Legal Challenge Likely if FCC Ends Identical-Support Rule

“It is fair to say that elimination of the identical support rule is subject to legal challenge,” an attorney for the carriers said. “The FCC more than once has ruled that identical support is competitively neutral. Now, without really explaining why, it says that it may not be. The FCC completely sidesteps its obligation to make support portable -- that is, support goes to the carrier that gets the consumer.”

The Rural Cellular Association devoted most of its long reply to defending the identical support rule, a major concern of competitive eligible telecommunications carriers. “The record does not supply the Commission with a sufficient factual, legal, or public policy basis for terminating the rule,” the group said. For the agency proposal to stand, “the Commission must explain and support its claim that the high-cost fund has been placed in jeopardy by rapid and uncontrolled growth precipitated by disbursements to competitive ETCs,” it said.

U.S. Cellular agrees that the FCC lacks “sufficient factual, legal, or public policy basis for terminating the rule,” it said. The Alliance of Rural CMRS Carriers said that for a wireless subscriber with a $50 monthly bill, the average USF charge is $2.10, of which 35 cents goes to high-cost support for competitive ETCs, compared with 93 cents to local incumbents. “These figures make it obvious that high-cost funding to competitive ETCs has a minimal impact on consumers, especially when compared to the consumer impact of funding incumbent carriers,” the group said.

VoIP groups mum in April spoke up about broadband’s importance to IP-enabled services. The VON Coalition urged the FCC to set up a fund for broadband. “The boundary lines that formerly distinguished wireline, cable and mobile networks are fading and American consumers will soon have access to robust broadband technology wherever they are in the country,” it said. “Accelerating the availability of ubiquitous, affordable broadband will require a fundamental shift in the Universal Service support mechanism.”

Vonage took no position on a broadband fund but urged the FCC to impose anti-bundling and net neutrality rules if it creates a fund. Like VON, Vonage filed no initial comments. If a company gets broadband subsidies, it shouldn’t be allowed to bundle the service with phone, video or other products, Vonage said. That would “preserve competition for IP-enabled services” by keeping recipients from using grants to subsidize other services, the VoIP carrier said. Vonage also urged the FCC to force recipients to adhere to a 2005 Internet policy on nondiscrimination. That would make the policy indisputably enforceable, it said.

Indian tribes endorsed a broadband fund. Northwestern tribes saddled with old telecom technology have had overtures from companies selling “reliable” wireless broadband, but “cannot afford these services without USF support,” said the Affiliated Tribes of Northwest Indians. ATNI represents 54 tribes in Oregon, Idaho, Washington, Alaska, California and Montana. The Osage Nation, a 10,000-member Oklahoma tribe, has the same problem, it said in separate comments.

A broadband fund could degrade the old voice network, Embarq said in replies. Carriers already can use USF dollars on broadband, it said. Requiring them to do so could sap revenues at voice networks that need regular maintenance, it said.

Battle Royal

Previous commenters largely took the offensive in reply comments. Embarq decried wireless carriers’ arguments, saying it wouldn’t be “competitively neutral” to kill the identical support rule, cap CETC support and take related steps. The comments are “fundamentally flawed because the underlying competitive landscape is itself far from neutral,” it said. Incumbent carriers “alone are required to build network in uneconomic places” and “charge rates that are substantially below cost,” it said. “This obligation… is a substantial competitive impediment, imposing a cost burden on ILECs that no wireless carrier ever encounters.”

Verizon attacked proposals to replace identical support with a system imposing “burdensome” requirements on ETCs to file cost data, Verizon said. Instead, the FCC should kill interstate access support and interstate common line support for competitive ETCs, it said. “This action addresses the problem of excessive funding to competitive ETCs without the need for a highly regulatory and administratively cumbersome, cost-based approach.” USTelecom also opposed a cost-based system. It recommended reverse auctions, an approach rural carriers continue to fight.

USTelecom slammed industry proposals to make information services contribute to USF. Only telecom services now pay into USF. “It is contradictory and counterproductive to place an obligation on broadband which would discourage its use for the express purpose of funding increased broadband use and deployment.” But an IP-enabled future demands information service contributions, NTCA said. “If USF contributions are limited to traditional wireline and wireless voice services only, the inevitable migration away from these services will eliminate all future universal service funding.”

The National Association of State Utility Advocates blasted proposals by AT&T, Qwest, Sprint Nextel, Windstream, USFon and the National Telecommunications Cooperative Association. AT&T’s proposals are “far-reaching but unsubstantiated,” and the others are “wrong-headed,” it said.

Until there’s a comprehensive overhaul, interim changes are crucial, including a way to provide “urgently needed build-out funding” for advanced wireless services, CTIA said. In the interim, it wants the FCC to: (1) Require local incumbents to combine multiple study areas in a state before support is figured. (2) Treat incumbents with more than 50,000 access lines in a state as “non-rural” and provide support for them based on a “more efficient non-rural support mechanism.” (3) Reduce the per-line support available to incumbents by “eliminating support for corporate operations expenses and allowing a more reasonable rate of return.”

Reform must begin with a “long-overdue” revamp of support for incumbents, CTIA said. “At minimum, the Commission must reduce ILECs’ support commensurate with these carriers’ loss of lines,” the group said. “This simple step, if it had been adopted just a few years ago, already would have saved substantially more support than competitive ETCs have received in the history of the universal service regime.”

Alltel said commenters on the USF proposals are united on key points, with general support for comprehensive overhaul of the high-cost funding and intercarrier compensation systems and recognition of the need to stabilize the USF. “Of course, the consensus for these basic goals falls apart when it comes to specific proposals to implement them,” Alltel said. “There are right ways and wrong ways to advance each of these goals -- principled approaches that actually take the goals seriously and try to effectuate them in the new 21st century market environment, and unprincipled approaches that feign support for these goals but actually are designed to protect particular categories of carriers rather than consumers.”

Sprint Nextel said its proposed alternate revamp would avoid problems posed by proposals offered in the NPRMs. “It can be implemented promptly, and without extensive changes to Commission rules,” Sprint said. “It makes use of pro-competitive mechanisms to lower the level of subsidy in the high cost support programs, while at the same time preserving subsidy where it is most needed for small rural carriers.”

Virgin Mobile suggested that low-income consumers’ interests may be overlooked as local incumbents, wireless carriers and broadband providers debate. The FCC “should dedicate additional effort to fostering increased access by lower-income customers to telecommunications services, especially wireless services,” the company said. “Low-income customers receive significant economic and social benefits from wireless services, including enhanced productivity, increased economic opportunity and broader access to emergency and safety services.”