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.
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.
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.
Senate Communications Subcommittee Chmn. Burns (R-Mont.) said he wasn’t sure when he will introduce the Universal Service Fund (USF) draft bill that has been floating around for some time, but said it could be before this session ends (CD Oct 28 p1). “We're thinking pretty quick, we think,” he said. Burns also said that once recommendations were received from the Federal-State Joint Board that’s studying USF distribution methods, further legislation might be warranted. “We don’t want to go down the distribution route until we see what the Joint Board has done,” he said. “I don’t want to preempt them in any way.”
States and municipalities are expressing concern that legislation designed to prevent taxes on access to Internet service eventually could restrict local govt. regulation of telephony and cable service. NARUC, the National Governors Assn. (NGA), National Assn. of Telecom Officers & Advisors (NATOA) and the TeleCommUninty Alliance (TCUA) are among the local interests expressing concern about S-150, the proposed Internet Tax Non-Discrimination Act.
Reps. Terry (R-Neb.) and Stupak (D-Mich.) chastised the FCC for failing to significantly reform a provision of the universal service fund (USF) Thurs. (CD Oct 17 p4). In response to a 10th U.S. Appeals Court, Denver, ruling, the FCC directed state regulators to compare rural rates with urban rates and sought comments on rate reviews. The “nonrural” fund -- $234 million for Bells and other large ILECs to serve rural customers -- has come under criticism because only states receive any funding, much of which goes to BellSouth. Miss. gets the lion’s share with $120 million. Terry and Stupak are the principal sponsors of legislation (HR-1582) designed to reform the distribution formula to be based on wire centers rather than statewide averages, which supporters say would spread the fund more evenly. “When given an opportunity to fix one of the most unfair and poorly targeted programs in the federal government, the FCC took a pass,” Terry said. “By turning a deaf ear to the public outcry, they've put the ball in our court and we're going to act.” Sen. Smith (R-Ore.) has sponsored a similar bill (S- 1380).
The FCC proposed an $806,861 fine against Globcom, a Northbrook, Ill., long distance reseller, for not making Universal Service Fund (USF) and Telecom Relay Service (TRS) contributions. The Commission said Tues. that Globcom owed $700,000 to the USF as of Aug. and hadn’t satisfied its obligation to contribute to the TRS Fund, which helps people with hearing or speech disabilities use the telephone system. The agency said Globcom apparently underreported its revenue to the Commission “and at times failed to report revenue information at all.” That information is used by the FCC to calculate carriers’ USF and TRS payments. The FCC Enforcement Bureau said this is the largest fine ever proposed for such violations and FCC Chmn. Powell said it’s “an important step in preserving the integrity of the Universal Service Fund by sending a signal to carriers who shirk their duty to pay their fair share.” The agency said it increased the normal level of fines because “it appears that Globcom deliberately chose not to pay its universal service contributions each month for revenues derived from January 1, 2001, to the present.” The Commission said that despite “numerous monthly communications” from the Universal Service Administrative Co. (USAC), Globcom had “done nothing to address this matter.” It also ordered Globcom to submit a report in 30 days outlining its plans for coming into compliance with the rules. Globcom can seek a reduction or cancellation of the fine in that 30-day period but the agency warned it wouldn’t take inability to pay as an excuse without federal tax returns, financial statements or other objective documentation.
The Progress & Freedom Foundation (PFF) released a study on the universal service fund (USF) that said the program was “ill-defined” and threatened by new technology. The study, written by Raymond Gifford and Adam Peters, outlined several possible solutions, but said “both regulators and legislators would be well-advised to take a step back and reconsider what the universal service fund is really supposed to pay for before determining which mechanisms should be employed.” One proposed solution is “phone stamps,” a voucher program to offset costs in rural areas for low income people. At a PFF panel discussion on Fri., several speakers discounted that idea. Nanette Thompson, Alaska PUC Comr., said such a “means-based” approach isn’t realistic because the expense for providers is in building the network. “It’s not a question of affordability of service, but of the cost to provide the service,” she said. Other ideas included an offset similar to the earned income tax credit and using a “reverse auction” as a distribution method. The paper also suggested abandoning charges on interstate services with an across-the-board surcharge on all communications service revenue. Thompson, who’s also the state chmn. on the joint federal-state board on USF, said the state side of the board favors that approach. Matt Brill, aide to FCC Comr. Abernathy, the federal chmn. of the joint board, said such an approach would likely require legislation. John Rose, OPASTCO pres., said reform of USF should focus on 4 issues: (1) The public interest standard. (2) An increase in accountability. (3) Distribution based on actually costs. (4) A broader base of support to draw from. John Stanton, Western Wireless chmn., said wireless companies should be included in the distribution of USF funds since that technology is well suited for rural areas and since it’s becoming the only line for many consumers. He said while wireless company contributions make up 30% of the USF, wireless companies receive only 2% of the distributions.
Careful not to step on the toes of the House Commerce Committee, House Small Business Rural Enterprise Subcommittee Chmn. Graves (R-Mo.) said he would be working with Commerce Committee Chmn. Tauzin (R-La.) as they examined the problems and potential solutions for the Universal Service Fund. After a subcommittee hearing Thurs. that focused mainly on eligible telecom carrier (ETC) designation, Graves said he had many concerns about the fund -- particularly how it was applied to rural small businesses -- and said he would work with Tauzin and the Commerce Committee as each panel examined USF issues. The House Telecom Subcommittee held its own hearing on USF issues Wed. (CD Sept 25 p1).
In the first of 3 days of House activity on the universal service fund, the House Telecom Subcommittee took a broad look at the program as most members and witnesses said something had to be done to fix the program before it becomes insolvent. But agreement ended at that point, as an array of witnesses offered competing suggestions for a fix.