The Kan. Corporation Commission refused to reconsider an early-April decision that it has authority to regulate the billing practices of wireless carriers getting universal service subsidies. It denied reconsideration pleas by 5 wireless carriers, saying none made a convincing case that the original ruling was wrong. The carriers said federal laws denying states jurisdiction over wireless rates and entry preempt state laws on certifying eligible telecom carriers (ETC), particularly carriers getting only federal universal service funding. The KCC (Case 06-GIMT-187-GIT) called billing integral to providing the universal service entitlement, saying the state can’t be given authority to qualify carriers for subsidies while being denied authority over provision of services those subsidies fund. The KCC also said state universal service statutes apply to the services being provided, no matter what technology is used to supply them.
Along with a cap on universal service subsidies (CD May 2 p1), the recommendations from the Federal-State Joint Board on Universal Service late Tues. could hit wireless carriers with a 2nd reduction in their payments. The Joint Board urged the FCC to “consider abandoning or modifying the so- called identical support… rule.” The rule bases competitive carrier funding on the same per-line support given to the rural ILEC operating in the same area.
In a letter to FCC and state regulators, Qwest recommended reforms to the Universal Service Fund’s high-cost program: (1) Capping per-line support to all USF eligible carriers and (2) subsidizing only one wireless connection a household. These are temporary measures, Qwest told members of the State-Federal Joint Board on Universal Service in the April 26 filing. Qwest said permanent changes are needed but it agrees with the “common theme” of recent reform proposals “that the unchecked growth of the universal service high-cost fund must be contained immediately.” For the long run, Qwest recommended Verizon’s proposal to continue capping high-cost support but said “the support should be re-targeted to high cost wire centers and redistributed prior to capping the fund.” In addition, if the Joint Board and FCC decide to use reverse auctions to distribute funding, they should adopt Verizon’s proposal to start with auctions for wireless providers, Qwest said. Meanwhile, the Western Telecom Alliance threw its support to an AT&T proposal for USF reform. “AT&T’s interim stabilization plan properly focuses upon the skyrocketing… support” to competitive providers, the rural telecom group said. “AT&T’s proposal to place a targeted cap upon the industry sector most responsible for recent USF growth is reasonable, effective and equitable.” The plan’s one-year moratorium on new applications by competitors will slow the USF’s growth, the Alliance said.
A bipartisan bill to use Universal Service Fund (USF) money for broadband while curbing USF growth won high marks from the phone industry at a Thurs. press conference by bill authors Reps. Boucher (D-Va.) and Terry (R-Neb.). The 2 House Commerce Committee members offered similar legislation last Congress, but committee leadership never advanced the bill. Boucher said “conversations have not begun yet” with Subcommittee Chmn. Markey (D-Mass.) on the bill.
Odds of an FCC cable franchise order arriving this year rose with Chmn. Martin under pressure from top Republicans on the House Commerce Committee (CD April 25 p10), said industry and FCC officials. In a Tues. letter, Reps. Barton (R-Tex.) and Upton (R-Mich.) asked Martin to put cable operators under video rules imposed on telcos in March. In that rulemaking, the FCC said it would issue an order in 6 months on when and whether cable operators can get the same local franchise authority (LFA) deregulation as Bells. Before Barton and Upton wrote, some on the 8th floor and in industry doubted that 6-month timeframe, saying cable franchising isn’t a priority for Martin, who might be reluctant to act while an LFA appeal continues.
Weighing in on a fight between rural carriers in Ia. and the Bells over alleged call blocking, CTIA said the ever nastier fight (CD April 20 p4) shows why broad intercarrier compensation reform is needed. In that rumpus, small carriers claim big carriers wrongly blocked calls to their subscribers. Big carriers allege rural local carriers are allying with service providers to stimulate high incoming traffic volume and increase terminating access revenue. The Ia. carriers want the FCC to take up the fight as a stand-alone item not tied to the broader intercarrier compensation fight.
House Telecom Subcommittee Chmn. Markey (D-Mass.) is waging an effective oversight campaign over the FCC, NTIA and DTV transition issues, according to interviews with industry sources and analysts. Markey presides today (Tues.) over a 4th hearing on broadband, examining how the U.S. policy compares with those of other countries. Controversy is likely given new rankings that show that the U.S. slipping even further behind in broadband deployment.
Stifel Nicolaus predicted Ia. Telecom will get some of the relief it’s seeking from the FCC through its forbearance petition asking for USF support, in a research note. The FCC must act by Aug. 6. “While the issues surrounding the petition are complicated, and approval is far from certain, we believe it more likely than not, that the FCC will grant Iowa Telecom at least some partial relief on the forbearance petition, and allow the company to recoup some additional regulatory support,” the analyst firm said, predicting it could receive the full amount it’s seeking, $22.2 million. An Ia. Telecom win would add 69 cents per fully diluted share to its bottom line, but will likely drive up the value of the stock, Stifel Nicholas said. “We believe most investors continue to value Iowa Telecom’s equity largely on the basis of the company’s dividend yield, and we note the political challenges that the company would likely face by dramatically increasing its dividend payout shortly after a regulatory win premised on the company being able to increase investment in telecommunications plant in rural areas,” the firm said.
Members of Congress floated ways to widen broadband, some at odds with one other, at a Tues. Computer & Communications Industry Assn. meeting. They discussed Universal Service Fund reform, the 700 MHz auction, Carterfone rules, net neutrality and white spaces, giving different predictions on this year’s legislative trends.
By capping or freezing universal service subsidies to rural carriers (CD April 13 p1), the FCC could create the perfect setting for a much-needed study of subsidy distribution, Embarq told a federal-state board in an April 12 filing. Freezing or capping rural subsidies would stabilize the high-cost program enough to do a more “granular” study of rural telecom costs, the company told the Federal-State Joint Board on Universal Service. Some areas of the country with very high costs don’t get Universal Service Fund (USF) support due to the way costs are measured, Embarq told the joint board, which is close to recommending measures, including a temporary cap, to halt USF growth. “The ability to accurately identify high-cost areas at a very granular level has reached a level of precision that was unimaginable only a few years ago,” Embarq said: “Advances in modeling, better data and ever-increasing computing power” give the Commission “a set of tools capable of producing a study to ensure that all high-cost areas that truly require explicit support are adequately supported,” Embarq said. The FCC should freeze or cap the fund while it works on “stabilizing” the USF, it said: “All things being equal, a temporary freeze would be preferable to a cap… since it ensures that no individual recipient would be made any worse off.” A cap could allow “the possibility of individual winners and losers underneath the cap,” Embarq said.