Mulling effects of the FCC Lifeline order, the District of Columbia telecom regulator gave more time for comments on a notice of proposed rulemaking (NOPR) about changes required by the federal order adding broadband support to the low-income fund (see 1609260067). The comments were due Monday, but the D.C. Public Service Commission extended the deadline to Oct. 17, and reply comments to Oct. 31 from Oct. 17. “Due to the requirement that the rule changes required by the Lifeline Modernization Order be in effect by December 1, 2016, there can be no further extensions of time for this NOPR,” the commission said in the Friday notice. Meanwhile, the Kentucky Public Service Commission previewed changes to Lifeline in a news release Monday. "The PSC is currently examining the future of the Kentucky Universal Service Fund (KUSF), which provides the state portion of the Lifeline subsidy," the Kentucky commission said. "The KUSF had been rapidly depleted in recent years, prompting the PSC in March to temporarily increase the surcharge in order to keep the fund solvent while determining its long-term viability." Revenue from contributions to state USFs has declined in multiple jurisdictions, our July canvassing found (see 1607010010).
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.
It’s too risky to increase New Mexico definitions of broadband and unserved and underserved areas in the state’s Rural USF, Public Regulation Commission staff said Monday. In comments on proposed rules taking effect Jan. 1 for the RUSF, the PRC's Telecom Bureau staff urged only conservative actions to avoid litigation. That followed industry opposition in Oregon last week to a proposal to include “access to broadband” in the definition of basic phone service.
The uncertain timing of a federal USF contribution overhaul stirred debate over whether states should proceed with changes to their own funds. In replies Friday at the Nebraska Public Service Commission, some telecom companies urged the PSC to wait to revamp its surcharge methodology until the FCC Federal State Joint Board on Universal Service and the FCC act on federal contribution reform. It’s unclear when the Joint Board will issue a recommendation; the FCC USF contribution reform proceeding has been open for more than a decade.
Revenue from contributions to state USFs has declined in multiple jurisdictions, we found last week from state USF financial documents and from interviewing state and industry officials. Those officials cited a variety of reasons for the falling revenue. Some cited outdated contribution methodology, while others said the drop is part of deliberate efforts to control the size of funds. Some states reported efforts to revamp USF contribution methodology, and one said its hands were tied by state legislation.
The House FY 2017 FCC funding bill retained its policy riders curbing the agency’s net neutrality order, mandating a pause to the set-top proceeding and mandating FCC process overhaul Thursday as it advanced to the floor. Appropriations Committee Republicans shot down Democrats' attempts to modify the Financial Services bill during the long full committee markup, approving the bill 30-17.
BOSTON -- The FCC was criticized by another group of stakeholders at INTX, as the show drew to a close Wednesday. All four state telecom regulator panelists heaped criticism on the FCC over a range of process and legal issues. Critiques involved moving Lifeline subsidies for the poor to broadband from voice in a way that allows the FCC to certify providers as eligible telecom carriers (ETC) instead of just states having that authority, and pre-empting anti-municipal broadband state law. Process concerns included that the federal commission takes too long to issue the text of orders, is too partisan, and commissioners don't cooperate. State commissioners of both parties said the FCC doesn't work closely with state telecom regulators and follow through by having such cooperation reflected in rules. Asked in Q&A whether the FCC had any bright spots, panelists praised it for moving USF to broadband.
A magistrate judge recommended against dismissing Charter’s challenge of a Minnesota Public Utilities Commission order asserting state authority over interconnected VoIP services. The report and recommendation (in Pacer) by U.S. Magistrate Judge Hildy Bowbeer isn't an order or judgment, and parties may object to the recommendation within 14 days. The U.S. District Court in Minnesota can issue an order 14 days after objections and responses are filed.
The federal USF had more than $8 billion in financial assets as of Dec. 31, said the 2015 annual report of Universal Service Administrative Co., which oversees the fund for the FCC. The USF, which had assets of $4.5 billion in 2006, paid out $8.4 billion in 2015 but collected more than that, further increasing its cash and other assets, said industry consultant Billy Jack Gregg in an email Wednesday summarizing findings from his analysis of the annual report (see 1603310052). A portion of the assets was used to offset USF funding commitments in 2015, such as model-based Connect America Fund Phase II support, Gregg said. "These assets also provide the reserve funds which the FCC will use to mitigate the $1.5 billion annual increase in the Schools and Libraries Fund, and to underwrite CAF Phase II competitive bidding support." The assets include $6.8 billion in investments, the report said.
The FCC revamped rate-of-return USF support mechanisms for the broadband era, in a 249-page order and Further NPRM released late Wednesday, with Commissioner Ajit Pai partially dissenting and partially concurring. The order gives rate-of-return telcos the option of receiving rural high-cost USF subsidies based on a broadband cost model over 10 years, which will be supplemented by $150 million in additional annual funding from existing USF reserves. For carriers not opting in to the model-based approach, the order updates a legacy mechanism -- renamed Connect America Fund Broadband Loop Support (CAF-BLS) -- to fund stand-alone broadband service to customers, which was a major driver of the reform effort. The changes include measures and incentives to spark greater broadband deployment, the order said.
A new draft FCC reauthorization bill from Senate Commerce Committee Chairman John Thune, R-S.D., no longer includes some process overhaul provisions that he floated last year. Thune announced last week that he wants to mark up the FCC Reauthorization Act in the coming weeks, and a new nine-page draft bill text is circulating. A Commerce Committee aide told us the bill could be marked up as soon as next week. The tentative markup date is March 16, a telecom industry lobbyist confirmed.