The FCC should get going on reforming its USF contribution system, ITTA and the Montana Telecommunications Association (MTA) said Friday. There is “growing pressure on the Universal Service Fund as the Commission considers expanding the scope of services supported by USF programs,” said midsize-telco group ITTA in a filing posted in docket 10-90 summarizing an Oct. 28 meeting with Gigi Sohn, counselor to FCC Chairman Tom Wheeler. “We urged the Commission to undertake USF contribution reform and broaden the base of contributors before taking any further steps to modify the Lifeline program to include support for broadband services.” MTA also urged the FCC to address contribution reform, “particularly given the increasing pressure on the high cost reform efforts caused by budgetary restraints and the shrinking contributions base,” the association said in a filing on its meetings with aides to Wheeler and Commissioners Mike O'Rielly and Jessica Rosenworcel. An FCC spokesman said the issue was before a federal-state joint board. Carriers currently contribute 16.7 percent of their interstate and international telecom revenue to USF, a rate that has trended up over the years as subsidies have increased and the industry revenue base has eroded. Carriers generally pass the fees along to consumers.
Federal Universal Service Fund
The FCC's Universal Service Fund (USF) was created by the Telecommunications Act of 1996 to fund programs designed to provide universal telecommunications access to all U.S. citizens. All telecommunications providers are required to contribute a percentage of their end-user revenues to the Fund, which the FCC allocates for four core programs: 1. Connect America Fund, which subsidizes telecom providers for the increased costs of offering services to customers in rural and remote areas 2. Lifeline, which directly subsidizes low-income households to help pay for the cost of phone and internet service 3. Rural Health Care, which subsidizes health care providers to offer broadband telehealth services that can connect rural patients and providers with specialists located farther away 4. E-Rate, which subsidizes rural and low-income schools and libraries for internet and telecommunications costs The Universal Service Administrative Company (USAC) administers the USF on behalf of the FCC, but requires Congressional approval for its actions. Many states also operate their own universal service funds, which operate independently from the federal program.
Few fireworks erupted during the Senate Commerce Committee reconfirmation hearing of FCC Commissioner Jessica Rosenworcel Wednesday. The White House nominated the former Democratic staffer for the committee for another five-year term this summer. Senators used the hearing to ask her about the agency’s progress on programs like Lifeline and E-rate, stand-alone broadband, spectrum policy and net neutrality.
Sen. Jerry Moran, R-Kan., fears the effects of the FCC’s direction on USF and what it has done to rural telecom companies’ ability to invest. Moran. a member of the Commerce Committee, also chairs the Appropriations Agriculture Subcommittee, where he held a hearing on rural development Wednesday and aired many concerns about how FCC policies may affect investment.
Industry parties and others continued to support FCC proposals to Lifeline USF subsidies to broadband service and revamp administrative oversight, but divisions remain over specifics. In reply comments filed in docket 11-42 responding to initial comments on the FCC’s NPRM (see 1509010073 and 1509040045), parties generally backed giving low-income consumers expanded choice and shifting responsibility for verifying Lifeline subscriber eligibility from telecom carriers to a third party. But there was disagreement over whether the FCC should establish minimum Lifeline standards for broadband/voice service. Numerous tribal groups also filed reply comments urging the FCC to retain and even increase enhanced Lifeline tribal support.
Commenters voiced substantial support for FCC proposals to extend Lifeline USF subsidies to broadband and restructure oversight, with differences over some priorities and many implementation details, including among the Bells. Expanding Lifeline support would boost broadband adoption and shifting administrative responsibility away from telecom providers would increase efficiency, many said in comments in docket 11-42 responding to a Further NPRM (see 1506180029). Some said the FCC should proceed carefully and focus on enforcing budget discipline and streamlining program administration. Monday was the filing deadline for initial comments, but some comments hadn't been posted on the commission’s website Tuesday, while some parties filed comments early (see 1508180069).
Some regulators and telcos want state and federal USF contribution revisions, while others representing wireless ISPs would rather see the entire system shut down and overhauled, said speakers during a National Regulatory Research Institute tele-seminar. Speaking Thursday, the deadline day for telcos to accept FCC Connect America Fund Phase II offers (see 1508270068), experts said the funds wouldn't cover building out all networks to FCC standards, so it’s up to states to try to supplement that spending to improve the networks' reach to rural areas. The companies are aware the investment needed will be more than the funding, so they're ready to work with each state on how far it will go and whether other assistance is available, telco representatives said.
Fifteen small rural telcos would lose almost $9 million in annual USF subsidies under preliminary FCC findings to phase out support where carriers completely overlap with unsubsidized broadband competitors. A Wireline Bureau public notice posted Wednesday in docket 10-90 sought comments by Aug. 28 and replies by Sept. 28 on the initial determinations.
FCC Enforcement Bureau letters notifying Icon Telecom and Oscar Enrique Perez-Zumaeta of their suspension from participating in the Lifeline USF program are to be published Thursday in the Federal Register, said two FR notices including the letters (here and here) posted Wednesday. The letters, which also give notice of the commencement of debarment proceedings against Icon and Perez-Zumaeta, were dated May 26 and June 8, respectively, and released at the time by the FCC (see 1505260027 and 1506080067), but the parties have 30 days to contest the suspensions upon receipt of the letter or publication of the suspension in the Federal Register, whichever comes first. Icon, a Lifeline participant, pleaded guilty "to knowingly making a false statement to the Universal Service Administrative Company through its submission of 58 fabricated customer recertification forms," the bureau said in its letter notifying Icon. In April, Wes Yui Chew, president and owner of Icon, was ordered to serve four years in federal prison and pay a fine of $117,166 after pleading guilty to money laundering for transferring $20.5 million from an Icon bank account to his own, "despite knowing that Icon had thousands fewer customers than it reported to the Commission," said the bureau in a separate letter notifying Chew of his own suspension (which was not part of Wednesday's FR notices). Chew also agreed to forfeit $27 million seized during a Department of Justice investigation. Perez-Zumaeta owned and managed PSPS Sales, which recruited low-income people to apply for Lifeline-supported phone services through Icon. He pleaded guilty to money laundering for depositing a $52,390 check from Icon into a PSPS bank account "despite knowing that more than $10,000.00 of those funds was the result of criminal fraud against the Commission," the bureau said in its letter to Perez-Zumaeta.
State policymakers must continue to address how to ensure communications services are available and affordable for consumers so industry can adapt and bring everything into the now broadband-focused playing field, USF experts said in interviews Friday. A white paper, released Friday, by Sherry Lichtenberg, National Regulatory Research Institute principal researcher, said state USF support includes high-cost support, funds for broadband access for schools and libraries, funding for Lifeline and dedicated broadband funding. A key finding in the review is the limitation on high-cost support for areas where competition has driven down the cost of service, reducing the need for support, Lichtenberg said.
Sen. Amy Klobuchar, D-Minn., urged the White House to support reauthorization of the Broadband Technology Opportunities Program, in comments posted Friday on the Broadband Opportunity Council’s (BBOC) request for comment on broadband availability and deployment issues. A group of House Democrats led by House Communications Subcommittee ranking member Anna Eshoo, D-Calif., and Rep. Jared Huffman, D-Calif., urged the U.S. Department of Agriculture in a separate filing to “modernize” regulations for the Rural Utility Service’s Telecom Infrastructure Loan and Loan Guarantee program to “better facilitate high-speed rural broadband deployment.” BBOC, which the White House created March 23 to spur broadband investment and adoption (see 1503230064), sought comment on ways the federal government can modernize “outdated regulations,” identify regulatory barriers to broadband deployment and promote broadband adoption.