Tate Urges Action on USF Overhaul
A “deep need for fundamental reform” of the Universal Service Fund should inspire action on the “practical” proposals by the Federal-State Joint Board on Universal Service, FCC Commissioner Deborah Tate said at a Federalist Society forum Tuesday. A USF revamp is an “overarching public policy issue” that isn’t likely to make one of David Letterman’s top ten lists, but it “probably should because it affects everyone,” Tate said. She co-chairs the joint board, which issued recommendation in November. “We just need to get on with it,” she said.
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Tate said she supports many of the board’s recommendations, such as eliminating the “identical support rule,” but thinks others require additional debate, such as creating USF high-cost funds for broadband and wireless. Tate challenged the wisdom of having three USF funds compete for dollars, sometimes to serve the same customers. “I question whether it is prudent to create new government- administered funds instead of reforming existing ones,” she said. “We must not forget that it is the consumer who ultimately pays universal service contributions.”
Tate wondered aloud how the USF broadband fund relates to other programs, such as a broadband program run by the Department of Agriculture and “the hundreds of state and local projects that have already been undertaken with state and local taxpayer dollars.” Tate is “very supportive” of community-based broadband efforts such as Connect Kentucky, she said: “Most solutions don’t come from government.” Industry and consumers must help supply the answers, she said.
Agreement was scant among members of a follow-up panel on the issue of capping USF subsidies to rural wireless carriers, another joint board proposal. Representatives of USTelecom and Qwest endorsed a cap. CTIA President Kyle McSlarrow said a cap should apply to all rural providers, not just wireless, and expressed doubt about whether an “interim” measure would work. Courtney Reinhard, House Commerce Committee minority counsel, said Ranking Minority Member Joe Barton of Texas favors capping “the entire fund.” Paul Nagle, Senate Commerce Committee minority chief counsel, said it’s “difficult to see where a cap makes sense.” An interim cap “can turn into a permanent one,” he warned. Neither wireless representatives nor Democratic members of Congress took part in the panel.
On behalf of her boss, Barton, Reinhard urged “increased accountability.” Performance measures should be imposed and carriers should report annually how USF money is spent, she said. Congress should fund additional FCC audits and increase fines for USF fraud, she said. “In regard to subsidizing broadband -- don’t,” she said, calling it a “disaster” to apply the outdated USF structure to broadband. A better way would be to expand programs like Connect Kentucky, she said.
USF growth is “out of control” because the universal service system uses an outdated “monopoly market structure” - - a problem aggravated by “bad laws by Congress and bad stewardship by the FCC,” Reinhard said. No bills will pass this election year, but Congress will fix the USF in the future because it’s so important, she said. Barton would cap the entire USF, move to a numbers-based contribution system and a “market-oriented way to distribute” subsidies, such as reverse auctions, said Reinhard.
“Almost everyone thinks the concept of universal service is important but almost no one thinks the process has kept pace” with the changing telecom market, McSlarrow said. The USF process is not “how you would construct it if you started over,” he said. “The temptation is to do something now to rein in cost” but impetuous action could hurt “real universal service reform,” McSlarrow said. He warned against overhaul efforts focusing only on broadband. “Until we figure out how to get the voice part of the fund right, we shouldn’t be thinking of expanding it to broadband,” he said.
The FCC needs to clear up “loose ends” left from changes after the Telecom Act’s passage, said USTelecom Senior Vice President Jon Banks. For example, not all implicit subsidies were made explicit as the Telecom Act had ordered, he said. Regulators keep consumer phone rates lower than those charged businesses, even though businesses “can be cheaper to serve” -- a form of a subsidy, he said. USTelecom also favors having fewer wireless providers ruled eligible for support in the same geographic area, he said.
Both Banks and McSlarrow endorsed a numbers-based contribution system over the current system, which is based on interstate revenue. Banks called that “difficult to explain to consumers and difficult for companies to administer.” Contributions now are based on “long distance revenue that almost no one thinks is relevant,” McSlarrow said. With bundled service, most people don’t think of local and long distance phone service as separate.
Subsidies should be limited to one wireless provider in each rural service area, said Qwest Vice President Larry Sarjeant. “USF in general shouldn’t support competitors or duplicate networks,” he said.