NARUC Suit Possible After FCC Lifeline Order; RLECs Cite Some Concerns

“We don’t casually commit to litigation without a pretty thorough review, and we certainly want to see the written orders and the dissents,” said Kavulla, also vice-chairman of the Montana Public Service Commission. “There are certain things that are really nonnegotiable, and one of those is ensuring states’ statutory role in oversight of public subsidies to these companies.”

Kavulla expects NARUC will reach a decision on whether to sue within a couple weeks after the FCC releases the final text, he said. If a suit goes forward, NARUC and any states that want to participate will make the complaint, he said. Usually, NARUC consults members before taking court action, he noted. “But in this circumstance, our members have already authorized a resolution that really embodies the core principles that we’re fighting over. So, at this point, it will simply be a decision of myself, the executive committee, the head of the Telecommunications Committee at NARUC … and our general counsel to go forward on this.”

The FCC Lifeline order flies in the face of federal statute and could be unlawful, Kavulla said. “Federal law specifies a role for state commissions in designation of these carriers that are to receive subsidies,” he said. “This wouldn’t be the first thing the FCC has done in recent years that seemed to run contrary to federal statute, and NARUC is certainly going to be exploring that especially in some detail.”

The order might also pull the rug out from state programs and investments in the certification process, Kavulla said. “This step by the FCC to create a kind of end-run around the state designation process will in all likelihood jeopardize state programs,” he said. “State legislators are not going to be fond of the idea of federal bureaucrats saying, ‘Well, this is now just all us, states. You can go pound sand.’”

“Some states have made some really significant investments … that are premised on the regime of cooperative federalism where it is primarily states’ role to certify companies and to certify the eligibility of users,” said Kavulla: California and some other states have set up their own certification databases.

The order could allow companies to go “forum shopping” and choose their own regulator, Kavulla said. “They can pick the FCC if it’s convenient to them. They can pick the states when it’s convenient to them. They can pick some states for certain jurisdictions, the federal backstop for others.” That could lead to more waste, fraud and abuse, he said. “It’s a pretty generally accepted theory that you don’t allow regulated entities to choose their regulator,” he said. “It kind of just falls short on basic logic.”

The Montana PSC certifies about 30 eligible telecom carriers to receive high-cost or Lifeline subsidies, Kavulla said. While he doesn’t know how many would likely turn to the national process, he said he could imagine a scenario in which the PSC asks “too many questions” of a company and the company goes to the FCC instead. A small ETC serving rural Montana might face less scrutiny from a federal authority compared with one in Montana, he said.

“The state investment in certification databases will be not be wasted,” an FCC spokesman responded. “The new National Eligibility Verifier will utilize those existing state eligibility systems as part of its operation.” Also, “designation at the FCC level is for Lifeline broadband providers only,” he said. “The streamlined process will not be applicable to the wireless resellers that have been the focus of many of our compliance problems. Regulating these providers remains a shared responsibility between state and federal government, and we value states’ continuing contributions to protecting Lifeline.” Broadband providers "have overwhelmingly told us they value having a more centralized designation paradigm, and we need to bring more broadband providers into the program to best serve low-income consumers,” the FCC spokesman added.

Kavulla acknowledged a “shout-out” to states’ role​ by Commissioner Mignon Clyburn at the FCC meeting, but said he can’t comment on it until he reads the full order. In her statement on the order, Clyburn said, “Yes, I heard loud and clear, the concerns from our state partners, and worked to balance those concerns, by ensuring that states that include funding for their own Lifeline program, will not be preempted, and any provider that wants state Lifeline funding, most go through the respective state’s process.”

Kavulla took a jab at FCC process after Thursday’s meeting was delayed three times and by more than three hours. “Yesterday was a carnival,” the NARUC president said. “I have never seen a federal agency act with such apparent dysfunction … It speaks to the opacity of the commission’s process, and it also undermines their credibility as an institution, because everyone watching this has to come away with the conclusion that [the FCC] is just one election away from a complete reversal of all of these policies. Telecom policy really shouldn’t be that partisan.”

While welcoming some FCC Lifeline moves, WTA said it had “serious concerns” about the scheduled phaseout of support for stand-alone voice, which the FCC expanded to include wireline service after originally proposing to target only mobile service. In a statement Friday, WTA also said it's concerned the FCC is indexing some USF program budgets (Lifeline and E-rate) for inflation and not others (including rural USF), and giving designated Lifeline broadband providers the ability to “cherry pick” the most desirable areas to serve. In its statement Thursday, NTCA also questioned why rural USF was subjected to a “hard and self-executing budget” (of $2 billion) Wednesday, while the Lifeline budget (of $2.25 billion) Thursday allows for a jump in spending, is indexed for inflation, and can be raised further in the future. The agency should ensure high-cost rural support is “sufficiently funded” to promote broadband, starting by indexing the program for inflation, NTCA said. The FCC worked closely with rural groups in developing the the high-cost USF overhaul.

Outside Democratic Pressure

Democrats on the Hill and at the Obama administration eyed Thursday’s FCC vote on Lifeline overhaul closely. Congressional Black Caucus Chairman G.K. Butterfield, D-N.C., led a letter of nine Commerce Committee Democrats sent to FCC Chairman Tom Wheeler Thursday, just ahead of the vote, urging the FCC “to reject a cap when it votes at the Agenda meeting today.” Democrats signing included Commerce Committee ranking member Frank Pallone, D-N.J., and Communications Subcommittee ranking member Anna Eshoo, D-Calif., in addition to Reps. Doris Matsui of California, Mike Doyle of Pennsylvania, Yvette Clarke of New York, Bobby Rush of Illinois, Jerry McNerney of California and Ben Ray Lujan of New Mexico. They warned that a cap “would severely limit the program” and “threaten the goals and purpose of Lifeline.”

The letter preceded the breakdown of a possible deal among Commissioner Mignon Clyburn, a Democrat, with Republican Commissioners Mike O’Rielly and Ajit Pai (see 1603310056). Pai, tweeting Friday, lamented the timing of the letter and questioned how Hill Democrats knew of the dealmaking: “I wonder how so many who supported Chairman's proposal learned about a nonpublic, bipartisan, *signed* agreement,” Pai tweeted. Following the deal’s breakdown, House Commerce Committee Republicans said they plan to take up Lifeline cap legislation from Rep. Austin Scott, R-Ga., in April (see 1603310060).

An FCC ex parte filing also showed much communication between Hill Democrats and David Grossman, a former Eshoo aide who is now chief of staff for Clyburn. “During the morning and early afternoon of March 31,” Grossman “communicated with the Offices of Rep. Doris Matsui, Rep. Mike Doyle, Rep. Jerry McNerney, House Energy & Commerce Committee Democratic Staff, Senator Cory Booker [N.J.], Senator Richard Blumenthal [Conn.], Senator Chris Murphy [Conn.], and Senate Judiciary Committee Democratic Staff,” the ex parte filing said. “These offices expressed concern about the imposition of a cap on the Lifeline program and the harm it could have on its intended beneficiaries.” Booker “expressed concern about the imposition of a cap on the Lifeline program and the impact it would have on his constituents,” it said. The offices of Eshoo and “Democratic Leader Nancy Pelosi inquired about the status of the Lifeline proceeding but did not advocate a position,” it said. The office of Sen. Claire McCaskill, D-Mo., who has backed a cap, “encouraged the Commissioner to reach a compromise on the Lifeline Order,” the filing said.

The White House’s David Edelman, special assistant to the president for economic and tech policy, lauded the FCC vote. It’s “a landmark step toward the President’s ConnectALL goal of getting 20 million more Americans online by 2020 by approving a national subsidy to help low-income Americans pay for broadband,” Edelman said in a blog post Thursday night. The overhaul “will help millions more Americans get online at a price they can afford, and open up the market for more competition to serve their connectivity needs,” he said. The Obama administration backed expanding the Lifeline program to cover broadband earlier this year.