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Wireless Carriers Align against Martin Universal Service Proposals

FCC Commissioners Robert McDowell and Jonathan Adelstein likely will come in for intense lobbying in coming weeks, as wireless carriers seek to beat a cap proposed for Universal Service Fund payments. The carriers want to know why they're getting special attention as the FCC tries to curb the fund.

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FCC Chairman Kevin Martin circulated an order that would cap USF payments to eligible telecom carriers at June 2007 levels. Carriers could escape the cap by filing cost data showing their per-line costs are less than the capped funding level. Martin also circulated rulemakings proposing reverse auctions for USF payments and killing the identical support rule (CD Nov 2 p11). All three items began to circulate Oct. 26, the day the FCC approved the Alltel privatization that includes a USF cap (CD Oct 29 p1).

Martin wants to set similar conditions on the AT&T-Dobson and Verizon-Rural Cellular mergers, effectively neutralizing Alltel, AT&T and Verizon, collectively the recipients of most ETC funding, sources said.

Martin is asking fellow commissioners for quick action, perhaps by the November agenda meeting, which could occur as early as Nov. 16. Commissioner Michael Copps is expected to oppose the cap. Adelstein and McDowell are seen as the swing votes. Wireless carriers likely will stress Capitol Hill concerns about a cap and questions about the wisdom of taking interim steps on USF funding instead of long-term reform.

“It’s unfortunate,” a wireless industry source said. “From what we understand the focus is directed primarily at the wireless industry. If the Commission really is going to take universal service seriously, they need to look at broad- based reform and not just look at one industry segment, especially an industry segment that is growing like the wireless industry has been.” The source predicted “there are going to be significant concerns, especially from wireless carriers that are trying to deploy networks in rural areas.”

An attorney active in the USF proceeding said the cap proposal likely will get close scrutiny by commissioners. “Commissioners are on record in the Alltel merger case as saying they're very uncomfortable with the way the conditions were imposed,” the attorney said. “You have Copps, very specifically, and Adelstein and McDowell sort of implicitly saying, ‘Why are we doing this on a piecemeal basis through a cap on one carrier? This isn’t the way to go.'” Key members of Congress have raised objections, a factor likely to give all three commissioners pause, the source said. “There are better than even odds of this not happening or certainly not happening in November.”

Martin’s NPRMs could face an uphill fight at the FCC, especially since the Joint Board on Universal Service hasn’t finished studying long-term USF reform, the lawyer said. “Everyone says ‘Eliminate the identical support rule,'” the source said. “Eliminate it and what is the rule? You have no rule… Whatever rule you have is long term reform. That’s what the Joint Board is working on.”

The identical support rule bases competitive carrier funding on the same per-line support given to the rural ILEC operating in the area. The joint board in May recommended basing payments to ETCs on actual costs rather than support to rural ILECs. “We recommend that the Commission expressly place competitive ETCs on notice that identical support without cost justification may be an outdated approach to USF funding,” the board said. The board has yet to comment on proposals to use reverse auctions to pick carriers as ETCs based on what their services cost.

An attorney for a small wireless carrier agreed that McDowell and Adelstein are the key cap votes. “My sense is that Martin will get at least four votes for an NPRM proposing to eliminate identical support, even though there are philosophical objections underneath it,” the attorney said. “The same with reverse auctions, although I'm not sure there are four votes for that.” A second small-carrier source said a cap would discriminate against companies still seeking ETC status. “How will carriers who have ETC applications pending, some of which have been pending for years, be treated, since they have no existing support?” the source asked. “If their applications are eventually approved, will they be required to file cost studies when existing CETCs will have a choice between their existing support and filing a cost study?” The source added that the equal support rule went into place after extensive debate. “There is a well-reasoned basis for its existence that has been conveniently forgotten today,” the source said. “No one has explained why that reasoning is no longer valid.”

Meanwhile, SouthernLINC Wireless filed a proposal at the FCC for a geographically-based means of curbing USF payments. “The best way to efficiently manage growth of the USF is to direct support solely to the geographic areas where it is truly needed, and to phase out support once it is no longer needed,” the carrier said.

Under that proposal, the USF would provide full support in each geographic support area until the area is served by an ILEC and three competitive ETCs. “Entry of a fourth ETC would trigger the phasing-out of support to all ETCs serving that geographic area, because this would demonstrate that support is no longer necessary for that area,” the carrier said. “The… proposal encourages entry to rural, insular and high-cost areas, but ends support once competition has taken root.”