Federal Universal Service Fund

As part of an effort to persuade the FCC to eliminate rate-of-return (ROR) regulation of rural ILECs (RLECs), Western Wireless gave the Commission a study titled “How Rate of Return Regulation Transformed the USF [Universal Service Fund] for Consumers into Corporate Welfare for the RLECs.” The study by Economics & Technology Inc. (ETI), included in Western Wireless’s reply comments filed Feb. 13 (CC Doc. 96- 45), said more than $1 billion in excess funding goes to rural ILECs and more than $500 million of their corporate operations expenses appeared to represent inefficiencies. Western Wireless -- which petitioned the FCC to open a rulemaking to eliminate ROR regulation of rural ILEC -- said the agency also should eliminate ROR-based access charges as part of intercarrier compensation reform and should recommend to the Federal-State Joint Board on Universal Service a way to replace ROR-based universal service support mechanisms “with a competitively neutral, forward-looking, least-cost technology-based universal service funding mechanism for all carriers.” A group of rural ILECs from Neb. told the FCC, also in reply comments, that some of Western Wireless’s comments “misrepresent the facts.” The Neb. companies said: “Innuendo, and not facts, is the only information that has been supplied to support the charge that the growth of high- cost universal service support [is caused by] ROR regulation.” The Neb. ILECs said the issues raised by the Western Wireless petition are being addressed in other proceedings so it’s “unnecessary and wasteful” to open another rulemaking as proposed by Western Wireless.

Vonage CEO Jeffrey Citron warned Fri. that “premature regulations could kill the nascent VoIP industry.” Speaking at a policy lunch sponsored by the Progress & Freedom Foundation in Washington, Citron said regulations could slow broadband deployment, undermine the U.S. position as a technological leader and force service providers offshore. He urged legislators to “bring clarity to the VoIP regulatory framework to protect competition. New laws are needed to ensure Internet applications remain free from regulation.”

With the FCC preparing to conduct a comprehensive study of how the federal govt. should regulate VoIP, NCTA for the first time laid out what the cable industry saw as the regulatory regime it would like. In a white paper sent to FCC commissioners and Capitol Hill Mon., NCTA said federal and state policy-makers should be careful not to overregulate this new technology and service and, in fact, should impose minimal regulation. Such an approach to VoIP could have potential implications for the Universal Service Fund (USF) and the Communications Assistance for Law Enforcement Act (CALEA) which are funded under traditional common carrier regulations.

The Federal-State Joint Board on Universal Service appears to be “very much divided” in its effort to seek improvements in the Universal Service Fund (USF)and, as a result, probably will present the FCC with some “conflicting views,” Western Wireless CEO John Stanton said Tues. in an interview with Communications Daily. Even in areas where there’s a majority view in the Joint Board’s recommendations, there probably will be an “active minority” view, perhaps leading to divisions at the FCC as well, Stanton predicted.

Western Wireless and NTCA officials, on opposite sides of many issues on the Universal Service Fund’s future, said Fri. they shared opposition to recommendation of a primary line restriction by the Federal-State Joint Board on Universal Service. Of the issues before the Joint Board, “the specter of primary line restriction is probably most troubling,” Mark Rubin, Western Wireless dir.-federal govt. affairs, told an FCBA lunch.

Several senators wrote to the Federal-State Joint Board on Universal Service leadership to argue against a primary line restriction for the universal service fund (USF). In a Dec. 18 letter to FCC Comr. Abernathy, joint board federal chmn., and Alaska Regulatory Comr. Nanette Thompson, state chmn., the senators argued that limiting USF to the primary line would deny rural consumers equal access to telecom services. The letter was signed by Senate Communications Subcommittee Chmn. Burns (R-Mont.), Senate Minority Leader Daschle (D-S.D.) and Sens. Dorgan (D-N.D.), Johnson (D-S.D.), Baucus (D-Mont.), Snowe (R-Me.), and Lincoln (D-Ark.). It said a primary line restriction would force rural customers to pay “exorbitant rates” for 2nd phone lines or wireless service. It said the Joint Board was considering imposing the primary line restriction, but hadn’t made any formal recommendations at this point. “Rural consumers want and need affordable multiple connections -- often from multiple providers -- just as much as consumers in urban areas,” the letter said. “The fact is that there is nothing reasonable or comparable about denying rural people access to 2nd lines or cellphones.” A primary line restriction would limit rural carriers’ ability to service debt on facilities approved by regulators and built, the senators wrote. They said small business could be badly hurt, since many needed more than one line. “We understand your concerns about the size of the program, but disagree with the need to take this drastic step of limiting support to a primary line,” the letter said.

Cox, which for 6 years has advocated the benefits of circuit-switched telephony, introduced voice-over-Internet protocol (VoIP) in the Roanoke, Va., area, where it will go head-to-head with Verizon. But unlike many cable players that in recent days have announced VoIP as their first voice offerings, Cox sees its long-term strategy as more of a hybrid, with the circuit switches serving as a backbone for a national architecture and VoIP deployment in smaller markets where its relatively low startup costs make it the more attractive option.

FCC Comr. Adelstein reiterated Thurs. his concern about the pressures on the Universal Service Fund (USF) caused by the growth of competitors seeking support from it, and recommended a new process that could place limits on competitive use of USF support. Speaking at a telecom conference sponsored by FCBA and the Practising Law Institute, Adelstein said the Telecom Act intended multiple carriers to be eligible for support or it wouldn’t have created the eligible telecom carrier (ETC) process for additional carriers to gain funding. However, he said he wondered whether Congress had anticipated the size of the demand that was emerging. “It may come to a choice of financing competition or financing network development in rural areas,” he said.

FCC Chmn. Powell gave early indications of his thinking about a regulatory regime for Voice-over-Internet Protocol (VoIP) Mon., saying he saw consensus that the service might be deemed “interstate” in nature and that concerns about VoIP were focused on 4 or 5 discrete issues. His comments to reporters came after an FCC forum on VoIP that featured industry leaders, state public utility commissioners and others.

A USTA plan to get high-tech suppliers to support a deregulatory lobbying campaign may be an antitrust violation, 26 competitive telecom companies plus ALTS and CompTel said in a letter sent Fri. to key congressional committees. USTA invited top executives of high-tech companies to a closed dinner Oct. 20 in Washington to discuss a possible lobbying alliance and seek funding from the suppliers. One Bell official later characterized the plan as a natural move, given that high-tech suppliers had tended to support Bells’ deregulatory campaigns.