Rural senators expressed variety of concerns about Universal Service Fund (USF) and way FCC is administering it in Senate Commerce Communications hearing on issue Wed. Sen. Rockefeller (D-W. Va.) criticized FCC Chmn. Powell, saying Powell wasn’t committed to USF despite “swearing” not to undermine fund during his Senate confirmation hearing. Rockefeller said FCC was using uncommitted e-rate funds to keep USF contributions stable. “I'm not sure of his commitment to e-rate. I'm not sure of his commitment to universal service,” Rockefeller said, adding that he was “very unhappy” with Powell’s treatment of those issues. FCC needs to be “much more aggressive and timely” in redefining USF contribution system and should have it “worked out” by April, Rockefeller said. Sen. Dorgan (D-N.D.) also was critical of Powell, saying FCC had “chopped away at” USF and fund was in great jeopardy if FCC didn’t take aggressive action. He also said Powell should be called before Senate Commerce Committee to testify about USF.
Wash. regulators granted wireless carrier RCC Minnesota, which does business under Cellular One brand, eligible telecom carrier (ETC) status. That qualifies carrier to receive universal service subsidies. Wash. Utilities & Transportation Commission (Case UT-023033) granted RCC’s petition despite objections of several rural incumbent telcos. WUTC disregarded incumbents’ call for hearings on their claim that RCC shouldn’t get ETC status because its wireless signals didn’t cover all wireline exchanges within its cellular service area. WUTC said hearings weren’t mandatory on ETC applications and weren’t necessary because RCC had demonstrated that support from USF would enable it to make infrastructure investments necessary to fill in its coverage gaps. WUTC said ETC designation for RCC would result in increased investment, more customer choice and improved public safety without harming rural incumbents.
Responding to request by AT&T (CD June 13 p6), FCC voted Thurs. to apply unused e-rate funds to reduce size of contributions carriers made to Universal Service Fund (USF). Agency emphasized that action ensured that USF line item on customers’ bills would remain “stable for the immediate future.” Increases in carrier contributions translate to increases in line items on customer bills because carriers pass those costs on to users. USF item originally was on agenda for open meeting Thurs. but FCC voted on it ahead of time. Decision appeared to be somewhat controversial, with Chmn. Powell concurring in part and Comr. Martin dissenting in part. E-rate program helps schools and libraries finance infrastructure for computers.
Neb. Supreme Court denied petition for direct hearing of lawsuit challenging legality of PSC’s 7% state universal service fund surcharge. Action means case must work its way through lower state courts. David Domina, attorney for plaintiffs in class action suit on behalf of all Neb. telecom ratepayers, said case would be filed in Lancaster County Dist. Court. Top Neb. court gave no reason for refusal to hear case. Suit alleged that surcharge set by PSC in 1999 actually was state tax that could be imposed only by act of legislature. Surcharge generates $55 million annually for state USF.
FCC is expected today (June 13) to take action on AT&T request that it apply unused e-rate funds to reduce universal service fund (USF) assessment on long distance carriers. Commission has scheduled vote on unused funds issue at agenda meeting, although it hasn’t indicated how vote will go. AT&T Vp Robert Quinn acknowledged that company had urged agency to take such action. He said AT&T first made proposal in March in response to FCC request for comment on what to do about $950 million in unused e-rate funds. Company stepped up its lobbying recently after Universal Service Administrative Co. (USAC) announced it would have to raise USF assessment to 8.77% of interstate revenue, up from 7.28%. Quinn said that would translate to further increase in 11.5% USF fee now charged to its customers to cover assessments. Customer fee is higher than percent paid by AT&T because of company’s continuing problem of declining revenue. Fee charged to AT&T is based on level of revenue 6 months earlier. By time AT&T makes contributions, its revenue is lower than that, meaning fees to customers have to be raised to get amount of money required. Quinn said AT&T also stepped up action because time had run out for action on waiver request to help ease revenue problem by letting AT&T base contributions on estimates of future revenue, rather than 6-month-old revenue. New assessments go into effect July 1. He said AT&T separately had asked FCC for longer term fix for declining revenue problem, such as basing contributions on number of lines rather than revenue. Quinn said problem appeared to be more acute for AT&T than some companies. Companies such as Verizon that are just entering long distance business have increasing revenue, he said. Some carriers have opposed AT&T’s initiative for fear it will muddy larger contribution reform issue. Meanwhile, FCC set 1 p.m. June 21 meeting to explore broader issue of whether to change USF contribution methodology. Agency late Wed. said it wanted “additional input from industry and other affected parties” on proposals to reform contribution system. Commission said it invited state members of Federal-State Joint Board on Universal Service to join in presiding over meeting.
Alaska Regulatory Commission (ARC) Chmn. Nan Thompson warned state’s lawmakers that failure to reauthorize her agency could endanger federal universal service funding that supported rural telecom service. In letter to legislature, Thompson said if there were no state commission, there would be no agency to handle annual universal service certifications required by FCC. Federal universal service fund (USF) rules require state commissions to make annual certification that USF money is being used for intended purposes. as prerequisite for continued federal support. Agency recently filed certification for 2002 and probably would be able to perform duty for 2003, but after that there would be no entity to ensure that state’s rural telecom carriers continued to receive the $70 million in annual USF support that now flows to Alaska. She said there would be other adverse consequences to Alaska’s economy, state budget and all regulated utilities if ARC weren’t renewed. She said “regulatory and legal confusion” surrounding dying ARC would undermine efforts by state’s telecom, electric, gas, pipeline, water and sewer companies to obtain financing for new projects. Legislature in regular and first special session was unable to break political barrier raised by key Senate Republicans that had blocked ARC reauthorization. Agency isn’t due to die until June 30, 2003, but Thompson warned that it must start curtailing its activities July 1 unless renewed. Legislature will try again to settle ARC issue in 2nd special session that’s due to convene June 24.
Ad hoc group of Neb. ratepayers asked Neb. Supreme Court for ruling that 7% monthly phone bill surcharge that supported state universal service fund was illegal tax. Plaintiffs say fee set by PSC in 1999 is unconstitutional tax that should have been imposed by legislature, not agency. Suit also alleged local exchange companies were misusing money from fund on general network upgrades rather than subsidizing service in high-cost areas. Surcharge, which generates more than $50 million annually, applies to all intrastate services except Internet access and covers costs above state’s $17.50 residential and $27.50 business benchmark rates. Some 26 of state’s 50 LECs draw from state USF.
ISPs could benefit from industry proposal to revise way it collects contributions from telecom carriers for universal service fund (USF), Information Technology Assn. of America (ITAA) told FCC in comments filed late Mon. Commission had asked for comments on proposal to move to connection-based methodology, meaning carriers’ contributions would be based on end-user connections -- generally wires to homes and offices or wireless phone numbers -- rather than based on interstate revenue. While proposal involves rather technical adjustments, it has elicited strong feelings because it would require wireless and local exchange carriers to contribute more and long distance carriers less. Under current system, long distance carriers are main contributors. In both scenarios, customers ultimately pay because carriers pass costs on to them in form of fees on bills.
FCC proposal to change way it assesses contributions from carriers for universal service fund (USF) isn’t competitively neutral as required by Telecom Act, Verizon said in comments filed Mon. at agency. Commission has proposed assessing contributions on flat, per-connection basis (CD Feb 15 p11), which means long distance companies would be freed from having to contribute, Verizon said. Companies collect USF fees from their customers to cover those contributions but size of those customer fees can affect their overall bills and thus, some say, their competitiveness. Verizon said per-connection plan would mean ILECs and wireless carriers would have to collect bulk of money because long distance companies didn’t have many “connections” -- lines to home or business or wireless phone numbers. FCC is looking at possible change in current system because carriers such as AT&T with declining revenue have complained that they're assessed too much and thus are collecting too much from their customers. Assessments are based on future revenue and AT&T has said it keeps finding itself collecting fees based on former, higher revenue. Verizon said that problem could be solved by basing contributions on estimated future revenue, with true-up feature, which is proposal AT&T made in another proceeding. Among others weighing in late Mon., American Assn. of Paging Carriers (AAPC) said proposal would result in “unjustified increase in USF assessments” for paging carriers. AAPC recommended that 2-tiered fee structure be established for paging carriers, with less charged to one-way pagers than to advanced paging services. “Converting USF assessments for paging carriers to a flat, per pager charge would be a desirable modification… if implemented properly,” AAPC said. “However, the proposed charge of [25 cents] per pager per month is grossly excessive and unjustified and inconsistent with statutory requirements.” USTA urged FCC to “to look at the larger picture” and develop long-term plan for collecting universal service contributions. “The failure to adopt a contribution mechanism that allows for the full funding of the high-cost universal service support mechanism in a competitively neutral manner is contrary to law and would be bad public policy,” USTA said. OPASTCO and National Rural Telecom Assn. said they supported idea of flat fee but not connection-based method proposed by agency earlier this year. Organizations said plan would violate mandate that contributions be made on nondiscriminatory basis: “The proposal would practically exempt from making contributions providers whose principle offering is the interstate transmission that actually gives any telecommunications service its interstate character… If LECs are to contribute under a flat-fee mechanism, then the IXCs must pay monthly contributions of at least the same amount for each of their interstate customers.”
If telcos don’t like FCC’s proposed “connection-based” method of collecting contributions to universal service fund (USF), they could help FCC by suggesting alternative, FCC Comr. Abernathy told USTA members Thurs. Speaking at group’s Washington Leadership Conference, she said she was convinced current contribution system “isn’t sustainable” so something would have to replace it. Abernathy told group it probably would take “a good 2 years” for FCC to replace current collection system and agency would welcome ideas from carriers. Explaining recently opened wireline Internet access proceeding, she said FCC’s proposed definition of Internet access as information service could mean that “most provisions of Title 2 [of Telecom Act] would not apply to Internet access.” She said there also was universal service angle to that proceeding because USF contributions were assessed only on telecom services. Under assumption that DSL was telecom service, USF contributions now are assessed on DSL provision. Proposed new definition for wireline Internet access services as information service could be interpreted as excluding DSL from universal service base because it’s no longer telecom service, she said. And that could have “significant impact” on money available for universal service support for high-cost carriers, she said. Asked about time frame for broadband proceedings, she said desire was by end of year but that would be “rocket speed.” She said she thought some parts would be completed, perhaps with further notice of proposed rulemaking on remaining issues.