Wireless carriers rejected legislative changes to Idaho USF, while rural LECs supported action but asked for more data on possible costs. The Idaho Public Utilities Commission asked in docket GNR-T-17-05 for recommendations for a possible legislative fix for state USF to present to the legislature next year (see 1808240017). Carriers disagree "with the premise that there is any need for changes to the funding mechanism for the IUSF in order to maintain the solvency,” said CTIA Director-State Regulatory Affairs Benjamin Aron in a Thursday letter: "Given the modest levels of the current surcharges there is considerable room to increase surcharge levels to offset the diminishing IUSF contribution base.” If the PUC must recommend legislative changes, it should either follow Washington state and support USF exclusively through general revenue using taxpayer funds, or Montana's “model of trusting the sufficiency of federal universal service support and declining to provide additional state funding,” Aron said. The Idaho Telecom Alliance wants legislative changes but said the state should first convene workshops and PUC staff should estimate costs of implementing various models used by neighboring states. Any device or service that connects to the public switched telephone network should be assessed a USF charge, and any carrier of last resort should be supported, the RLEC group 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.
Senate Indian Affairs Committee members focused on what they see as deficiencies in FCC practices for determining broadband coverage on tribal lands, during a Wednesday hearing. The hearing examined a September GAO report that said the FCC overstates broadband availability on tribal lands because it considers service available in a census block if a provider can serve at least one location (see 1809100041). A Thursday Senate Commerce Committee hearing on progress in rural broadband deployments is likely to also touch on tribal governments' concerns. But the panel will largely be an overview of the chamber's work in this Congress on encouraging broadband projects in rural areas and is likely to frame Senate Commerce's approach to that issue in 2019, lawmakers and lobbyists told us.
The FCC proposed a USF contribution factor of 20.1 percent for Q4, up from Q3's 17.9 percent, of U.S. interstate and international telecom end-user revenue, said an Office of Managing Director public notice Wednesday in docket 96-45. The proposal will take effect if the commission takes no further action within 14 days. It's the first time the factor will exceed 20 percent (see 1808310047). USF demand has trended up and the industry long-distance revenue base has trended down, producing a rising contribution factor over time, though variables cause some quarterly fluctuations. Commissioner Mike O'Rielly, who chairs a federal-state joint board, opposes any USF assessment of growing broadband revenue, which he says state joint board members favor (see 1802060028). “As accessible telecommunication revenues continue to decline the universal service fee necessarily increases," emailed State Joint Board Chair Chris Nelson of South Dakota. "In 2014 the FCC referred the question of Universal Service Fund contribution methodology to the Universal Service Joint Board for a solution to this unsustainable increase in the fee percentage. At that time the percentage was 16%, now it tops 20%. This is no surprise. The State Members of the Joint Board have a proposal to solve this and other issues with the contribution methodology. Failure to act will only see the fee continue to rise.” An FCC spokesperson and O'Rielly's office didn't comment.
Nebraska commissioners voted 4-1 for a hybrid state USF contribution mechanism with a $1.75 per connection surcharge for residential wireline, postpaid wireless and interconnected VoIP services and a 6.95 percent revenue-based surcharge for business and other services. CenturyLink and small rural carriers Wednesday applauded the Public Service Commission’s Tuesday rate design order in docket NUSF-111, which followed last year’s decision to move to a connections-based contribution mechanism. Cox and CTIA raised red flags. Other state commissions are working toward USF updates, including Alaska, New Mexico and Oklahoma.
The FCC should try harder to thaw the separations freeze, two state members of the Joint Board on Separations and the state chair of the Joint Board on Universal Service said in interviews ahead of NARUC's summer meeting. They complained that the federal side of the Joint Board isn’t engaging to update separations factors set more than 30 years ago and first temporarily frozen in 2001. NARUC members plan to vote next week in Scottsdale, Arizona, on asking the FCC to extend the freeze’s 2018 expiration by two years, and other draft resolutions related to the Lifeline national verifier, IP captioned telephone service (IP CTS) and a precision agriculture bill pending in Congress (see 1807030052).
CTIA said the FCC is in no position to determine if any telecom companies are a threat to U.S. security, and it should work with the Department of Homeland Security, which has more expertise in the area. Other commenters also urged caution. The Rural Wireless Association said the FCC has already chilled investment in rural networks. Reply comments were posted this week in docket 18-89 on the NPRM approved 5-0 by commissioners in April (see 1804170038).
The FCC approved 3-1 an order to further relax telecom service discontinuance duties and related regulatory processes in an effort to remove barriers and encourage the industry shift from legacy wireline to next-generation, IP-based offerings. Commissioners also voted 4-0 to adopt an order to relieve certain rural telcos of USF contribution obligations on their broadband services to equalize their treatment with other carriers and promote affordability. Commissioner Jessica Rosenworcel largely dissented on the discontinuance order and concurred on the rural telco USF order.
The FCC proposal to bar USF spending on products or services from companies seen as posing a national security risk is meeting with mixed reaction, with disagreements about whether rules should be limited to USF-funded equipment and services or should have broader reach, recent docket 18-89 comments show. Huawei called the rulemaking launched in April (see 1804170038) an "improper and imprudent" blacklist, and some critics questioned the efficacy of the proposed approach. Comments were due Friday, replies July 2.
The federal USF shift to the U.S. Treasury is moving ahead, with changes to the contribution and distribution processes happening Tuesday, Universal Service Administrative Co. emailed Monday. "Effective immediately, as of May 2018, USAC will accept payments to and distribute funds from the U.S. Treasury," said a USAC announcement on a web page where it said further transition updates will be posted. "We are taking this step to safeguard USF funds consistent with guidance from GAO and OMB. And we have made clear for months that the funds were going to be moved to the Treasury,” emailed an FCC spokesman.
Utah Public Service Commission staff is pleased with early results of changing state USF to a connections-based contribution from the earlier revenue-based model, said PSC Telecom Manager Bill Duncan in an interview this week. The change to 36 cents per line took effect Jan. 1; PSC telecom staff released its first status report taking connections into account on April 19. CTIA opposes the change and its lawsuit created legal uncertainty for Utah's pioneering shift away from revenue-based contribution, the method used for federal and other state USFs (see 1804120046). Separately, industry supported an Idaho Public Utilities Commission staff finding that revamping state USF requires the state legislature to act.