The Clear Coalition, which supports Sen. Smith’s (R- Ore.) bill (S-284) to redistribute the $292 million “non- rural” fund in the universal service fund (USF), delivered flowers and a Valentine’s Day message to the 80 senators representing 40 states that don’t receive any of the money. The message said: “Look which states get NO LOVE this Valentine’s Day.” Miss., Ala. and W. Va. are leading recipients of the fund. The fund goes to larger ILECs that serve rural consumers. Supporters of the fund have argued there are more rural consumers served by large ILECs in the leading states, which is why these states get much of the money.
Senate Commerce Committee Chmn. Stevens (R-Alaska) had strong words for AT&T, which he said was skirting its universal service fund (USF) obligations by not applying the fee to its prepaid calling cards. AT&T has argued that since the cards also feature an ad, it’s an information service rather than a long-distance service. Stevens’ anger was also directed at AT&T’s efforts to use these calling cards to direct complaints to members of Congress, who he said were inundated with calls from constituents concerned about the issue.
Verizon Wireless Gen. Counsel Steven Zipperstein said the carrier isn’t sure what wireless carriers will get out of the FCC’s intercarrier compensation (ICC) proceeding, which is to kick off next week in a major way with the release of a rulemaking. “The situation is fluid,” Zipperstein told reporters: “There are a lot of competing interests at stake. It’s a very, very highly political issue. What I would say is we're absolutely on top of it.” Zipperstein compared ICC to wireless carriers ongoing campaign to cut taxes on wireless services. “Our concern is… that wireless customers are treated fairly,” he said. “Just like in the tax area where wireless customers have been unfairly burdened with discriminatory taxation where the states have been foisting on our customers unfair obligations… the same core principle holds true in the intercarrier comp and USF area.”
Sen. Smith (R-Ore.) was expected at our deadline to again introduce legislation designed to distribute a portion of the universal service fund to more states. The bill will likely be similar to his legislation introduced last year, S-1380, which would change the distribution formula for the USF’s so-called nonrural fund, used to fund larger carriers’ networks in rural areas. Industry sources said the bill would have 19 co-sponsors. Rep. Terry (R-Neb.) introduced similar legislation last year (HR-1582). The bill is supported by Qwest, which serves many rural states that don’t receive funding. “Under the FCC’s latest estimates, a single state will receive more than half of this fund, and 40 states -- including many of the most rural and remote parts of the country -- will not receive a dime. This is clearly unfair and unacceptable, and we support Senator Smith’s efforts to fix it,” said Gary Lytle, Qwest senior vp-federal relations. The CLEAR Coalition, which also supports the Smith bill, released data Thurs. that said Miss. -- served by BellSouth -- received more than half the $290 million fund. The study said 3 states in 2005 would receive about 75% of the fund. Only 10 states receive funding, the report said. Since 2000, Miss. has received about $726 million from this one USF account, the report said.
House members representing rural districts need to be ready to fight for rural communication concerns when the House considers telecom reform, said Rep. Gutknecht (R- Minn.), chmn. of the Congressional Rural Caucus Telecom Task Force (TTF). The TTF held a forum Wed. that reviewed rural telecom issues and included large and small carriers’ representatives. “It is clear that rural concerns, especially reforms related to the USF, must be addressed when we rewrite the telecom bill,” Gutknecht said. “It is my hope that we can create a House ‘farm team’ that will advocate these concerns as we update this policy.” USTA Chmn. Gene South told lawmakers that landline service providers are hampered by “extensive day- to-day government micromanagement of our business.” He said cable and wireless providers don’t face the same kind of regulations, and some services, including cable and satellite services, aren’t paying into the universal service fund (USF). South said regulations are keeping smaller wireline companies from offering video service to compete with cable. CTIA Pres. Steve Largent said wireless services, and the broadband services they can now provide, could help bridge the digital divide. But Largent also said myriad state regulations threatened the industry. He also said IRS rules on equipment depreciation were increasing the cost of deployment in rural areas. On USF, Largent said wireless carriers should be allowed to compete for funds. He said wireless service is more expensive to provide to rural areas, but “the wireless industry nonetheless believes that wireless carriers can be a cost effective solution for consumers in these areas.” Lawrence Sarjeant, Qwest vp-federal legislative & regulatory affairs, said USF needed a fairer distribution system. Sarjeant said the Bell serves vast rural areas but receives little help from USF fund because it’s defined as a “non-rural” company. Qwest has supported legislation introduced last session by Rep. Terry (R-Neb.) and Sen. Smith (R-Ore.) to rectify the situation by changing the funding formats. Smith was expected to reintroduce the legislation Thurs. (see separate item, this issue).
Senate Commerce Committee Chmn. Stevens (R-Alaska) will support legislation (S-241) Sen. Snowe (R-Me.) introduced Tues. that would make permanent the universal service fund’s exemption from the Anti-Deficiency Act (ADA). Congress near the end of last session enacted a year’s moratorium on application of the ADA to USF. The FCC announced last year that it would have to apply ADA accounting rules to USF, which would have disrupted E-rate payments. Stevens is a co-sponsor of the legislation, along with Senate Commerce Committee ranking Democrat Inouye (D-Hawaii) and Sen. Rockefeller (D-W.Va.). OPASTCO urged Congress to support the bill because: “The sooner USF is made permanently ineligible to ADA requirements, the sooner we will have certainty that schools and libraries, rural health care providers, low-income consumers and consumers in high-cost areas will have continued access to quality telecommunications and broadband services.”
While telecom and universal service fund (USF) reform have dominated communications industry speculation about the congressional agenda, House Commerce Committee leaders made clear their first priority: DTV transition by 2006. House Commerce Committee Chmn. Barton (R-Tex.) and Telecom Subcommittee Chmn. Upton (R-Mich.) told reporters Wed. they would push legislation that would enforce a 2006 transition date for conversion of analog TV signals to digital, and it would be up to broadcasters to convince them a longer transition was needed. Barton has proposed a subsidy to help buy DTV converters for the poor and elderly. Upton said DTV conversion hearings would be held soon, and he hoped a bill would be introduced by late May.
Divisions appear to growing rather than narrowing between the various sides, including small and large ILECs, wireless carriers and the states, as the FCC readies a proposed rulemaking on intercarrier compensation (ICC) reform for its Feb. 10 meeting. Sources told us that as of Fri. the commissioners were just starting to consider the rulemaking and accompanying orders to address associated wireless issues.
A rumored merger between SBC and AT&T could get done but would probably take a long time to receive regulatory approval and require major divestitures, many industry sources and analysts agreed. They said with cable and wireless entering the market, AT&T wasn’t the most important competitor to the Bells any more. “From antitrust and regulatory [standpoint,] the deal is no longer unthinkable and imminently do-able,” Precursor Group CEO Scott Cleland told us: “A lot changed in the last 7 years, and it would likely be approved.” But many complexities would need to be addressed and that could significantly slow down the regulatory approval.
A group of 14 telecom manufacturers urged the FCC in a letter to deny AT&T’s prepaid calling card petition. The signatories expressed concern that granting the petition could “further harm an already beleaguered telecom manufacturing industry.” They said local telephone companies were among the manufacturers’ largest customers: “If local phone revenues are decreased by several hundred million dollars per year because of unilateral refusal by some telecom carriers to pay the intrastate access and USF fees that existing regulatory policies require, the local telephone industry’s ability to finance plant modernization obviously would suffer even more damage than the massive amount of damage that already has occurred for a variety of reasons.”