The Federal-State Joint Board on universal service released its most recent monitoring report, which reflects information filed with the FCC through May 2004. The report said the universal service fund (USF) distributed 61.1% for high-cost support, 25.1% for schools and libraries, 13.4% for low-income support and 0.4% for rural health care support. Total industry revenue for telecom services provided to end users in 2003 rose to $234 billion from $232 billion in 2002. Low-income support increased to $716 million in 2003, up from $676 million. High-cost support increased to $3.3 billion from $2.9 billion in 2002.
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 said Wed. the Commission acted properly in ordering the Universal Service Administrative Corp. (USAC) to change how it accounts for money in the federal E-rate program fund, the subject of a Senate Commerce Committee hearing yesterday. The issue has gotten considerable national attention in recent days, including coverage in the N.Y. Times and across the country. But the FCC’s 2 Democrats sharply criticized Powell over the way the Commission handled the issue.
The Universal Service Administrative Corp. (USAC), which administers the $2.25 billion federal E-rate program, acknowledged at a Senate Commerce Committee hearing Tues. it had lost $4.6 million as a result of an accounting change requiring the corporation to have cash on hand to meet commitment letters. The change forced USAC to sell off high interest Treasury bills (T-bills) and other assets, paying significant penalties.
Many industry and Hill sources said an amendment to the Senate Commerce Justice State (CJS) appropriations bill that would prevent the FCC from adopting a primary line restriction on the Universal Service Fund (USF) (CD Sept 16 p1) is still a long shot. But while they acknowledged Thurs. the bill still had a long road to travel, it was certainly possible it could pass.
The Senate Appropriations Committee voted Wed. to prevent the FCC from imposing a primary-line restriction on Universal Service Fund (USF) support. With no discussion or objection, the amendment to the Senate Appropriations Commerce Justice State bill will forbid the FCC from expending any funds for a USF system in which funds could be distributed only for “primary lines.” The amendment was pushed by Senate Communications Subcommittee Chmn. Burns (R-Mont.) and supported by Sens. Dorgan (D- N.D.), Stevens (R-Alaska), Hollings (D-S.C.), Gregg (R- N.H.), Brownback (R-Kan.), and Durbin (D-Ill.), sources said. Burns said the joint board proposal would hurt Mont.’s economy, which depends on small business. “In short, if the FCC moves forward with this potentially devastating recommendation, rural America would have a harsh winter of economic isolation,” Burns said.
One of the few surprises at Wed.’s FCC mostly well scripted meeting was a strong statement from Comr. Copps warning that the FCC is still falling short on homeland security. Shortly after the session’s start, Copps -- responding to an FCC report on post-Sept. 11 communications changes that led off a meeting largely focused on homeland security -- addressed at length Commission shortcomings. Sources involved with emergency communications said Thurs. that issues remain, echoing in part Copps’ statements. Copps, sources said, delivered what he viewed as a moderate speech.
SBC said in a July 30 letter to the FCC that AT&T’s exclusive contract with the Defense Dept. (DoD) should be examined. AT&T has petitioned the FCC to have its long distance calling card be classified as an information service rather than a telecom service, which would prevent the carrier from meeting universal service fund and access charges requirements (CD July 26 p1). SBC said AT&T was engaged in “unethical and illegal acts” because it wasn’t collecting the charges on the cards, which are used by military personnel, including in Iraq and Afghanistan. “DoD should hold AT&T to the terms of its procurement contract and/or launch an investigation into whether the representations AT&T made in bidding on that contract, or AT&T’s performance under the contract, violate federal laws and regulations.” SBC said DoD would set a “dangerous precedent” if it gave the contract to suppliers that offer lower prices by violating the law. SBC said AT&T’s threat to raise rates would mask dodging of USF payments. SBC said: “Providers that play by the rules likely will seek a refund of their USF payments or copy AT&T’s charade.” AT&T has said that since the service includes a prerecorded advertisement, it’s an informational service. SBC disagreed. The letter was signed by Paul Mancini, SBC senior vp-asst. gen. counsel.
Wireline and wireless carriers alike opposed reseller TracFone Wireless’s request for universal service funding in N.Y., saying it would add pressure on the Universal Service Fund (USF) without benefits. But public interest groups said the entry of TracFone, which offers prepaid service, would help low-income consumers. TracFone had asked the FCC to give it eligible telecommunications carrier (ETC) status, needed to receive USF support, and to forbear from rules that require a carrier to have facilities of its own to receive that USF support.
States might have to begin thinking about replacing revenue from telecom services with another revenue stream, perhaps the streamlined sales tax, House Judiciary Commercial & Administrative Law Subcommittee Chmn. Cannon (R-Utah) suggested Fri. During Fri.’s hearing on VoIP regulation, Cannon asked many questions about state taxation of VoIP specifically and telecom and Internet taxation generally. In a broad discussion that also touched on the Internet tax moratorium and wireline access regulations, Cannon said VoIP will likely reduce state revenue, even if states get authority to tax it.
The Senate Commerce Committee approved several pieces of legislation Thurs. -- including VoIP, satellite home viewer improvement act (SHVIA), low power FM radio, junk fax and reauthorization of the Corp. for Public Bcstg. (CPB) -- but fighting over an FTC nominee brought an abrupt end to the markup, which could have prevented some amendments from being introduced. Sen. Wyden (D-Ore.) infuriated Committee Chmn. McCain (R-Ariz.) by invoking the “2-hour rule” which prevents committee meetings from lasting more than 2 hours when the Senate is in session. Wyden was battling McCain on procedures concerning Deborah Majoras, the nominee for FTC Chmn. Wyden opposed the nomination over disagreements with FTC action on gasoline prices. Sources said potential amendments to junk fax and CPB legislation couldn’t be offered after Wyden’s procedural move. The Committee had approved the 2 bills under unanimous consent with the understanding they could be amended later in the markup.