Judges Question Timing of States’ Request to Revamp Non-Rural Support, Old Data, Failure to File Waiver
Two of the three judges who heard Vermont Public Service Board v. FCC cited the FCC’s plan to revamp the overall Universal Service Fund as they considered Vermont and Maine’s request to fix the FCC’s non-rural high-cost system. In a U.S. Court of Appeals for the District of Columbia Circuit hearing, judges questioned the use of outdated data by the FCC and the states’ failure to seek a waiver to request supplemental high-cost support. The case stems from a 10th U.S. Circuit Court of Appeals remand in the so-called Qwest II case, in which the commission said rural and urban rates “are reasonably comparable.” State regulators have challenged, claiming the FCC “failed to compare rural rates in each state to a national average urban rate.”
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The USF system is not perfect but fixing it would cost a lot of money, said Judge David Tatel. Citing the FCC’s overall USF revamp efforts, he questioned the necessity of fixing a system that might disappear. Judge Thomas Griffith asked when the revamp would happen. The FCC had said it would get it done this fall, but “we can’t commit to that,” said FCC attorney Maureen Flood. She said the current level of non-rural support is “sufficient,” and the current system should remain in effect pending comprehensive USF revamp. She claimed the states’ proposal to modify the system would mean an $2.7 billion annual increase in USF, a burden that consumers ultimately would bear. Adopting the state petitioners’ plan would slow the overall USF revamp process and increase the overall size of the fund, said attorney Helgi Walker, representing NASUCA.
Tatel questioned the FCC’s use of nearly decade-old data that supports its cost model. It’s not a complicated process to get new data from the carriers and compare, he said. But collecting data is a complex process, Flood said. The agency gets data from carriers and takes line counts and allocates them across different categories, she said. The FCC failed to consider the states’ proposals to update and revise the forward-looking cost model that calculates support amounts under the non-rural support system, said attorney James Lister, representing the Vermont Public Service Board.
The FCC acknowledged that the forward-looking cost model is out of date, both in regard to the model inputs and the underlying technical assumptions, Flood said. Meanwhile, if high-cost support isn’t sufficient, the agency could allow a non-rural carrier to ask for higher support, Flood said, but no carrier in states like Vermont has requested that. The FCC’s data showed that the national telephone penetration rate had remained consistently high since passage of the 1996 Telecom Act, she said. The FCC also found that average consumer expenditures on telephone service have remained relatively stable over time, even though consumers now receive additional services, she said. Additionally, the price of telephone service had declined, she said.
Tatel questioned why Vermont didn’t use the waiver mechanism to request supplemental high-cost support. The waiver mechanism itself is unlawful because a state seeking a waiver must satisfy the two standard deviations rate benchmark rejected in Qwest II, Lister said. Qwest II didn’t foreclose use of the rate benchmark, Flood said. In adopting the rate benchmark, the FCC emphasized that the benchmark merely creates a presumption regarding the reasonable comparable, she said. The third judge, Karen Henderson, didn’t ask any questions.