More groups are urging Congress to pass legislation that would exempt the universal service fund (USF) and E- rate programs from Anti-Deficiency Act (ADA) account requirements. Several groups joined NTCA -- which sent letters Mon. -- in sending letters to the Hill urging a legislative fix in the lame-duck session scheduled to start Nov. 16. By applying the ADA rules to USF, the FCC forced the Universal Service Administrative Company (USAC) to withhold millions in E-rate funds until cash flow issues can be corrected. These groups also said the accounting change could affect USF programs and force USAC to raise USF contribution levels. NARUC told Senate Commerce Committee Chmn. McCain (R-Ariz.) that USAC already has been forced to hold $460 million in E-rate funding. “It is our strong view that applying the accounting standards contained in these acts does nothing to stabilize the fund or promote the goals of universal service, and in fact jeopardizes the stability of the fund,” NARUC said. These groups urged action before the congressional session’s end. NARUC also said USF should also be exempted from the Miscellaneous Receipts Act, even though the Office of Management & Budget ruled that the Act’s not applicable to USF. NARUC noted that the Federal Highway Fund and Fish & Wildlife Service were also exempt from ADA. Joining NTCA and NARUC were OPASTCO, the Independent Telephone & Telecom Alliance, the Rural Telecom Group and the Western Telecom Alliance.
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.
Vonage’s DigitalVoice VoIP service is interstate so it can’t be regulated by state PUCs, the FCC ruled Tues. The ruling, which asserts federal jurisdiction over Vonage-like services, came in response to a preemption petition filed last year by Vonage. Although referring to Vonage service, the decision applies to other types of IP- enabled services, the Commission said.
An accounting change that resulted in loss of money in the Universal Service Fund (USF) (CD Nov 1 p1) could bankrupt some rural telephone companies, NTCA said in a Nov. 3 letter urging key members of Congress to take legislative action to solve the problem. “The entire portfolio of federal programs supported by the… USF, including its premiere high-cost program, is facing a politically perilous situation as a result of a recent accounting modification mandated by the… FCC,” NTCA CEO Michael Brunner wrote. Subjecting the high-cost and related low-income programs to the Anti-Deficiency Act (ADA) would “either skyrocket the contribution factor to 25% or more, or… rural telephone companies could be bankrupted should support payments be withheld in order to avoid such an escalation,” the letter said. The letter was sent to House and Senate leadership as well as the chmn. and ranking minority member of Commerce and Appropriations committees in both houses. NTCA followed up with a letter Fri. to FCC Chmn. Powell, urging the agency’s support for Hill efforts. NTCA told Powell it was in discussions with members of Congress about a solution “but your leadership is critical.” NTCA said in a news release that it has been working “with a broad coalition of private as well as public interests as this situation unfolds in an effort to prevent any harm to the high-cost program.” Required changes in the accounting practices of the Universal Service Administrative Co. (USAC) have resulted in a loss of money and disrupted USAC’s procedures for funding schools, libraries and possibly rural telephone companies. Recipients of universal service funding are particularly concerned about an ADA requirement that USAC can’t make “commitments” to provide funding unless the funds are in hand, which appears to conflict with the way some USF funds are provided. Recipients say the changes could result in higher contribution costs by carriers, which would be passed onto consumers, or serious disruptions to universal service programs. Spearheaded by outside members of USAC’s board, organizations such as NTCA are seeking legislation to exempt USAC from the ADA. Brunner’s letter said Sens. Snowe (R-Me.) and Rockefeller (D-W.Va.) “are engaged in discussions with the FCC chairman and others to develop a legislative solution to this dilemma.” Meanwhile, the USAC has issued its projected “demand” figures for first quarter 2005, which the FCC will use to determine a contribution percentage “factor” in Dec. Based on the USAC filing, a number of parties are estimating the factor could raise to around 12.74% from the current 8.9% due to the accounting changes. Legg Mason said in a report Fri. that it thinks “Congress will be very interested in a permanent legislative fix, possibly during this month’s lame-duck session.” The goal is a rider to the appropriations bill, but it’s possible Congress will settle for a continuing resolution and not pass the appropriations bill this year, the analysts said.
The Universal Service Administrative Co.’s (USAC’s) outside board members are trying to get a legislative fix to solve an accounting problem (CD Oct 6 p1) that caused the $6.5 billion universal service program to lose money and jeopardized not only to the E-rate program but also high-cost rural telephony support. Although USAC can’t lobby Congress, its board has been meeting with state regulators, telecom industry associations, education groups and others to seek help in gaining legislation during the lame-duck session of Congress beginning Nov. 15. “The USAC board is reaching out to constituents, talking to people about a solution, trying to do as much as we can,” said USAC Chmn. Frank Gumper, a Verizon consultant: “We've got to do something to get the situation under control, to get the program back to normal.”
LAS VEGAS -- Whether VoIP’s success is due to “regulatory arbitrage” or “superior technology” remains a key question, according to state PUC commissioners speaking Tues. at the USTA convention here. Commissioners said improper regulation could increase regulatory arbitrage. Meanwhile, other speakers predicted state retail rate regulation would largely fade out by decade’s end.
The Federal-State Joint Board on universal service released its most recent monitoring report, which reflects information filed with the FCC through May 2004. The report said the universal service fund (USF) distributed 61.1% for high-cost support, 25.1% for schools and libraries, 13.4% for low-income support and 0.4% for rural health care support. Total industry revenue for telecom services provided to end users in 2003 rose to $234 billion from $232 billion in 2002. Low-income support increased to $716 million in 2003, up from $676 million. High-cost support increased to $3.3 billion from $2.9 billion in 2002.
FCC Chmn. Powell said Wed. the Commission acted properly in ordering the Universal Service Administrative Corp. (USAC) to change how it accounts for money in the federal E-rate program fund, the subject of a Senate Commerce Committee hearing yesterday. The issue has gotten considerable national attention in recent days, including coverage in the N.Y. Times and across the country. But the FCC’s 2 Democrats sharply criticized Powell over the way the Commission handled the issue.
The Universal Service Administrative Corp. (USAC), which administers the $2.25 billion federal E-rate program, acknowledged at a Senate Commerce Committee hearing Tues. it had lost $4.6 million as a result of an accounting change requiring the corporation to have cash on hand to meet commitment letters. The change forced USAC to sell off high interest Treasury bills (T-bills) and other assets, paying significant penalties.
Many industry and Hill sources said an amendment to the Senate Commerce Justice State (CJS) appropriations bill that would prevent the FCC from adopting a primary line restriction on the Universal Service Fund (USF) (CD Sept 16 p1) is still a long shot. But while they acknowledged Thurs. the bill still had a long road to travel, it was certainly possible it could pass.
The Senate Appropriations Committee voted Wed. to prevent the FCC from imposing a primary-line restriction on Universal Service Fund (USF) support. With no discussion or objection, the amendment to the Senate Appropriations Commerce Justice State bill will forbid the FCC from expending any funds for a USF system in which funds could be distributed only for “primary lines.” The amendment was pushed by Senate Communications Subcommittee Chmn. Burns (R-Mont.) and supported by Sens. Dorgan (D- N.D.), Stevens (R-Alaska), Hollings (D-S.C.), Gregg (R- N.H.), Brownback (R-Kan.), and Durbin (D-Ill.), sources said. Burns said the joint board proposal would hurt Mont.’s economy, which depends on small business. “In short, if the FCC moves forward with this potentially devastating recommendation, rural America would have a harsh winter of economic isolation,” Burns said.