A collection system for the Universal Service Fund (USF) based on telephone numbers gained the support of a new telecom alliance called the USF by the Numbers Coalition. The coalition - made up of groups such as NCTA, CTIA and USTelecom and its members AT&T and BellSouth -- held a news conference call Tues. to “set the story straight” on misconceptions about the plan, it said.
VoIP providers are setting up meetings to discuss their options in light of a surprise FCC decision ending their federal preemption protection if they use traffic studies to calculate Universal Service Fund payments, VON Coalition Pres. Staci Pies said. The FCC’s universal service reform order, released June 27, lets VoIP providers pay into the USF based on 65% of revenue, a figure known as a “safe harbor,” or submit traffic studies to show the amount of interstate revenue is lower. But if they use traffic studies the FCC no longer will deem them eligible for federal preemption, subjecting them to state regulation. The order said the FCC in the 2004 Vonage Order opted for federal regulation of VoIP because “it was impossible to determine whether calls by Vonage’s customers stay within or cross state boundaries.” But if a VoIP provider can tally its USF payment based on the actual percent of interstate calls, “the central rationale justifying preemption… no longer would be applicable” to that provider. That is, if they can pinpoint their traffic’s jurisdiction, the problem spurring the Vonage Order no longer exists, according to the new order. “It’s a Catch-22,” said Pies, a PointOne vp. NARUC Gen. Counsel Brad Ramsay said the “state friendly” language was welcome. The preemption decision wasn’t mentioned in the news release on the FCC vote June 21 (CD June 22 p1).
The telecom industry voiced mixed feelings about an Iowa Telecom request to receive universal service funding through the nonrural program even though it’s a rural company. In comments filed July 3, some said the FCC should approve the request, some said the FCC shouldn’t let Iowa Telecom “game” the system and AT&T said it sympathizes with Iowa Telecom but thinks the FCC should reform the process rather than make a special concession. Iowa Telecom sought the special treatment because the nonrural program is based on forward- looking economic costs (FLEC), rather than the embedded costs used in the rural program. Under FLEC, the company could get Universal Service Fund (USF) support; under the embedded cost standard, it can’t. Iowa Telecom’s former owner invested very little in the network, making Iowa Telecom’s embedded costs so low it can’t get USF support under the rural mechanism, the company told the FCC. In comments filed July 3, Embarq urged that Iowa Telecom’s petition be granted because the company is in an unfair position due partly by outdated universal service rules. “Ten years have passed since the Commission first acknowledged that FLEC was the proper costing approach to be used when calculating explicit federal support” and yet it still calculates rural costs on an embedded cost methodology, Embarq said. The Independent Telephone & Telecom Alliance (ITTA) said “by historical accident… Iowa Telecom appears to be caught in a trap in which its federal and state wholesale and retail pricing mechanisms… do not align with the method by which rural carriers become eligible for high-cost loop support.” ITTA said Iowa Telecom “should not be penalized either for the low inherited book value of its assets or for the more generalized concerns about the application of FLEC to rural carriers.” AT&T agreed Iowa Telecom is in “an untenable position” but said the better route would be for the FCC to act in a pending proceeding aimed at reforming the high cost support mechanisms. “Iowa Telecom’s petition exemplifies the irrationality of the Commission’s existing mechanisms and the need for comprehensive universal service reform,” AT&T said: “Without such support, Iowa Telecom faces the Hobson’s choice of imposing significant rate increases or foregoing network investment necessary to provide advanced services to its customers.” But the National Assn. of State Utility Consumer Advocates (NASUCA) said “no company should be able to game the Universal Service Fund… to maximize its ’take’ under the fund.” Iowa Telecom “is a rural carrier and is limited to the support allowed under the USF for rural carriers.” Sprint Nextel accused Iowa Telecom of trying to gain a “windfall” of “ineligible” USF support. Sprint Nextel said Iowa Telecom already got some relief by gaining forbearance from access charge rules “ostensibly so the Iowa Telecom can fund its infrastructure upgrades.” It’s not necessary for the FCC to grant the company “an additional exemption,” Sprint Nextel said.
Correction: The Keep USF Fair Coalition opposes a numbers-based contribution system for universal service (CD June 21 Special Report).
Rural telecom carriers fear that political pressure for a cap on Universal Service Fund (USF) support could revive when the bill (HR-5252) goes to the Senate floor, industry sources said. Rural carriers also are concerned that amendments might be introduced limiting USF support to primary lines only, which could harm small rural businesses dependent on USF support for multiple lines, sources said.
The FCC released an order late Fri. that requires prepaid calling card services to pay regulatory fees, but not retroactively. The order has long been anticipated because the FCC voted on it June 1 (CD June 2 p2). An AT&T spokesman said the order offers certainty for providers and “a degree of stability for the Universal Service Fund.” The action requires providers of prepaid cards, including the so-called menu-driven cards and those using IP transport, to pay access charges and contribute to the USF based on interstate revenue. The Commission said payment is required because these cards qualify as telecom services. AT&T and Verizon had lobbied hard against retroactive treatment and in a separate statement FCC Comr. Adelstein said he had concerns about not applying retroactivity. The decision is a follow- up of a Feb. 2005 ruling requiring AT&T to pay regulatory fees on its first enhanced card. The company had sought regulatory guidance for newer cards that it said could be considered information services and thus exempt from fee payments.
Close votes on key amendments dealing with net neutrality and buildout requirements signal a tough fight ahead on the Senate floor for the Senate telecom bill (HR- 5252), lobbyists and industry sources said. Senate Commerce Committee Chmn. Stevens (R-Alaska) has acknowledged the difficulty he faces and said at the end of Wed.’s markup that he’s considering introducing a slimmed-down bill.
Senate Commerce Committee Chmn. Stevens doesn’t yet have the 60 votes needed to end debate and set up a vote on the telecom bill (S-2686) on the Senate floor, he told reporters after markup Tues. Senate leadership has “no great interest” in the bill while the debate continues as it has, he said. His comments came after a day-long session in a markup that began last week. Key issues remain to be tackled, but the bill is expected to pass out of the committee.
Wireless carriers using traffic studies as an alternative to paying USF safe harbor percentages must submit the studies to the Commission, the FCC decided. There was doubt last week as to whether the FCC would toughen its stance in this area, when the Commission approved a report and order and NPRM addressing interim steps the agency is taking to shore up the USF. Text of the order was released at our deadline. “We take an additional step to ensure the accuracy of reported revenue data,” the FCC said: “Mobile wireless providers have incentives to bias any traffic studies to minimize their amount of interstate and international end-user revenues and thereby minimize their fund contributions; there are no countervailing market forces to offset these incentives. Consequently, we now require any mobile wireless provider that uses a traffic study to determine its interstate end-user revenues for universal service contribution purposes to submit the study to the Commission and to USAC for review.” In the order the Commission also raised the wireless safe harbor from 28.5% to 37.1%. Carriers are allowed to submit traffic studies to show the actual percentage of interstate calls versus intrastate calls made by subscribers falls below the safe harbor.
People under 25 would be hit hard if the FCC adopted a system based on phone numbers or “connections” to fund universal service, the Keep USF Fair Coalition warned Tues. The coalition, made up of consumer groups, said younger people tend to have more communications devices, each with a phone number or telephone line. The group, a long-time foe of the proposal, has issued similar warnings about the impact on the elderly and the poor of basing Universal Service Fund (USF) contributions on numbers. The current system is based on interstate revenues.