Cap universal service subsidies across the board rather than targeting “one select group of providers,” 4 senators told the Federal-State Joint Board on Universal Service in a Fri. letter. “We reiterate the need for capping the overall program and doing so in a manner that does not pick winners and losers or favor one technology over another,” said Republican Sens. Sununu (N.H.), DeMint (S.C.), McCain (Ariz.) and Ensign (Nev.). Recommendations the joint board soon will make to the FCC may are expected to include temporary caps (CD April 13 p1), possibly applied only to new competitors -- mostly wireless -- rather than wireline incumbents. The FCC should regard caps not as an end in themselves, but as tools it can use to buy time in which to consider permanent reform, the letter said. The senators urged the joint board to “give significant weight to a reverse auction mechanism for distributing USF support,” a mechanism that should include all carriers, not just one “platform,” such as wireless. A reverse auction would “bid down support needed to serve particular consumers” thus reducing the USF high-cost program’s size, the senators said. Reverse auctions are efficient, guarantee “regulatory parity,” offer “market- oriented solutions” and “allow for the emergence of new technologies to many markets,” they said.
A state-federal regulatory board is expected to recommend a 2-year cap on the subsidies some rural carriers get from the Universal Service Fund (USF), sources said Thurs. The cap, which could be announced in a week or 2, probably will be applied only to competitive rural carriers, with incumbent landline rural telecom companies not subjected to the limit on subsidy growth, knowledgeable industry sources said. The so-called competitive eligible telecom carriers (CETCs) are mostly wireless.
USCellular CEO John Rooney urged the FCC to provide more USF money to wireless carriers in rural America. Rooney filed a letter with the FCC following a meeting with Comr. Tate at the CTIA conference in Orlando. “Urban consumers have numerous choices in services and service providers today, and will continue to have such choices into the future,” Rooney wrote: “That is not the case in our nation’s rural areas. Many small towns are left out of the wireless revolution because no company’s business plan supports the construction of the networks needed to enable consumers to use a mobile phone everywhere they live and work.” Networks won’t get built without support, he said: “You can be certain that if it were profitable to do so, it would have happened in the nearly 20 years since the Commission first issued cellular licenses in rural America.” Rooney also urged the FCC to grant its ETC applications in N.C., Va., and N.H., saying consumers in those states “have been waiting nearly three years for us to accelerate our network construction and deliver new services.”
The Universal Service Fund high cost program has all sorts of problems, and simply curbing its size isn’t enough, Windstream told the Federal-State Joint Board on Universal Service Mon. in an ex parte filing. Windstream, formed in a merger between Valor and Alltel’s spun-off wireline business, isn’t “heavily reliant” on USF support, so implementing its ideas wouldn’t significantly change how much money it gets, it said. Among problems it cited: (1) The program inadequately targets high-cost, rural areas. (2) Based on embedded costs, it “provides higher levels of support to less efficient providers.” (3) Competitive eligible telecom carriers (CETCs) can get support based on incumbent wireline carriers’ costs, often “unrelated to the CETCs’ costs and based on different technologies.” Broader reform is needed, starting with how CETCs are funded, Windstream said. The joint board should recommend limiting USF support to one mobile and one wireline ETC per area, the company said. Windstream said support to CETCs should be based on their costs or a reverse auction. Reverse auctions to set support levels should be viewed with “caution,” but if the joint board goes that way it should take Verizon’s suggestion and start with auctions for mobile CETCs, Windstream said. The FCC shouldn’t designate any more CETCs until reform is finished, said Windstream. Other recommendations: (1) Target support to smaller areas, such as wire centers, to be sure support goes to the highest-cost rural areas. (2) Change how high-cost support levels are calculated by using forward-looking costs, if possible. Forward-looking cost models “may not be efficient or practical” for very small rural companies, Windstream conceded. (3) Consider using money “available from eliminating multiple mobile CETCs to support under-funded high-cost areas.” (4) The joint board should set an “affordability” benchmark to encourage comparable rates nationwide.
FCC Chmn. Martin has some questions to answer on the Universal Service Fund (USF), House Telecom Subcommittee Chmn. Markey (D-Mass.) said in a letter sent Mon. to the Commission. Markey wants a “blueprint for achieving affordable broadband service” for all Americans and plans to study proposals aimed at that goal, he told Martin in the letter. “I am eager to get your thoughts,” Markey said, voicing concern at the fund’s “explosive growth” to $7.2 billion so far this year, largely due to the uncapped high- cost fund. Martin said at the FCC oversight hearing (CD March 15 p1) that he favored capping the fund. Markey’s letter seeks specifics: “Will you ask the Joint Board to place a ‘cap’ or ‘freeze’ on the high cost program in its entirety, or on some portion of the program, such as the funding provided to a certain class of telecommunications carriers?” Markey asked Martin to quantify the effect of the FCC decision to treat DSL as an information service. Contributions for the service ended Q3 2006. “Does the Commission plan to take any action to broaden the contribution base to reduce the contribution factor and the corresponding burden placed on consumers?” Markey asked. The FCC policy shift on USF “portability” funding had a profound effect on the fund, causing incumbents to retain support for lines they lose to a competitor while the competitor also receives support, resulting in double payments, Markey said, noting that a Joint Board member testified to the committee that the rule change has added $1 billion to the fund since 2003. “Do you agree? Please explain your answer,” Markey said, asking Martin if the Commission is reviewing “whether it would be meritorious” to revive the portability rule. Markey also asked Martin if he would support enforcing the primary line restriction if Congress lifted a ban on the policy. Markey told Martin he has no position on reverse auctions, but is “intrigued” and wants to understand Martin’s criticism of a reverse auction that distributes support to more than one winner for a particular high cost area. “Does your reverse auction proposal encompass ‘bids’ that offer a more robust package of services, including affordable broadband access to the Internet” along with bids for subsidy for voice services? Markey asked Martin. He asked if Martin favors adopting such “attributes” in a reverse auction plan, and whether he favors lifting the E-rate program cap, now $2.25 billion. Finally, he asked Martin to clarify the rules for E-rate funding and to outline recommendations he would make to improve the appeals process. Markey asked Martin to answer by May 4.
ORLANDO -- If the FCC imposes a cap on competitive eligible telecom carrier (CETC) participation in the USF program it will likely be short-term, said 2 members of the Federal State Board on Universal Service, including FCC Comr. Tate, Wed. at CTIA’s Wireless 2007 show. A source said the cap could be lifted this year. Recommendations of the joint board are expected shortly.
ORLANDO -- Wireless will have a major role in the USF program, FCC Chmn. Martin reassured wireless carriers Tues. Sources said after Martin’s remarks to the CTIA conference here that they're having trouble reconciling Martin’s advocacy of caps on reimbursements to competitive eligible telecom carriers (CETCs) with his insistence Tues. that USF be technologically neutral.
AT&T proposed a plan to “stabilize” the Universal Service Fund (USF) by calling a one-year moratorium on new carriers’ applications for USF money, freezing the number of lines for which wireless carriers can get USF support and making about $200 million in targeted reductions to USF programs. AT&T emphasized the plan isn’t “a crude cap” on funding, as proposed by Verizon. “Simply freezing the fund is neither an appropriate nor a sufficient goal,” AT&T said in a March 22 filing with the Federal-State Joint Board on Universal Service. “This interim stabilization step must be seen not only as a means of providing the Joint Board with time to conduct its review of longer-term proposals, but as the first step on the path to such fundamental reform,” the company wrote. AT&T said the plan targets “the source of runaway fund growth [which] has come most significantly from new ETCs [Eligible Telecommunications Carriers] and new ETC lines.” ETC is a regulatory term for carriers eligible to get USF subsidies. Much of AT&T’s plan would hit competitive ETCs, many of whom are wireless carriers. For example, the $200 million in reduced funding would occur through a 25% reduction in the USF funding that’s used to replace access charges. The money would continue to be available to rural ILECs whose access charges were replaced but not to competitive “ETCs that neither have, nor have ever had, an entitlement to access charges and thus do not share incumbents’ historical reliance on such support,” AT&T said.
The growth of the Universal Service Fund (USF) could be stemmed by creating a separate sub-fund for wireless carriers, based on their own costs, not rural ILECs'costs, the Independent Telephone & Telecom Alliance (ITTA) told the FCC. Competitive eligible telecom carriers (CETCs), which mainly are wireless, are “key drivers” of huge USF growth since 2001, the ITTA told agency staff in a March 22 ex parte meeting. USF outlays to wireless competitors were about $1 million in 2000 but more than $1 billion in 2006, ITTA said in materials given FCC staff. CETC funding is pegged at $1.28 billion this year and projected to reach nearly $2 billion in 2008, said ITTA, which represents midsized rural carriers. Subsidies to wireline carriers were flat 2000-2006 at about $2 billion, plus $1 billion to offset access charge reductions, ITTA said in a chart. As an option to a separate wireless universal service fund, ITTA proposed requiring wireless companies to assume “carrier of last resort” obligations if they kept getting universal service support based on ILEC costs and ILEC study areas. ITTA told the FCC the wireline network is the best vehicle for expanding broadband service to rural areas, with other service providers relying on it. So it’s important to have a “stable and predictable” USF to support ILEC broadband deployment, the association said.
Regulators should consider something other than a cap to slow Universal Service Fund (USF) growth, 5 Senate Commerce Committee members told the co-chairmen of the Federal-State Joint Board in a March 21 letter. In the belief that the joint board and FCC “won’t adopt any serious reforms of the program without a cap,” several witnesses at a recent committee hearing recommended capping the USF, the senators told FCC Comr. Tate and Ore. PUC Chmn. Ray Baum: “We reject that notion.” The joint board is expected to urge an “emergency cap” soon, said Sens. Rockefeller (D-W.Va.), Pryor (D-Ark.), Dorgan (D-N.D.), Klobuchar (D-Minn.) and Smith (R- Ore.): “We urge you to consider other more thoughtful measures to limit the growth of the USF instead of arbitrarily capping the fund.” Instead, the joint board should weigh “competitively-neutral proposals, ensure accountability for how funds are used, and promote build-out of advanced services in rural regions through effective targeting of funds to high cost areas,” the letter said. The cap has been described as a temporary measure, but “we are concerned that it would become a de facto permanent cap,” the senators said.