Federal Universal Service Fund

Telecom providers criticized a Nebraska proposal to change the state USF contribution formula from one based on revenue to a connections-based mechanism using phone numbers. In February, the Public Service Commission proposed a $1.29 surcharge for mobile voice, $1.24 for residential fixed voice and a five-tiered scheme for assessing charges to business lines. The current revenue-based contribution factor is 6.95 percent. But in testimony Friday released this week in docket NUSF-100, business line providers including Cox, Frontier and Windstream said the scheme for business lines isn't clear and may be tough to manage. For business lines, it’s not clear what revenue is to be considered in determining the surcharge -- only the business tariff rate or also extended-area-service fees and long-distance charges, Windstream said. Long-distance charges can fluctuate widely month to month, and business bundles could further complicate assessment, it said. Frontier said its billing system can't segregate or sort business customers into the five proposed tiers. Level 3 said assessing based on the number of phone numbers could hurt enterprise and government customers that have many phone numbers. CenturyLink said the business tiers are hazy and distinguishing between mobile and fixed lines for USF fees isn't equitable. CTIA said assessing different fees to mobile and fixed lines is “unreasonably discriminatory.” In other testimony, Communications Director Cullen Robbins proposed three alternative plans for contribution fees: (1) set mobile and residential voice surcharges equal at $1.29 and use two categories for businesses, single-line and multiline; (2) charge mobile and fixed the same fee and have one charge for business lines; and (3) use two categories for business -- single line and multitiered -- and treat residential fixed voice as a single-line business. "Continued declines in Nebraska Universal Service Fund (NUSF) remittances as a result of the erosion of the assessable base has led to a need to revise the contribution mechanism for the NUSF," Robbins said. A connections-based system is "more stable and predictable than the current mechanism,” he said. Some wireline companies supported the principle of assessing USF fees by connection as bringing more stability to USF. "A connection-based mechanism should be less volatile than a revenue-based mechanism, and … it should be less vulnerable to erosion of the contribution base," Windstream said. But Charter said it would be better to keep the status quo. "Moving away from this system will be complex, costly, confusing, and will likely need to be duplicated if the FCC ultimately changes the federal system,” it said. "Continuing with a revenue-based system is the most efficient, the most trusted, the most enforced and most enforceable, system yet devised. As [Winston] Churchill said: 'Democracy is the worst form of government, except for all the others.' The same can be said for revenue-based contribution systems -- at least at this time.”

Any grand infrastructure plan should go beyond public-private partnerships and tax credits and find ways to incorporate broadband, senators and witnesses said Wednesday during a Commerce Committee hearing. It followed another call Tuesday from President Donald Trump that Congress act on infrastructure. Senators repeatedly questioned what a broadband component should look like.

NCTA urged Congress, in any infrastructure proposal, to identify “problem areas before spending money to fix them,” “deliver broadband to those who don’t have it,” offer “equal opportunities for all qualified broadband providers,” and accept “alternative technologies in remote areas,” in a blog post prior to a Wednesday Senate Commerce Committee hearing on infrastructure spending. Policymakers should guarantee “transparency and accountability to ensure government funds achieve intended results,” said NCTA, which isn’t testifying. The one witness at the hearing with a clear telecom focus is NTCA CEO Shirley Bloomfield. She and USTelecom President Jonathan Spalter offered what they called a “simple road map” for the broadband spending they recommend. “Rather than reinventing the wheel, let’s put to better use initiatives and programs that have worked in the past to enable the availability and sustainability of rural broadband,” they said in a blog post for The Hill. “Serious consideration should be given, for example, to leveraging the federal Universal Service Fund (USF) programs as part of any new broadband infrastructure initiative.” They urged Congress to streamline and kill regulatory barriers in the process. ITTA, NTCA, USTelecom and WTA joined earlier this week to send a letter with recommendations (see 1702270038). Public Knowledge Vice President-Government Affairs Chris Lewis sent a letter to committee leaders urging Congress to weigh "how to ensure affordable, reliable access for all Americans, to expand economic opportunity for all." Lewis pointed to what he called market failures: "While high prices have driven robust rates of return on capital investment for broadband providers, they have not led those providers to invest those profits into deployment to rural, unserved, and underserved communities." President Donald Trump pressed for an infrastructure proposal of up to $1 trillion but didn't offer precise details. He was expected to have addressed a joint session of Congress Tuesday night, and infrastructure is one topic slated for the speech. “I hope that the president will lay out what it is he wants to do,” Senate Commerce Committee Chairman John Thune, R-S.D., told reporters Tuesday. “We don’t know exactly what approach he wants to take. From my standpoint, I’m interested obviously in how you would do any infrastructure plan that includes these private-public partnerships, or P3s as they call them, that work in more populated areas but how you would fund infrastructure in rural areas.”

A Vermont 911 case is raising legal and public policy questions about whether states can mandate backup-power requirements for wireless or interconnected VoIP carriers. Last week at the Public Service Board, some commented that federal statute bars states from making battery-backup mandates to either industry, and -- for wireline providers including VoIP -- that FCC existing backup power requirements make separate state rules unnecessary. A recent former California commissioner said in an interview it’s critical from a public policy standpoint for states and local governments to make their own decisions on communications network resiliency, including battery backup. A NARUC attorney disputed industry claims of federal pre-emption.

State commissioners seek more certainty about where they fit into the telecom landscape, said NARUC Telecom Committee Chairman Paul Kjellander in an interview Wednesday at the group's meeting. Early decisions by FCC Chairman Ajit Pai and congressional talk of a possible Telecom Act rewrite are good signs that clarity is coming, Kjellander said. As the meeting wrapped Wednesday, the board passed the three substantive telecom resolutions adopted Tuesday by the committee (see 1702140003).

FCC Chairman Ajit Pai has gotten off to an active start in his first two weeks in the job. Several former FCC officials said early on, in contrast to former Chairman Tom Wheeler, Pai could have a tough time figuring out what to do once designated to lead the regulator, especially given the Republican emphasis on less rather than more regulation and the strong possibility Congress, not the FCC, will address ISP privacy and net neutrality rules. But Pai is already moving forward with a busy agenda, teeing up six items for the Feb. 23 commissioners meeting. Much of his early emphasis has been on closing the digital divide. But controversy arose Friday (see 1702030070).

State government officials and others stressed benefits for rural schools as Arizona seeks to take advantage of up to $100 million in federal E-rate Category One funding for broadband. The state must act quickly to meet a likely April deadline to submit funding applications to the Universal Service Administrative Co., the officials said at an all-day Arizona Corporation Commission (ACC) workshop live-streamed Monday. The workshop is part of a rulemaking to create an estimated $8 million-$10 million state match of rural broadband funds with funding from the state USF (see 1701110062). With nearly a quarter of Arizona schools not meeting the national standard of 100 kbps per student -- affecting about 250,000 students -- the E-rate funding is a way to “get rural Arizona into the game,” said Commissioner Andy Tobin (R).

About 30 rural telcos told the FCC this past week they intend to stop offering broadband internet transmission service as separate components of their broadband internet access services. Minnesota Valley Telephone and Winthrop Telephone made filings (here and here) Friday of their broadband intentions, joining other rural telcos from Minnesota, Wisconsin and Iowa that made such filings in dockets 01-92, 14-28 and 10-90 earlier in the week. Under a Wireline Bureau clarification last June of the FCC's net neutrality and broadband reclassification order, the rate-of-return carriers said, "the revenues associated with the broadband internet access transmission would no longer be subject to the federal universal service fund assessment." FairPoint Communications made a similar move last year (see 1606280037).

Arizona should tap the state USF to bring broadband to rural students, said Arizona Corporation Commissioner Andy Tobin. In a Monday letter in docket RT-00000H-97-0137, Tobin supported Republican Gov. Doug Ducey’s call for high-speed internet in rural and tribal areas. Tobin proposed a partnership with the governor, state superintendent and nonprofit EducationSuperHighway to create a state match of rural broadband funds for schools and libraries totaling $8 million to $13 million, the state commission said in a Tuesday news release. Tobin proposed a one-time distribution of $8 million from the Arizona USF to support the state match. The state match could help school districts obtain an estimated $80 million to $100 million in federal E-rate Category One funding, but Arizona must act quickly to meet a likely April deadline to submit funding applications to Universal Service Administrative Co., he said. To make the deadline, the state commission should open an emergency rulemaking, he said. Later this year, the commission should open another rulemaking examining the high-cost portion of the state USF, he said. “There is a real and troubling digital divide when it comes to internet access in our urban and rural areas,” Tobin wrote. “Every student must be afforded the same opportunity to learn, including those who live on tribal lands, in some inner city areas, or in the most remote reaches of the state.” Ducey said in the governor’s State of the State address Monday that “too many students, specifically in our rural areas, and in our tribal nations, are missing out. It’s 2017, but outside of our urban areas, broadband is still spotty. Let’s fix this, by connecting these rural schools to high-speed internet.” The proposed program will be discussed at a commission staff meeting Wednesday at 10 a.m. MST, the commission said.

Sandwich Isles Communications faces $77 million in repayment duties and proposed fines from the FCC for violations and apparent violations of the USF high-cost program in Hawaii, with more repayments to come. The commission also ruled against SIC in a cost dispute with AT&T and the National Exchange Carrier Association (NECA) over an undersea cable. The agency noted Sandwich Isles has continuing obligations to its customers and can't discontinue telecom service without express authorization.