Everybody Agrees on Need for Universal Service Change, but Details Vary

"What we're really asking, is which customers should pay?” said AT&T Vice President-Public Policy Joel Lubin. “And how should they pay?” However the system is reformed, it must be done in a rational and coherent way, with bright line standards for companies that need to contribute, Lubin said. “We need to keep it simple,” he said. “Let’s not distort the marketplace or repress the very demand you want to stimulate."

Carol Mattey, deputy chief of the FCC Wireline Bureau, recalled a time when she was in private practice, consulting for telecom companies on their required universal service contributions. She said she stared at FCC Form 499-Q Telecommunications Reporting Worksheet in dismay, wondering how to “fit the numbers in the general ledger onto this form.” The guiding principles of determining the contribution base should be simplicity, ease of administration, and clarity on consumer obligations, she said. It makes for good government, and it’s always good for companies to know what the rules of the road are, she said.

AT&T and T-Mobile executives said they once had supported funding the contribution base by charging customers $1 per telephone number per month. Earlier plans had proposed 85 cents per number, $5 for an Internet connection below 64 kbps, and $35 for a connection above that.

Rick Cimerman, NCTA vice president-external and state affairs, said NCTA was also an early supporter of the number plan. With over 600 million phone numbers in the U.S., such a funding base would bring in over $7 billion per year. That would be a simple solution, he said, compared to a plan that charged based on the speed of one’s broadband connection, he said.

Dave Conn, national director of state regulatory affairs for T-Mobile, said it was important to only give money in places where it’s really necessary. “Our universal service policy has been to dump a whole lot of money into the system and hope we get universal service,” he said. The Connect America Fund, which doesn’t give money to an area that already has an unsubsidized carrier, is a better approach, he said.

"We certainly think that when you're supporting broadband, broadband needs to contribute,” Conn said. It does contribute now through the purchase of telecom inputs, he added, but that’s not very transparent, or “intuitively obvious that it’s equitable.” Cimerman proposed expanding the base even further, arguing that everyone who benefits should pay into the fund, and it would be easy to come up with a list: “Who benefits the most? Google, Amazon.” Shirley Bloomfield, CEO of NTCA, agreed that companies that have built their model on Internet access should “pay their fair share."

Speakers on a bill-and-keep panel Tuesday debated whether and how the new intercarrier compensation regime in the FCC’s USF/ICC Order would benefit consumers and different carriers. For state regulators, bill-and-keep is the fundamental problem in the order, said Commissioner James Cawley with the Pennsylvania Public Service Commission. The approach undermines the intrastate access overhaul efforts by states, he said. Certain large wireline and wireless operators stand to benefit from the regime while consumers would see their bills go up in order to subsidize the access expense reductions, he said. Under the approach, companies would have no obligation to pass access expense savings onto consumers, he said. The bill-and-keep regime is also a violation of Section 254(k) of the Telecom Act, Cawley said. The section is clear that services included in the definition of universal service bear no more than a reasonable share of the joint and common costs of facilities used to provide those services, he said.

But Joseph Gillan, consultant with Gillan Associates, said the FCC’s on firm ground proposing the bill-and-keep regime. However, the order fundamentally reduces revenue, he said. But the commission should've designed a system that balances out the marketplace and considers potential impacts on carriers of all sizes, said Gillan, who has clients on both sides of the debate. USTelecom’s members were concerned about access line loss before the USF order, said Jonathan Banks, senior vice president. “We were in a bad place before the order.” There’s no doubt that a new approach to the intercarrier compensation regime is needed, he said. Meanwhile, it appears that the FCC wanted to limit its ICC reform to terminating access charges at this time, Banks said. However, the commission could further evaluate other charges including originating access, he noted. The order may result in potential arbitrage opportunities regarding originating access, which the FCC should address, he said.

Provisions mandating an ultimate price of zero for all switched access and reciprocal compensation services, imposing retroactive and dynamically changing caps on USF-supported costs and blurring the lines between regulated and non-regulated operations are inconsistent with law, said Josh Seidemann, director of policy with NTCA. The order recognized the role of rural companies and offers those companies significant benefits not afforded to competitors, said Jennifer McKee, vice president at NCTA.

NARUC Notebook

Sen. Ron Wyden, D-Ore., hopes for a hearing on his wireless tax bill (S-543) “right after the February recess,” Wyden told us after his remarks at the NARUC conference Tuesday. Last year, the House passed a companion bill (HR-1002) by Rep. Zoe Lofgren, D-Calif. Wyden requested a hearing on his bill in a September letter to Senate Finance Committee leaders. Speaking to the conference, Wyden said he fought Internet piracy legislation because he believed it would have undone the country’s work on cybersecurity. “Everything that’s being done on cybersecurity is built around the DNS system,” he said. “To simply unravel all that after decades of thoughtful and comprehensive work on cybersecurity made no sense to me.”