Five telecom groups back the Federal-State Joint Board’s proposal to cap universal support to competitive eligible telecom carriers (CETCs), they told Senate Commerce Committee leaders in a June 25 letter. A cap “is a necessary first step toward comprehensive reform of the Universal Service Fund (USF),” said the International Telephone & Telecommunications Alliance, Western Telecommunications Alliance, National Telecommunications and Cooperative Association, USTelecom and OPASTCO. During 2001-2006, CETC support ballooned $15 million yearly to nearly $1 billion, the groups said, while funding for incumbent carriers has remained flat since 2003. CETC funding burdens consumers, the groups argued, adding that the money “is being spent inefficiently” by underwriting multiple wireless carriers vying to serve the same geographic areas.
The House today (Wednesday) is set to debate an appropriations bill (HR-2829) that would give the FCC $2 million to design a program explaining the shift from analog to digital TV. The FCC originally sought $1.5 million, but the Financial Services Subcommittee upped the sum out of concern about “low” public awareness about the transition. The overall bill could face a veto, since it contains provisions dealing with pay raises for members of Congress.
Arguments against capping universal service subsidies to competitive carriers are based on “short-term self interest rather than long-term public interest,” OPASTCO told the FCC. “Excessive growth in the High-Cost program that is threatening its sustainability is attributable solely to competitive ETCs,” said OPASTCO in reply comments on the cap proposal. On the other hand, extending the interim cap to all rural telecom companies would “seriously threaten” wireline rural carriers, OPASTCO said. “At greatest risk would be continued service to subscribers in the most remote and highest-cost regions that may not have other reliable service options,” said the group, which represents wireline LECs.
The FCC wants comments on Oblio Telecom’s request for a ruling that it is “unreasonable” for a wholesale carrier to refuse to honor a reseller’s “proof of exemption from Universal Service Fund pass-through charges.” Oblio told the FCC that “a wholesaler’s selective honoring of valid USF pass-through exemption requests from some reseller customers, but not other similarly-situated customers, and to selectively refund collected USF charges to some, but not others, constitute unjust and unreasonable discriminatory practices.” The FCC set July 19 for comments, August 3 for replies.
The Washington Court of Appeals ruled a consumer’s billing suit against AT&T Wireless qualified as a certified class action. The ruling was on a consumer suit alleging AT&T from 1998 to 2003 unlawfully billed a “universal connectivity charge” as a government-mandated tax when it actually was recovering an overhead cost of AT&T’s assessment to support the federal universal service fund. The suit (Case No. 57523-6-I) alleged AT&T violated state consumer protection laws by misleading consumers into thinking the fee was a tax and violated contracts by increasing the fee without notice. Litigation so far was about whether the case should be tried as a class action. A state trial court had rejected class action status, saying plaintiffs failed to demonstrate a likelihood that all or most AT&T subscribers were deceived, and that class action status would provide a windfall to customers who had paid the fee without complaint. The appeals court, however, said deceptions in trade are unlawful in all transactions, regardless of whether an individual customer notices, so it’s enough for class-action status to show some customers were deceived into thinking the fee was a tax. The court remanded the case to the lower court for trial as a class action.
Alltel said the Florida Public Service Commission did rural customers in the Quincy area of the panhandle region a disservice in deferring action Tuesday on its application for wireless eligible telecom carrier (ETC) status, which would qualify it to receive universal service subsidies. Alltel said the PSC deferral was inappropriate because it hinged on national universal service policy issues rather than the merits of Alltel’s petition. Alltel (Case 06-0582-TP) said the PSC shouldn’t have turned its ETC petition into a platform for debate on national problems arising from the extremely rapid growth of the federal Universal Service Fund. The PSC said it deferred action in the face of conflicting recommendations from its staff. Some staffers recommended granting the application because it met all legal requirements and would give customers more service options. But other staffers urged denial on ground that naming Alltel an ETC would contribute to the explosive growth of the federal Universal Service Fund, leading to higher universal service fees for all Florida phone customers. The PSC members who voted for the deferral said they acted not only because of the Universal Service Fund issues but also to ensure all issues related to the need for Alltel as an additional universal service provider in the Quincy area are addressed.
CHICAGO -- Everything’s becoming reliant on broadband but the Universal Service Fund (USF) still is used to “facilitate voice competition in areas where it’s not economic to support even one provider,” FCC Chairman Kevin Martin said at NXTcomm Tuesday. The USF sorely needs to be “updated to facilitate broadband,” he said. Martin addressed the group remotely; his second child is due any day and he wanted to stay close to his wife in Washington, FCC staff members said.
Economists dueled Fri. over the govt. need to stimulate broadband deployment. At one point the debaters discussed whether broadband can is like “water or an iPod.” Robert Atkinson, Information Technology & Innovation Foundation (ITIF) pres., called for a “national broadband policy” to address what he said is incontrovertibly a lag in broadband deployment in the U.S. The OECD broadband rankings’ validity can be debated, but the key fact is that year ago the U.S. stood higher in those rankings and has slipped, he said at the ITIF-sponsored debate. “We need a proactive policy” on both supply and demand, said Atkinson: “The OECD numbers show we can do better.” But the Progress & Freedom Foundation’s Scott Wallsten said facts are scarce when it comes to justifying concern about U.S. rankings or to decide if a national policy is needed. OECD data are unreliable owing to inconsistent collection methods, he said. The count doesn’t include large categories like colleges and universities, Wallsten said: “The key is to identify what market failure there is.” Asked by a listener if society’s responsibilities vary in line with whether broadband is seen as a “fundamental need,” like a utility, or a consumer product, like an iPod, Wallsten said “broadband sure isn’t [a utility like] water.” Atkinson said he comes down “in the middle, slightly toward the water side.” Wallsten warned that some wanted to make ISDN national policy and now many don’t even know what ISDN is, except that it’s a slow technology. Atkinson said he wasn’t advocating a policy based on a specific technology like ISDN but rather a wider- scope broadband policy. The economists agreed on one thing: Any subsidies should be from “general funds,” not the USF. “There’s an enormous amount of inefficiency in USF support,” Atkinson said. “The USF is growing out of control,” said Wallsten. “Don’t go down that road again.”
“Dramatic shifts in the way universal service support is funded” reflect changes in the telecom industry, the FCC said in its 2005 “Telecommunications Industry Revenues” report, the latest in its annual series. The USF is funded via industry long distance, or “toll” revenue, which has seen continual drops, most recently from $71 billion in 2004 to $69 billion in 2005, the report said. Counting international toll revenue, the total USF base in 2005 was $75.3 billion, data show. One big change, said the FCC: Traditional long distance providers who in 1997 accounted for more than 80% of USF contributions now contribute less than 40%. Other items: (1) Overall wireless industry revenue grew 9% in 2005 to $107 billion. ILEC revenue fell about 2% to $104 billion. CLEC revenue rose 6% to $22 billion in 2006, one of few categories with more recent data.
USF subsidy of wireless carriers doesn’t significantly increase wireless provider coverage in rural areas, said studies for Verizon by Criterion Economics. Economist Jeffrey Eisenach said FCC, USAC and wireless carrier coverage map data show “unsubsidized carriers cover more people than subsidized” carriers. Subsidized competitive carriers aren’t compelled to expand geographic coverage areas, he told a Wed. briefing. They can add subscribers merely by opening a retail store in a town they already serve, intensifying coverage in the town without pushing out to more rural areas, he said. Another way to look at it, said Eisenach: Most USF-subsidized wireless service occurs in areas where unsubsidized wireless providers already operate. “All but 3.2 million, about 2%, of the population in subsidized areas have duplicative coverage from unsubsidized carriers,” he said. For example, “all but 2 million of Alltel’s 34.7 million subsidized covered pops have coverage from unsubsidized carriers,” Eisenach said. “There is no statistical correlation between the amount of subsidies paid and the proportion of the population or land area that has wireless coverage. I don’t think most people, including policymakers, have focused on the fact that the USF subsidizes lines,” not coverage areas. “We would strongly disagree that USF subsidies don’t equal more wireless service to rural Americans, said a CTIA spokesman. “Rural Americans desire wireless service, just like suburban Americans.”