Carriers, Cisco Debate How to Fix Universal Service

The high-cost fund remains important, said Jeff Lanning, Embarq federal affairs director. Without subsidies, carriers would have to find money “in some other, unsustainable way,” he said. The high-cost fund matters, agreed Tony Alessi, Sprint Nextel senior counsel. But support must be pared and focused, he said. Competitive eligible telecom carriers and incumbent local exchange carriers alike make the current fund unsustainable, he said. A recent Sprint proposal to the FCC (CD May 15 p8) attempts to address those issues, he said.

The fund’s existence isn’t at debate, said Jeff Campbell, Cisco technology and communications policy director. “The question isn’t whether we should have a high cost fund,” he said. “The question is whether we should have this high cost fund.” Subsidies should move to broadband from voice, he said. The circuit-switched network won’t be turned off tomorrow, “but it is going to be turned off,” he said. Technological change is a “tremendously important” facet of USF reform for Adelstein, said Bergmann. The commissioner believes USF should evolve with technology, he said.

A proposal for reverse auctions is “front and center at the FCC,” said Bergmann. But the “devil’s in the details.” Reverse auctions would be effective as a way to shrink the fund, since regulators could see what support is needed to serve an area, said Kathleen Grillo, Verizon federal regulatory affairs vice president. But service quality factors must be weighed, Campbell said. Different broadband technologies could mean different levels of service, he said. The FCC should avoid establishing a system where auctions always lead to 768 kbps broadband, he said. Use of reverse auctions isn’t a practical way to make the fund sustainable, Alessi said. Questions remain unanswered, relating to eligibility, geographic scope and other issues, he said.

The FCC shouldn’t make its cap on the high-cost fund permanent, because such action “legitimizes current levels of support,” Alessi said. Grillo disagreed, noting that the Joint Board on Universal Service wanted a permanent cap. Most government programs operate on budgets, she added. Adelstein is generally skeptical of caps, Bergmann said. Dissenting on the USF interim cap was a “difficult choice,” but the commissioner worried about how the cap would work, he said.

Most agree the FCC should kill the identical support rule, which bases subsidies on ILEC costs, Grillo said. But it’s harder to say what should replace it, she said. Sprint doesn’t support killing the rule, because there’s “nothing that could be realistically put in its place,” Alessi said. - - Adam Bender

NXTcomm Notes…

Verizon Wireless’s stance on universal service reform won’t change much after it acquires Alltel, Verizon Executive Vice President Tom Tauke told reporters at the NXTcomm show in Las Vegas. Alltel, a major USF subsidy taker, has been at odds with Verizon, a big contributor, on USF reform policy. Verizon will continue to support reverse auctions for USF, “starting with the wireless side,” Tauke said. The flow of subsidies won’t change, either, he said. “We have never sought to apply for CETC status for our wireless company, and I expect that we would continue that policy. Where we acquire a company that is receiving funds, we would expect that we would continue to allow those funds to flow to that entity.” -- AB

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Verizon will sell higher-speed FiOS to its entire footprint, said Verizon President Denny Strigl in a NXTcomm keynote Wednesday. Starting next week, all FiOS customers can get 50 Mbps downstream and 20 Mbps upstream, Strigl said. Currently, Verizon sells those speeds only in select markets. Verizon is also doubling the basic service tier to 10 Mbps down and 2 Mbps up, but keeping the current price, he said. Verizon plans to eventually sell 100 Mbps downstream service, he said. The timing of the 100 Mbps service will keep Verizon “competitive” with similar offerings planned by cable, Strigl said afterward. Verizon expects to pass 12 million homes with FiOS by year end, Strigl said. The carrier is about to launch the service in New York City, and plans to bring it to all five boroughs in the next 5-6 years, he said. Verizon is also bringing FiOS to markets outside its footprint in a “next-neighborhood-over strategy,” Strigl said afterward. Verizon has entered AT&T territory in Dallas, he said. Strigl downplayed the newsiness of the effort, saying it’s not a “huge” focus for the company. Verizon doesn’t have specific plans for other markets, he said. Following the pattern of other keynotes, Strigl also talked convergence and offered a rosy outlook on the telecom industry’s future. Verizon sees convergence as the “holy grail,” and a significant growth opportunity, Strigl said. Verizon soon will move to IMS technology, connecting networks for voice, messaging and video, he said. IMS will let customers get applications they want delivered to any device. Verizon’s next-generation LTE network is also moving along, with testing planned for later this year, Strigl said. He disputed studies ranking the U.S. lower than other countries on broadband deployment. “It’s time we put this myth to rest,” he said. The U.S. has more broadband connections than anyone else, and broadband is available in “virtually every ZIP code,” he said. Studies that rank the U.S. low don’t count wireless broadband, which is growing three times faster here than in Europe, he said. They also don’t consider geographic differences between the U.S. and other countries, he said. -- AB

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“Openness… is essential for a fresh flow of new ideas,” Sprint Nextel CEO Dan Hesse told the NXTCOMM conference Wednesday. Since Hesse’s appointment, Sprint has made an effort to place the customer first, he said. Part of that is a commitment to open networks, he said. Customers can download any application they want on Sprint’s WiMAX network, he said. And Sprint wants to “loosen the reins” on wireless device certification, he said. Sprint also plans to make it easier for customers to customize devices, he said. Sprint has an open development program, and is a member of the Open Handset Alliance and Open Patent Alliance, he said. Hesse also gave an update on Sprint’s impending WiMAX launch, which he said will give Sprint a two year technological advantage over competitors. Sprint will launch WiMAX commercially in Baltimore this September, and Chicago and Washington later this year, he said. Hesse also took an apparent jab at AT&T’s new iPhone, saying “one competitor’s” new 3G device might not have a vast enough 3G network to satisfy consumers.

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ATIS and the MultiService Forum (MSF) will partner in the next round of interoperability testing for next- generation networks, they said at NXTCOMM. The partnership for the biennial Global MSF Interoperability event Oct. 20-31 will be the first time MSF has worked with a single standards-setting body, they said. The event will provide a global next-generation network linking the U.S. (Verizon and others), Europe (BT and Vodafone) and Asia (China Mobile) to verify interoperability. The goal is to “provide assurance to vendors worldwide so they can move forward to large-scale production,” said ATIS President Susan Miller. She said the event will show “we are ready now… Our work is far more advanced than other work around the world on IPTV standards.”