Federal Universal Service Fund

FCC Chmn. Martin said Tues. he sees reverse auctions as a solution for stemming the “unsustainable” growth of the Universal Service Fund caused by increased competitive providers. Martin told the Federal State Joint Board on Universal Service that he never supported giving USF subsidies to multiple recipients in an area, and just what he feared has happened -- a sharp rise in USF subsidies caused by the increase in competitive rural carriers.

Another universal-service proposal has surfaced, this one from wireless provider Alltel, which backs a “pilot” reverse auction focused on broadband deployment. A bidder would win by offering the lowest price for deploying “substantial broadband service,” in addition to existing USF- supported basic services, to specific percentages of a zip code’s population, Alltel said. All eligible telecom carriers (ETCs) operating in an area, not just the auction winner, would get comparable per-line funding for making the same service commitment. The plan calls for revamping the USF system, such as by limiting growth of per-line support in each study area to the inflation rate. The “transitional” reforms require more accountability and reporting by ILECs and competitive ETCs and would make the Universal Service Administration Co. (USAC), not NECA, responsible for collecting and processing cost data and setting support amounts. NECA is “an RLEC-dominated advocacy group,” Alltel said in the Feb. 16 ex parte filing with the Federal-State Joint Board on Universal Service. The plan would “retain the rule that all ETCs receive the same amount of support per line served,” a practice rural LECs strongly oppose. To “target funds more effectively,” Alltel would: (1) Consolidate study areas served by a single ILEC holding company in each state into a single study area. (2) Apply “non-rural” funding rules to such study areas if they had 50,000-plus lines. (3) Revise the “high cost model” support mechanism for nonrural carriers “to provide support in the highest-cost wire centers nationwide, not just in 10 states.” Rural consumers want high-bandwidth and wireless services but “due to the relatively high costs of deploying… networks in many rural areas, these services are being deployed less rapidly in rural areas than elsewhere,” Alltel said. The plan builds on ideas from W. Va. PSC Consumer Advocate Bill Jack Gregg and others, Alltel said: “These policy changes will affect CETCs as much as ILECs. Alltel is not offering these proposals in an intent to benefit or harm any category of providers.”

Alltel fears Verizon’s universal service reform plan may unfairly target wireless companies, an Alltel official said. The company, still studying the Verizon proposal, “would be concerned with any plan… that implies that wireless is to blame for problems with the current funding system and essentially asks wireless to shoulder much of the burden of USF reform,” he said: “As Verizon correctly identifies, we need a system that provides all high-cost funding recipients with more rational incentives and ensures that consumers receive the benefits of innovation.” Alltel is a major provider of competitive wireless service in rural areas. Verizon’s plan and others will be reviewed by the Federal-State Joint Board on Universal Service 2 p.m. Feb. 20 at the Renaissance Washington Hotel during NARUC’s week-long winter meeting.

Verizon isn’t seeking “sweeping” telecom legislation this Congress, Exec. Vp Public Affairs Tom Tauke told reporters Mon. The 2007 focus is getting broadband to consumers who lack it, but that doesn’t demand major legislation, he said. Congress simply may need to refocus existing grant and loan programs, Tauke said.

Phased-in competitive bidding could slow the growth of the Universal Service Fund (USF) while easing concerns of incumbent rural telcos about shortfalls, Verizon and Verizon Wireless told the Federal-State Joint Board on Universal Service in a proposal filed late Fri. The Joint Board is expected to consider Verizon’s proposal at a Feb. 20 meeting during the NARUC winter meeting in D.C. The Joint Board plans to look at competitive bidding and other ideas for easing demands on the USF during that en banc meeting. The board includes FCC Chmn. Martin, Comrs. Tate and Copps and several state commissioners.

A federal appeals court indicated it may ask the FCC to reconsider parts of an order requiring VoIP providers to contribute to the Universal Service Fund. A 3-judge panel of the U.S. Appeals Court, D.C. questioned possible disparities in the FCC’s treatment of VoIP carriers in relation to other telecom carriers and asked the agency for legal justification for several sections of the order approved last summer (CD June 22 p1), during oral argument Fri.

Numbers-based collection of federal Universal Service Fund (USF) contributions would be simpler to administer and easier for consumers to understand, said an industry study released Tues. The Numbers Coalition, made up of wireless, cable and telecom associations, said the per-number fee would be about $1.20 per month, about what residential wireline consumers now pay. Low-income Lifeline customers could be exempted, with adjustments to ensure against unreasonable assessment against low-volume and low-cost services, the study said. “The numbers-based USF fee does not discourage telephone usage and thus increases consumer welfare as a whole,” the study said: “Consumers would be able to make more long-distance calls for their collar than they do today.”

Lawmakers introduced several telecom measures Thurs. on the opening day of Congress -- some of which didn’t make it last Congress. Senate Commerce Committee Ranking Member Stevens (R-Alaska) introduced 5 measures, including a bill that would reform the Universal Service Fund (USF) program that Senate Minority Whip Lott (R-Miss.) is co-sponsoring. Stevens also is introducing a measure that would address FCC and FTC roles in policing pretexting -- impersonating someone else’s identity to illegally gain access to private phone records. A Judiciary bill was enacted last Congress.

FCC Comr. Tate is “energized” at the thought of reverse auctions to set rural universal service subsidies, she said Wed. at a Phoenix Center conference. Tate wants to hear “positives and negatives” about use of auctions,” she said. “Something needs to be done” about Universal Service Fund growth, Tate, who is Universal Service Joint Board chmn., said: “I think we are at the tipping point.” One thing to keep in mind, Tate said: USF programs must continue to assure adequate infrastructure for homeland security and interoperability needs. Tate moderated a panel on rural broadband that included Dennis Weller, Verizon’s chief economist, who said an outdated USF must change. “Competitive bidding may be the solution” because it “imposes market discipline,” he said. If the USF model is “restructured,” said Brian Adkins, Embarq’s federal legislative dir., rural wireline carriers must shed their carrier-of-last-resort requirements, or all USF recipients must face those mandates. Net neutrality probably will be the top communications issue, above universal service reform, in the Democratic-led Congress, said Daniel Sepulveda, aide to Sen. Obama (D-Ill.). But universal service offers “opportunities for bipartisan cooperation,” he said.

The FCC should deny a Cingular request for Universal Service Fund (USF) subsidies in Va., wireline companies said, arguing the big wireless company doesn’t need USF subsidies. Letting Cingular draw on the USF could sap the subsidy program, Verizon said in an opposition filed late Mon. USF subsidies should be used where telecom service otherwise isn’t financially feasible, Embarq said. “It should not be wasted on uneconomic arbitrage,” said the company, a spinoff of Sprint’s wireline operations.