Federal Universal Service Fund

FCC legal advisers said Wed. they were aware of concerns by rural ILECs that universal service money was shrinking while requests for it were growing with the arrival of competitive carriers in rural areas. But they also told members of the National Telecom Co-op Assn. (NTCA) that those were very difficult problems to solve because the Telecom Act encouraged competition as well as universal service. The advisers told NTCA that numerous universal service issues were teed up at the Commission, including what services should be funded and how the support money should be raised, and they wouldn’t be easy to solve. NTCA members were in town for their annual Legislative & Policy Conference.

Reports of fraud in the E-rate program may be “just the tip of the iceberg,” said House Commerce Committee Chmn. Tauzin (R-La.), who’s pushing the panel’s investigation of the program. As part of the Universal Service Fund (USF), the E-Rate program funds telecom services to schools and public libraries. In letters to the FCC and the Universal Service Administrative Co. (USAC), which administers USF under the FCC’s direction, Tauzin cited the potential of more than $200 million in fraud and raised questions about the effectiveness of federal oversight of the program, which never has been fully audited. Oversight & Investigations Subcommittee Chmn. Greenwood (R-Pa.) also signed the letter.

Verizon agreed to pay $5.7 million to U.S. Treasury to settle FCC investigation into violations of Telecom Act ban on Bell companies’ providing long distance service before receiving authority from FCC. Commission announced it had entered into consent decree with Verizon in which company admitted it had marketed long distance in its local service region on 5 occasions in Jan.-July 2002 through cable TV ads, bill inserts and direct mail solicitations. FCC Chmn. Powell said action demonstrated agency’s “commitment to deterring companies from entering the market prematurely.”

OPASTCO said Tues. it was upset with way many state PUCs were allowing competitive carriers to receive Universal Service Fund (USF). Group said it would start pushing message to Congress that states were straying from congressional intent of Telecom Act of 1996 and that FCC needed more oversight of PUCs. With OPASTCO members in Washington for annual legislative and regulatory conference, many were planning to meet with members of Congress this week in attempt to put more focus on USF issues, particularly designations of eligible telecom carrier (ETC) by state PUCs.

There’s no reason FCC has to limit itself to same universal service contribution system for all types of telecom carriers, American Assn. of Paging Carriers (AAPC) told Commission in comments Fri. AAPC told agency that all 3 proposals to change contribution methodology to one based on connections would hurt paging companies and suggested agency use different systems for different carriers

While economic improvement will be major theme pushed by most ILEC and Bell company lobbyists on Capitol Hill in new session beginning in Jan., ILECs also plan to address other issues, from tax reform to content management. Bell and ILEC lobbyists have said regulatory change that could help spur investment is primary goal, but many are vague on specifics and cite pending FCC action as precursor to Hill lobbying strategy.

Congress eventually will have to “weigh in” on universal service, NTCA CEO Michael Bunner said Wed. in letter to incoming Senate Commerce Committee Chmn. John McCain (R- Ariz.) that urged continuing universal service fund (USF) support. “We continue to advocate these concepts before the Federal Communications Commission in a plethora of open proceedings,” letter said. “Yet, it is our belief that it will be crucial for Congress to weigh in on these matters as well, to ensure congressional intent is being met in terms of ensuring the future of this indispensable national policy.” Bunner said “string of adverse regulatory and judicial decisions” in name of “competitive neutrality” have eroded congressional mandate on universal service. “The Senate has long played a leading role in advocating and monitoring the many aspects of this critical national policy,” he said. NTCA outlined its leading USF principles: (1) Universal service support must be sufficient and sustainable and all providers of telecom should contribute as public interest mandates. (2) Eligible telecom carriers (ETCs) receiving universal service support should receive such support based on their own costs rather than on costs of incumbent. (3) Competing ETCs should receive support only when they actually had captured customer lines, begun service to new lines or modified their rates or services. (4) States must take their public interest duties more seriously when authorizing additional ETC’s in given market.

SAN FRANCISCO -- Internet not only is undercutting rural telcos’ regulatory-based revenue sources, but also is shifting their policy focus away from states, industry conference heard here Mon. As e-mail, instant messaging and Web-based services, along with cell calls, increasingly supplant wireline voice and fax communications, local incumbents’ access revenues plunge correspondingly, compounding regulatory reductions in access rates, Chmn. Robert Riordan told convention of OPASTCO.

Mich. PSC called for comments by Sept. 9 on whether it should create state universal service fund (USF) to supplement federal universal service support. PSC (Case U- 13477) asked parties to comment on: (1) Whether state USF was necessary. (2) Effects of USF on affordability under rate regime of total element long-run incremental cost. (3) Other effects on state and industry if PSC were to create fund. Parties also were asked to make suggestions on how PSC should conduct USF inquiry and timeline it should follow.

Requiring all facilities-based broadband providers to contribute to schools and libraries (e-rate) portion of Universal Service Fund (USF) would create level playing field and broaden the pool’s funding base, Verizon Regulatory Affairs Dir. Scott Randolph told FCC in ex parte filing July 2. Randolph’s letter came after reply comments deadline for broadband wireline proceeding at FCC July 1, in which some cable operators expressed opposition to Verizon’s proposal.