SAN FRANCISCO -- State policymakers mainly turned a cold shoulder to industry pleas for tax breaks in a discussion at last week’s CTIA conference. The wireless industry can keep saying “till you're blue in the face” that mobile service is overtaxed nationwide, but policymakers won’t budge, said Daryl Bassett, a Republican member of the Arkansas Public Service Commission.
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.
Rate-of-return incumbent carriers should be allowed to allocate federal Universal Service Fund audit costs solely to interstate operations, said the National Telecommunications Cooperative Association. In a Friday petition, NTCA urged the FCC to clarify and/or waive a rule on how rate-of-return carriers should assign USF audit costs via the jurisdictional separations process. “Federal USF audit expenses are solely interstate in nature,” NTCA said. “Consequently, it is appropriate that those expense be allocated to the interstate jurisdiction.” Rate-of-return carriers now can be denied recovery of federal USF audit expenses if a state declares the costs to be “clearly interstate in nature,” NTCA said. “Should these carriers not be allowed to recover all of the costs spent on USF audits, their ability to serve their customers will be impaired, to the detriment of the public interest.”
Qwest received $28.5 million in assistance from the universal service program’s high-cost fund in 2007, the company told House Oversight Committee Chairman Henry Waxman, D-Calif., in a letter Monday. Waxman had asked Qwest and 23 other carriers to respond by Monday to questions on how they spend USF subsidies as part of an ongoing inquiry (CD July 28 p6). Waxman is concerned that phone customers are paying surcharges of 11 percent or more to support the fund, he said. Several carriers told us Monday they did not want to release their responses to Waxman, although they had completed the letters. Qwest said it received no high-cost assistance in rural states such as Iowa, New Mexico and North Dakota. “Qwest’s region-wide support … equals the amount of support provided to non-rural eligible telecommunications carriers in West Virginia and was just one-seventh of the non-rural high cost support awarded in Mississippi,” said a letter to Waxman from Shirley Bloomfield, Qwest’s senior vice president of federal relations. The carrier told Waxman that high-cost support should be targeted to rural areas served by non-rural ILECs.
The FCC will reform intercarrier compensation and the Universal Service Fund together, perhaps this year, Tom Tauke, Verizon executive vice president, told reporters Thursday. “If [reform is] going to happen, it’s going to happen in a package,” Tauke said. Two months ago, he doubted intercarrier reform could happen this year, he said. Taking compensation together with USF distribution and contribution is “a lot to swallow,” but court pressure and growing industry consensus makes him optimistic, Tauke said. Now is the “last best chance” for the telecom and technology sector to ally and reform an “unsustainable” system, he said.
The Rural Cellular Association formally challenged an FCC interim cap on the Universal Service Fund high-cost program, filing a reconsideration petition over the weekend. The group was expected to file a motion for stay on Monday, but hadn’t at our deadline. The reconsideration petition also was signed by small wireless competitive eligible telecommunications carriers. “The high-cost fund ‘emergency’ alleged by the commission is a farce,” said RCA Executive Director Eric Peterson. “The decision to implement the cap is based on inaccurate facts, false assumptions, flawed legal reasoning and ignores Congressional direction and the principle of competitive neutrality.”
PORTLAND, Ore. State regulators Wednesday called for a joint federal-state task force to develop national wireless consumer protection standards enforced by a partnership of federal and state authorities. The resolution, adopted by the board of the National Association of Regulatory Utilities Commissioners, marks a major change in NARUC policy.
The FCC should cap federal interstate access charges for rate-of-return carriers at today’s rates while considering Universal Service Fund and intercarrier compensation overhauls, said the National Telecommunications Cooperative Association. The group was responding to a May 2 FCC request to refresh the record on USF and intercarrier compensation. Access costs unrecovered under the capped rates “should be recovered from interim USF funding as another component of Interstate Common Line Support,” NTCA said. The action likely won’t swell the fund because the FCC has capped USF support for competitive eligible telecommunications carriers and is looking to kill the identical support rule, which bases CETC subsidies on incumbent costs, NTCA said. “This decisive FCC action now will preserve and advance universal service in high-cost and rural areas, will provide a specific and predictable universal service mechanism and will provide a reasonable cost recovery mechanism for rate of return carriers for the foreseeable future,” the NTCA said. It also urged the FCC to create a timeline to shift the universal service system from Public Switched Telephone Network technology to IP broadband.
The Senate Appropriations Committee Thursday approved a bill recommending $341 million for the FY 2009 FCC budget. It also admonished the agency for inadequate oversight of the universal program. The FCC needs to do a better job with the program, the committee said. Members also ordered the FCC to report on the feasibility of a broadcast “code of conduct” for foul language, sexual content and violence. They also sought a study of commercially supported broadcasting on public school buses.
The Universal Service Fund for schools and libraries is under the lens of a congressional inquiry into programs prone to payment errors, according to GAO reports and congressional correspondence. The inquiry comes as the FCC must choose a contractor to run the “E-rate” program. The Universal Service Administrative Company, which recently solicited bids for a five-year contract to run the program, sent its recommendation to the FCC last week, a company spokesman told us.
Sen. John McCain, R-Ariz., has accomplished little on communications, ex-FCC chairman William Kennard said Wednesday in a debate hosted by the Media Access Project. Kennard spoke for Sen. Barack Obama, D-Ill., while former NTIA official John Kneuer backed McCain. Obama has a significantly more detailed technology policy, despite a shorter resume, Kennard said. McCain is opposed to Washington “micromanagement” of the industry, and has been dealing with communications issues for years, Kneuer said. The industry has a “stark, stark choice,” Kennard said.