitrarily selected date,” said a second wireless industry source. “There should be exceptions allowed so that the cap would not apply where carriers are waiting for state or FCC action on ETC applications.”
Stanford Group Analyst Paul Glenchur said in a research report that Alltel likely will submit to the cap “as a cost of doing business” to complete the merger. “This is a bit ironic because Republican members of the Commission in the past have criticized merger conditions that are usually dealt with in broad industry-wide proceedings,” he said. “But the lack of progress on the overall wireless industry subsidy cap seems to be driving potential conditions here.”
FCC Chairman Kevin Martin and Commissioner Deborah Tate complained last year about conditions imposed in the AT&T- BellSouth merger, which they said had “nothing to do with the transaction, are discriminatory, and run contrary to Commission policy and precedent.”