Federal Universal Service Fund

There was no agreement on whether the FCC should grant Level 3 petition seeking relief from access charges on “voice-embedded IP communications,” in comments filed with the Commission. Level 3 had asked the agency to forbear on rules that might be interpreted as permitting LECs to impose access charges on IP traffic originating or terminating on the public switched telephone network (PSTN), while the agency completes its reform of intercarrier compensation. The FCC last month ruled that Pulver.com’s computer-to- computer Free World Dialup service was an unregulated information service, marking the first “easy” step in addressing IP-based services (CD Feb 13 p1). However, many agreed Level 3 petition dealing with VoIP that touches the PSTN, raised more complicated issues, which should be addressed in the forthcoming VoIP rulemaking proceeding.

The FCC could “come under heavy pressure from lawmakers to back away” from a proposal by the Federal-State Joint Board on Universal Service to limit universal service funding to customers’ primary lines, Legg Mason said Mon. in a research report. The proposal released late Fri. sought to curtail the burgeoning increase in demand on the Universal Service Fund (USF), fueled in part by the growth of competition from wireless providers. The action means the current situation in which USF support can go to multiple lines and multiple carriers no longer would exist. The board offered the FCC suggestions for easing the plan’s impact on rural telephone companies: (1) “Restate” existing USF support for rural LECs (RLECs) based on primary lines so they wouldn’t lose support at first. (2) Order lump sum payments for RLECs so they would be kept whole at first. In both cases, RLECs would lose support only as they lost primary lines to competitors. (3) Freeze the per-line support available to competitors but “hold harmless” the RLECs so they don’t lose funding. FCC Comr. Martin had said his support for the primary line restriction was contingent on adopting the hold-harmless approach. The primary line plan was criticized by both competitors and RLECs. Western Wireless said the proposal would create “huge implementation difficulties” and was “antithetical” to the Telecom Act’s goals. The National Telecommunications Co-op Assn. (NTCA) said limiting universal service support to a single line “is not the right way to control the growth of the fund.” NTCA said “better management” could accomplish the same end: “All carriers should demonstrate their costs and receive support based on those actual costs.” NECA Pres. Bob Anderson said he was concerned that providing support to only one line would “seriously disrupt the flow of revenue to rural telephone companies.” He said rural companies depended on universal service revenue to provide services such as broadband: “Without these revenues it would be very difficult, if not impossible, for these companies to continue providing the telecommunications services that their customers are now receiving.”

A federal-state board recommended Fri. that the FCC limit universal service support to one line per customer to make sure the Universal Service Fund (USF) remains solvent. The recommendation by the Federal-State Joint Board on Universal Service drew partial dissents from 3 members. FCC Comr. Adelstein, Mont. PSC Comr. Bob Rowe and Nanette Thompson of the Alaska Regulatory Commission said restricting funds to primary lines “is a well-intentioned effort that will have a deleterious effect on the provision of universal service.” In a joint statement, they said “restricting funding to primary lines is not necessary to control fund growth.”

Giving VoIP a “new voice in Washington and in states,” several VoIP providers led by the VON Coalition officially announced a group to encourage a public policy that refrains from applying traditional telecom regulation to Internet voice communications. The group, called The Voice Over Internet Coalition, includes AT&T, Callipso, Convedia, iBasis, Intel, Intrado, ITXC, MCI, PointOne and Texas Instruments. The group, which has unofficially operated a few weeks (CD Dec 10 p4), announced new members and expanded principles Mon.

Senate Appropriations Chmn. Stevens (R-Alaska) told the leadership of the Federal-State Joint Board on Universal Service reform he would oppose restricting the universal service fund (USF) to a single line. In a Jan. 22 letter to FCC Comr. Abernathy and Alaska Regulatory Comr. Nanette Thompson, who are co-chmn. of the board, Stevens said restricting USF to the primary line is “contrary to the fundamental purposes for universal services.” Stevens said the restriction to a single line would favor urban consumers over rural consumers. Extending USF to multiple lines would let rural carriers build out network facilities, he said. “I also worry that limiting support to primary lines would also become burdensome on small businesses operating in rural areas because they would be forced to pay higher rates for their telecommunications services in high-cost areas than they would pay in urban areas,” Stevens said. He also said he worried a “split decision” by the Board would result in confusion in rural areas and deter investment. “It is my hope that the Joint Board will be able to find a unified solution that will encourage investment in the rural markets rather than cause confusion,” Stevens said.

As part of an effort to persuade the FCC to eliminate rate-of-return (ROR) regulation of rural ILECs (RLECs), Western Wireless gave the Commission a study titled “How Rate of Return Regulation Transformed the USF [Universal Service Fund] for Consumers into Corporate Welfare for the RLECs.” The study by Economics & Technology Inc. (ETI), included in Western Wireless’s reply comments filed Feb. 13 (CC Doc. 96- 45), said more than $1 billion in excess funding goes to rural ILECs and more than $500 million of their corporate operations expenses appeared to represent inefficiencies. Western Wireless -- which petitioned the FCC to open a rulemaking to eliminate ROR regulation of rural ILEC -- said the agency also should eliminate ROR-based access charges as part of intercarrier compensation reform and should recommend to the Federal-State Joint Board on Universal Service a way to replace ROR-based universal service support mechanisms “with a competitively neutral, forward-looking, least-cost technology-based universal service funding mechanism for all carriers.” A group of rural ILECs from Neb. told the FCC, also in reply comments, that some of Western Wireless’s comments “misrepresent the facts.” The Neb. companies said: “Innuendo, and not facts, is the only information that has been supplied to support the charge that the growth of high- cost universal service support [is caused by] ROR regulation.” The Neb. ILECs said the issues raised by the Western Wireless petition are being addressed in other proceedings so it’s “unnecessary and wasteful” to open another rulemaking as proposed by Western Wireless.

Vonage CEO Jeffrey Citron warned Fri. that “premature regulations could kill the nascent VoIP industry.” Speaking at a policy lunch sponsored by the Progress & Freedom Foundation in Washington, Citron said regulations could slow broadband deployment, undermine the U.S. position as a technological leader and force service providers offshore. He urged legislators to “bring clarity to the VoIP regulatory framework to protect competition. New laws are needed to ensure Internet applications remain free from regulation.”

With the FCC preparing to conduct a comprehensive study of how the federal govt. should regulate VoIP, NCTA for the first time laid out what the cable industry saw as the regulatory regime it would like. In a white paper sent to FCC commissioners and Capitol Hill Mon., NCTA said federal and state policy-makers should be careful not to overregulate this new technology and service and, in fact, should impose minimal regulation. Such an approach to VoIP could have potential implications for the Universal Service Fund (USF) and the Communications Assistance for Law Enforcement Act (CALEA) which are funded under traditional common carrier regulations.

The Federal-State Joint Board on Universal Service appears to be “very much divided” in its effort to seek improvements in the Universal Service Fund (USF)and, as a result, probably will present the FCC with some “conflicting views,” Western Wireless CEO John Stanton said Tues. in an interview with Communications Daily. Even in areas where there’s a majority view in the Joint Board’s recommendations, there probably will be an “active minority” view, perhaps leading to divisions at the FCC as well, Stanton predicted.

Western Wireless and NTCA officials, on opposite sides of many issues on the Universal Service Fund’s future, said Fri. they shared opposition to recommendation of a primary line restriction by the Federal-State Joint Board on Universal Service. Of the issues before the Joint Board, “the specter of primary line restriction is probably most troubling,” Mark Rubin, Western Wireless dir.-federal govt. affairs, told an FCBA lunch.