FCC Chairman Tom Wheeler’s proposal for changing the $1.7 billion USF Lifeline program to cover Internet access could face some resistance from FCC Republicans, industry officials told us Monday. An order and further rulemaking on Lifeline are teed up for a vote at the FCC’s June 18 meeting (see 1505280037). Wheeler proposed an examination of a cap on the program as part of the proposal circulated last week to commissioners. The Senate Communications Subcommittee plans a hearing on Lifeline Tuesday (see 1506010050) The Lifeline item is lengthy and various commissioner offices were still taking a closer look as of Monday, FCC officials said.
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.
Lawmakers in both chambers are preparing a letter to the FCC to address one of NTCA’s USF priorities on stand-alone broadband, reviving a bicameral, bipartisan letter sent to the FCC last Congress. NTCA also received promises from two lawmakers Tuesday that they will take the group’s priorities to heart, with legislation if need be. Prominent topics included overhaul of the USF, call completion problems and net neutrality, a controversial and partisan item in Congress.
Sprint and T-Mobile spent less on lobbying so far this year, Q1 lobbying reports showed. Monday was the deadline for quarterly lobbying reports, but many trade associations and companies hadn't filed theirs by our deadline. Observers have said net neutrality and proposed acquisitions are big drivers of spending in the telecom space, and those issues turned up repeatedly in the Q1 forms posted this week.
Beyond the usual difficulty in getting the Supreme Court to take a case, petitions (see 1504080050) seeking review of the 2011 USF/intercarrier compensation order (see 1405270045) face some obstacles, former FCC Chairman Reed Hundt and other telecom attorneys told us. U.S. Cellular’s argument that the net neutrality order adds to the urgency to deal with the agency’s Telecommunications Act 706 authority through the Universal Service Fund/ICC case is unlikely to move justices, they said.
Industry groups are upset over an FCC policy statement creating what they call “draconian” treble damages for amounts owed to USF and other funds. CTIA, Comptel, NCTA and USTelecom filed petitions for reconsideration and a stay, saying the statement violates notice requirements and the “inflexible” triple damages violates the Communications Act. ITTA filed comments supporting the joint petitions.
FCC Commissioner Ajit Pai intends to ask Congress to strip the agency of money to execute its net neutrality order, he said in written testimony for a House Appropriations subcommittee scheduled for Tuesday. “Congress should forbid the Commission from using any appropriated funds to implement or enforce the plan the FCC just adopted to regulate the Internet,” Pai plans to testify. “Not only is this plan bad policy; absent outside intervention, the Commission will expend substantial resources implementing and enforcing regulations that are wasteful, unnecessary, and affirmatively detrimental to the American public.” Pai, one of two GOP commissioners, is “unable to support” the FCC’s FY 2016 budget request, he will say.
The FCC has not only “failed to pursue meaningful solutions” to making sure broadband is being deployed in a timely and reasonable fashion, but exacerbated the problem by “arbitrarily raising” the broadband benchmark speed and imposing Communications Act Title II regulation on broadband in the net neutrality order, NCTA said in comments filed Friday. Responded to the agency’s January notice of inquiry (see 1501290043) on improving broadband deployment, the comments hadn't been posted in docket 14-126. USTelecom also filed comments on the NOI Friday, which, according to its blog, focused on removing “outdated legacy regulations” and “restrictive local rules and regulations.” The commission failed to “effectively implement many of its own prior recommendations,” including adding broadband to Lifeline and implementing the Remote Areas Fund (RAF) to deploy broadband to unserved areas, NCTA said. The commission should immediately revoke offers to ILECs for high-cost USF support that don't meet the new 25 Mbps download/3 Mbps upload standard, it said. The funding should be offered on a competitively neutral basis to any qualified broadband provider willing to provide the new speed, NCTA said. The agency should also implement the RAF and issue an NPRM to create a broadband Lifeline program, the filing said. An independent third party should also examine why there hasn’t been more progress extending broadband deployment to unserved areas, even though more than $28 billion in federal funding has been spent on the goal since 2010, the filing said. USTelecom urged the agency to grant its October 2014 forbearance petition (see 1410070050), reforming state and local regulations “that impede a provider’s ability to roll out broadband services,” and ensure that broadband providers can deploy fiber in multi-dwelling units. The FCC should “promote efficient and carefully targeted broadband deployment in rural areas” through the Connect America Fund and develop “’sooner rather than later’ a long-term universal service solution for rate-of-return carriers,” USTelecom said.
The net neutrality order approved Thursday (see 1502260043) prevents states for now from making broadband contribute to states' USF, an agency official told us. Commissioner Mignon Clyburn, in voting for the overall order, opposed the restriction, but NARUC General Counsel Brad Ramsay said he doesn’t expect it to cause the same kind of backlash from states as the commission’s pre-emption at the same meeting of North Carolina and Tennessee municipal broadband laws (see 1502260030).
The FCC assertion that Chairman Tom Wheeler’s draft net neutrality order would impose no taxes or fees was disputed Friday by Commissioner Ajit Pai, who claimed in a statement it “explicitly opens the door to billions of dollars in new taxes on broadband.” An economist also claimed in a Forbes op-ed that the plan would lead to at least $500 million in federal fees and potentially more in state charges. An FCC spokesman Friday stood by a Wednesday fact sheet’s assertion, telling us the Internet Tax Freedom Act (ITFA) applies to broadband, even at the state and federal level.
The FCC portrayed the reclassification of broadband in Chairman Tom Wheeler’s net neutrality proposal as a modernized Title II. But pledges from senior agency officials not to impose traditional Communications Act common-carriage regulations like rate regulation didn't ease the concerns of reclassification’s opponents.