Industry officials urged Congress to reconsider many elements of USF support policy, despite lauding the broad principles that have guided it. House Communications Subcommittee Republicans issued a white paper last month (http://1.usa.gov/1pmX66c) asking several questions about USF, seeking responses by Friday. It was the fifth white paper the subcommittee issued as part of efforts to overhaul the Communications Act, an initiative announced in December. Initial responses, which the committee has not posted online but were shared with us, were on what parties considered necessary changes to the USF contribution mechanism.
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.
Calls by education and library groups, and FCC Commissioner Jessica Rosenworcel in a speech Wednesday, to increase E-rate funding are running into opposition from telcos, in comments filed in the E-rate modernization Further NPRM. The Independent Telephone and Telecommunications Alliance and USTelecom said they worry expanding E-rate could cut into other USF programs like the Connect America Fund.
USF contribution reform “should not be seen as a backdoor way of increasing the size of the universal service fund or imposing new fees on the Internet,” FCC Commissioner Mike O'Rielly said in a statement. The agency asked the Federal-State Joint Board on Universal Service Thursday to recommend how to modify contribution methodology (CD Aug. 7 p5). The commission approved the referral (http://bit.ly/1oh17cQ) unanimously. It referred the joint board to the commission’s 2012 Further Notice of Proposed Rulemaking on the issue, and asked for recommendations “with a particular focus on how any modifications to the contribution system would impact achievement of the statutory principle that there be state as well as federal mechanisms to preserve and advance universal service.” Network convergence and technological innovation “have transformed the telecommunications industry, and the contribution system has become increasingly complex and difficult to administer,” said the order, which asked for the recommendations by April 7. “The Joint Board process ensures that the agency will receive expert recommendations from the States officials closest to the consumers affected by changes to the Universal Service program,” said NARUC Telecommunications Chairman Chris Nelson in a statement. Nelson, vice chairman of the South Dakota Public Utilities Commission, is on the state board.
An FCC order on circulation would generically ask the agency’s Federal-State Joint Board on Universal Service to examine changes to USF contribution methodology without recommending how the group should proceed, said agency and industry officials in interviews this week.
Basing net neutrality rules on Communications Act Title II would mean small- and medium-sized ISPs would be “burdened with the costs required to retain lawyers” and “to administer the reporting and other rules that would no doubt go along with it,” 99 companies wrote Commerce Secretary Penny Pritzker, hoping to push President Barack Obama’s administration to oppose treating the companies as common carriers. “We want to get the president’s ear,” said Alex Phillips, FCC committee chairman for the Wireless Internet Service Providers Association, of the letter to the cabinet-level agency from WISPA members.
FCC Chairman Tom Wheeler has sidestepped likely partisan Capitol Hill battles surrounding E-rate for now due to the nature of his overhaul, apparently focusing on Wi-Fi and not immediately touching the fund’s contribution rate and size, lobbyists and observers told us. They predict political rancor will come in later phases of the E-rate revamp when those parts will be inevitably addressed. The prime Hill critics now are Democratic architects of the original 1996 Telecom Act E-rate provisions, who question the proposal in more granular ways and urge the agency to listen as E-rate beneficiaries express fears, sending a critical letter Tuesday. The FCC will vote on Wheeler’s item Friday, and it’s been controversial among FCC Republicans. (See separate report in this issue.)
Eight libraries, including those in Hartford, Memphis, New York and Seattle, protested FCC Chairman Tom Wheeler’s proposed E-rate changes, which FCC officials said would fund libraries based on their square footage, in filings posted in docket 13-184 Wednesday and Thursday. CenturyLink protested another element of the plan to eliminate E-rate funding for voice services, arguing funding of the services is required by the Telecom Act. Under Wheeler’s draft, libraries would receive $1-per-square foot, said Reed Hundt, who represents the Urban Libraries Council, though FCC Managing Director Jon Wilkins said during a media call Tuesday (CD July 2 p2) the figure is still being negotiated. Seattle public libraries total 633,000 square feet, and the cost of delivering Wi-Fi over five years is $4 to $5 per square foot, said Seattle Public Library Director-Information Technology Jim Loter in a letter (http://bit.ly/1vBUh09). Using square footage “is unfair to urban libraries, and to our patrons who are disproportionately low-income, unemployed or underemployed. ... Wi-Fi is essential to our urban patrons,” the filing said. “If square footage is used as the basis to allocate E-rate funding for Wi-Fi, we fear urban libraries will not be adequately funded,” the New York Public Library said in a letter (http://bit.ly/1zaJdMc). While supportive of E-rate modernization, “it would be a mistake to discontinue support for voice services -- which actually are required by statute,” CenturyLink officials told aides to commissioners Ajit Pai and Michael O'Rielly on June 30, said an ex parte filing (http://bit.ly/1xmZEmG). Any reduction in voice support should be phased in over time and must apply equally to all types of voice services, including all technologies and bundled services, the telco said. Universal service support extends to the services of “telecommunications carriers” that “are supported by Federal universal service support mechanisms, the company said. “Standalone voice is among them, and in the USF/[Intercarrier Compensation] ICC Transformation Order, the Commission explained that voice, not broadband, is the USF-supported service, and it expressly required eligible telecommunications carriers to offer standalone voice service.” Wheeler’s plan calls for funding Wi-Fi connections within schools partly through eliminating funding for some services including voice, FCC officials said during the media call on the plan.
More than six weeks after passage, the text of the Connect America Fund order was released Tuesday (http://bit.ly/1pl9HHQ). Many of the changes to the CAF order (CD June 9 p7) were primarily focused on responding to Commissioner Ajit Pai’s dissent, FCC officials told us. An FCC spokesman declined to comment on the internal editing process or whether substantive changes were made, but said the fact sheet given to reporters at the April meeting “accurately reflects the final draft.”
The 10th U.S. Circuit Court of Appeals decision upholding the FCC 2011 USF/intercarrier compensation order (CD May 27 p1) (http://1.usa.gov/1r18uaa) won’t have an immediate impact on state utilities commissions that had been taking administrative steps to incorporate the order in rules, particularly reductions in intrastate access rates, said officials at NARUC and several regulatory commissions in interviews. Barring an appeal and a reversal, there could be long-term ramifications, they continued to caution, by weakening the authority of state regulators, while forcing the commissions to deal with the order’s ramifications. Ohio, where Middle Point Home Telephone Co. is seeking state permission to raise residential rates by nearly a half in response to the FCC order, is an early example, said David Bergmann, a National Association of State Utility Consumer Advocates attorney on its 10th Circuit petition for review of that order. State interests or perhaps other losers have indicated an appeal is all but certain (CD May 28 p3).
Using Title II of the Communications Act to ensure nondiscrimination on the Internet wouldn’t work, would lead to massive litigation and would be a “ticking time bomb” that would reverberate throughout the Internet ecosystem, said panelists at a Thursday FCBA event. It would also raise thorny USF issues as regulators try to determine which high-tech companies should pay into the fund if broadband becomes a telecom service and thus regulated under Title II, some said. But not everyone agreed that Title II classification would lead to the suggested parade of horribles.