Federal Universal Service Fund

Congress faces a choice between acting quickly to preempt states from regulating VoIP or taking more time to tackle the Internet service in a broader rewrite of the Telecom Act, House Telecom Subcommittee members said Wed. At a hearing on VoIP, industry witnesses disagreed. The preference seemed to be what some committee members considered impossible: A more comprehensive Telecom Act rewrite done quickly. House Commerce Subcommittee on Commerce Chmn. Stearns (R-Fla.) told us after the hearing, however, that the debate is more complicated than that. “Some of them [Commerce Committee members] don’t want to do anything at all,” he said. Full Committee Chmn. Barton (R- Tex.) didn’t take a position on the best approach, but he did predict “VoIP is going to be huge. I think it’s going to make cell phone expansion look like wagon trains.” Barton told the witnesses Congress will preempt states on VoIP regulation: “There should be only one, federal set of rules that apply to VoIP.”

House Commerce Committee ranking Democrat Dingell (Mich.) urged the FCC to reject “immediately” an AT&T petition asking that its enhanced prepaid calling card services be classified as interstate information services. In a letter to FCC Chmn. Powell last week, he expressed concern that “until the Commission acts, AT&T will continue its apparent practice of improperly withholding payments it should be paying into the Universal Service Fund (USF), as well as withholding appropriate payments of intrastate access charges.” In a petition filed more than a year ago, AT&T asked the Commission to rule that its “enhanced” prepaid calling card services were “interstate communications subject to interstate, rather than intrastate, access charges.” It also argued that services were information, rather than telecom services, because calling card users heard recorded ads when placing calls. Dingell called the claims absurd and said he was “troubled by the implications of the relief AT&T seeks.” He said ruling in AT&T’s favor would “upset the present balance which permits lower consumer phone rates,” because the company sought to “avoid its obligation to pay lawful intrastate access charges… on calls in which the calling and called parties are located within the same state.” He also urged the Commission to reject AT&T’s claims that its prepaid calling card services were information services, saying that granting such claims would “only free AT&T of any obligation to contribute to the USF in connection with these services” and create an “enormous loophole for other carriers to avoid supporting universal service.” Consumer Federation of America (CFA) Research Dir. Mark Cooper said in an interview CFA was “concerned” about AT&T trying to avoid paying access charges and USF contributions. “The FCC should make sure that everybody who benefits from the public switched network should make fair contributions to recover costs” of maintaining it, he said.

Supported by at least 2 Bell companies, USTA urged the FCC in comments to leave the IP-enabled services market free of economic regulation. But some consumer groups argued the Commission should subject VoIP to Title II regulation to protect consumers, and use its authority to exempt such services from unnecessary regulations. The Local Govt. Coalition reminded the FCC it had “no power to adopt a comprehensive scheme for regulating information services independent of Title II, Title III or Title VI” of the Communications Act. Meanwhile, states pressed for a technology-neutral functional approach to VoIP oversight. “Regulators should not be choosing technology winners and losers,” NARUC Gen. Counsel Brad Ramsay told us. More comments were expected after our deadline Fri.

The organization that administers the universal service program reportedly is planning an audit of the prepaid calling card business to see if providers are contributing enough to the universal service fund (USF). A spokesman for the Universal Service Administrative Co. (USAC) said he can’t comment on whether audits are being conducted, but sources close to the process said the board recently approved funding to conduct such an audit.

OPASTCO members from rural telephone companies throughout the country are lobbying on Capitol Hill this week to urge 3 things: Changes to the universal service program, a delay in VoIP legislation and repeal of the estate tax. “The message you're taking to Capitol Hill will directly impact your companies’ future, the viability of your communities and the ability of your customers to have modern service,” OPASTCO Pres. John Rose told more than 130 members Tues. at a morning briefing before the Hill visits: “Go to the Hill and deliver the message for rural areas.”

Advanced telecom capabilities such as broadband are being deployed to all Americans in “a reasonable and timely fashion,” telecom and cable operators said in comments to the FCC Mon. The comments were filed in response to the 4th inquiry launched by the Commission under Sec. 706 of the Telecom Act earlier this year (CD March 12 p6). The Act requires that the Commission conclude the inquiry and report to Congress within 180 days.

Hours before the Senate took up legislation seeking to ban Internet access taxes, President Bush promoted the ban as a way to stimulate broadband deployment (see separate story, this issue). The Senate late Mon. was prepared to take a procedural vote as the first step toward consideration of S- 150 by Sen. Allen (R-Va.). S-150’s main opponent, Sen. Alexander (R-Tenn.), said Senate Majority Leader Frist (R- Tenn.) has been urging compromise for months, but said talks appeared to have failed: “We simply have a difference of opinion.”

The FCC is expected to call for comments “in a month or 2” on a proposal by the Federal-State Joint Board on Universal Service (CD March 1 p1) to make changes in the funding program’s operation, including a controversial plan to limit funding to one line per customer.

Rural telephone company executives at a convention in Washington applauded loudly Mon. when FCC Comr. Adelstein promised he would fight to defeat a proposal to limit universal service funding to one “primary” line. “I hope it’s dead on arrival at the FCC,” Adelstein said of the proposal by the Federal-State Joint Board on Universal Service. Limits on universal service funding would put consumers in rural areas “at a disadvantage,” he told the National Telecom Co-op Assn. (NTCA). Such limits would “undercut investment in rural America,” he said.

Newly anointed House Commerce Committee Chmn. Barton (R- Tex.) reiterated his support for the “Tauzin-Dingell” method of telecom deregulation, noting that he was a co-sponsor of the bill in the 107th Congress. Asked if Tauzin-Dingell was essentially dead since the FCC has enacted some of the bill’s provisions, Barton said the philosophy behind Tauzin-Dingell hasn’t died. Barton has said the Telecom Act of 1996 will need to be reformed in the upcoming 109th Congress, as has Senate Appropriations Chmn. Stevens (R-Alaska), who will likely become Senate Commerce Committee Chmn. next year. Barton said the U.S. was falling behind other countries -- Korea, Japan, Western Europe -- in broadband deployment, and the govt. should look for ways to accelerate the rollout of high-speed Internet access. However, Barton has named Rep. Pickering (R-Miss.), an opponent of the Tauzin-Dingell approach, to be the Committee vice-chmn. Pickering said when evaluating the Telecom Act, the Committee will take into account many factors, including VoIP, the universal service fund (USF) and spectrum reform. Pickering said the Committee should look to “maintain competition and choices” when reforming telecom law. Barton was careful not to commit to any changes in telecom policy, noting that the Committee hadn’t yet been through the hearing process that he said is needed to educate members on the state of the industry. Barton said the Committee will have hearings this year on the federal budget and will likely hear testimony from relevant Administration officials, including those from the Commerce Dept. Barton said the Committee will look for ways to streamline the budget of agencies over which the Committee has jurisdiction. The Committee will also continue its investigation into the E-Rate USF fund that provides funds to schools and libraries for telecom services, Investigations Subcommittee Chmn. Greenwood (R-Pa.) said. Barton didn’t say whether he would support the E-rate program, only saying it remains a “controversial” spending mechanism. House Telecom Subcommittee Chmn. Upton (R-Mich.) will remain in his post, and he said Thurs. that the Subcommittee would begin to “lay the framework” for telecom reform this year. He said the Subcommittee will hold a hearing on the Satellite Home Viewer Improvement Act (SHVIA) next week. There were few changes to the Committee structure from that of former Chmn. Tauzin (R- La.). Rep. Hall (R-Tex.), who switched from the Democratic party, will take Barton’s position as chmn. of the Energy Subcommittee. Rep. Shadegg (R-Ariz.) will be the Committee Whip and Rep. Shimkus (R-Ill.) will become the Committee Coalition Dir. Barton said most of the staff would remain in place, save the few who follow Tauzin when he leaves Congress. Barton announced C.H. “Bud” Albright would be the Committee Staff Dir. Albright comes to the Committee from Reliant Resources -- an energy company -- and once was the Committee’s Chief Oversight Counsel. Lawrence Neal will become Deputy Staff Dir. for Communications. Neal spent 20 years in the press office of former Sen. Phil Gramm (R-Tex.) and comes to the Committee from the Census Bureau. Andy Black will be the Deputy Staff Dir. for Policy. Black was on Barton’s Energy Subcommittee and also in the private sector for The Advocacy Group.