The FCC Wireline Bureau issued the first double-digit contribution factor for carriers paying into the Universal Service Fund (USF) -- 10.7% for first quarter 2005, up from 8.9%. The factor is a percentage of carriers’ interstate revenue and usually is passed on to customers as a line item on phone bills. It reflects USF costs but not costs caused by the FCC’s decision to apply the Anti- Deficiency Act to the USF. Congress recently passed legislation exempting the USF from the Act’s requirements until the end of 2005. SBC Senior Vp James Smith said the double-digit USF figure “clearly highlights the need for comprehensive reform of how the program is funded” through measures such as the changes proposed by the Intercarrier Compensation Forum. The USF increase also could have been lessened if the FCC required AT&T “to pay its lawful share into the fund,” Smith said. AT&T hasn’t been making USF contributions on revenue from its enhanced prepaid card services. SBC contended the amount AT&T is withholding represents about 1/2 the contribution factor increase. An AT&T spokeswoman said SBC’s comments were “self-serving rhetoric.” She said it would be “misguided policy” to impose USF obligations on enhanced prepaid cards because it would “shift more of the costs of the fund to those least able to afford it.” AT&T is the largest contributor to the USF. The FCC is expected to act on the AT&T card issue early next month.
CTIA called for completely neutral rules for deciding when a carrier can be classified as an eligible telecom carrier (ETC) under the federal USF program. “The rules should be modified so that competitive ETCs should begin receiving support upon designation,” CTIA said. CTIA also said any new guidelines should be applied retroactively.
The Senate sent telecom legislation to President Bush on Wed. evening in a literal 11th-hour vote. By approving HR-5419, the Senate approved 3 legislative measures and ended weeks of political infighting about everything from Congressional Budget Office scoring to appropriators’ authority and boxing regulation. Sources said the White House would sign the act, which includes the spectrum relocation trust fund, E-911 funding and a temporary fix to accounting problems in the E-rate program. The junk fax bill, HR-4600, was the only legislation that had a reasonable chance to pass and didn’t. “The legislation brings needed changes that will promote homeland security and increase wireless broadband opportunities,” FCC Chmn. Powell said.
At our deadline, Congress had taken no action on pending telecom legislation and appeared unlikely to do so. Conflicting stories and behind-the-scenes finger pointing highlighted the debate this week, but congressional and industry sources attributed the collapse of legislation to one central theme: Political infighting and retaliation.
There appears to be a break in the stalemate over remaining telecom legislation before Congress, but it remains unclear if there’s time to move legislation before Congress recesses for the year. Senate Commerce Committee Chmn. McCain (R-Ariz.) agreed to move the Universal Service Fund provision that’s part of the trio of telecom bills awaiting congressional action (HR-5419). McCain had a hold on the bill because the House wouldn’t consider his bill to create a national boxing commission. It appeared the 2 other measures -- on spectrum trust fund relocation and E-911 funding -- wouldn’t get moved.
FCC Chmn. Powell and USTA urged Congress Mon. to pass legislation that would exempt the universal service fund from Anti-Deficiency Act requirements that would delay E- rate payments and could lead to higher USF fees on telecom consumers. The USF provision is part of HR-5419, which also includes spectrum trust fund relocation legislation and federal funding for E-911 deployment. The bill has been stalled by Senate Commerce Committee Chmn. McCain (R- Ariz.), who’s insisting that the House also consider his legislation that would establish a national boxing commission. In a public statement Mon., Powell said all 3 measures were important and urged Congress to pass the bill before it adjourns. Congress is scheduled to meet this week to consider the intelligence reform legislation, but many in the telecom industry hope the impasse on HR- 5419 can also be resolved this week, though sources have said both McCain and House leaders appear reluctant to change their position. “The temporary Anti-Deficiency Act exemption is necessary to mitigate unnecessary increases to our contribution factor as well as ensure our school children have continued access to computer resources,” Powell said. A letter Mon. from 219 USTA members to Senate leaders urged Congress to pass the USF legislation. “Unfortunately, if not corrected, this bureaucratic change could also cause consumer phone rates to rise dramatically,” said USTA Pres. Walter McCormick.
A senior House Commerce Committee aide said Fri. that high-cost support of the Universal Service Fund (USF) was growing too large, and when reforming USF next year, members would look for more efficient ways to disburse the fund, perhaps even favoring wireless technologies over wireline. House Commerce Committee senior counsel Howard Waltzman told a Progress & Freedom Foundation (PFF) forum on USF that if the goal of the high-cost program is to ensure affordable voice telephony, more-efficient wireless technology might be preferred to costly wireline service. Waltzman said “appropriators didn’t consult us” before inserting a provision in the 2005 omnibus appropriations bill that would prevent the FCC from imposing a “primary- line restriction” on USF high-cost support. Waltzman intimated that House Commerce Committee leadership would be interested in considering some forms of line restrictions when USF came up in the House. “There’s no reason to increase the size of the fund,” Waltzman said of the high-cost fund.
House Telecom Subcommittee ranking Democrat Markey (Mass.) said FCC Chmn. Powell and the Office of Management & Budget gave “insufficient analysis to the repercussions” to the Universal Service Fund of the FCC’s application of the Anti-Deficiency Act (ADA). Powell responded to several questions Markey asked Powell about ADA application to USF, to which Markey said it was clear that Congress needed to act “quickly to minimize the damage” the policy change would create. Powell told Markey that the Commission didn’t believe there was or would be any risk that USF programs -- including E-rate -- wouldn’t meet their funding requirements. Powell told Markey that he didn’t expect any short- or long-term effects from the accounting change.
CTIA asked the FCC to change a requirement in a 2002 order revising Universal Service Fund contribution rules that force carriers that decide to pay USF fees based on the 28.5% wireless safe harbor to nonetheless calculate some of revenue streams and submit the numbers to the FCC. The safe harbor is the assumed amount of wireless calls that are interstate and thus subject to USF fees. A carrier source said Thurs. that when the FCC modified its rules most didn’t notice at first that in addition to raising the safe harbor from 15% to 28.5% the FCC also imposed a reporting requirement for some classes of revenue, specifically for minutes beyond the customer’s monthly basket and for international calls. The source said taking this step negates some of the safe harbor’s benefit. “It’s not that easy for wireless carriers to do this for any category of revenues,” the source said. “For those who avail themselves of the safe harbor it doesn’t make sense to do it for some [revenue sources] but not for everything.” About half of the carriers use safe harbor calculation in assessing USF contributions. The larger carriers in particular find the calculations difficult. CTIA said the reporting requirements “improperly limit the scope of the wireless safe harbor and will result in recovery practices that are unreasonably expensive, administratively burdensome for carriers, extremely confusing for consumers, and inconsistent with direction provided in Commission orders.” - HB
A review of the 1996 Telecom Act might not be the only reform coming from Congress next year, staffers said Wed. Lisa Sutherland, telecom aide to Sen. Stevens (R- Alaska), told the ALTS Business & Policy Conference that Stevens would consider reforming the FCC’s decision-making process. Sutherland, who will become the Senate Commerce Committee staff dir. next year when Stevens becomes chmn., didn’t offer any ideas on how the process should be fixed, but told us the telecom industry always seems to be in a state of uncertainty because FCC rulemakings take too long and are held up in lengthy court challenges.