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.”
House Commerce Committee Vice-Chmn. Pickering (R- Miss.) speculated Wed. that the House could be done with comprehensive telecom legislation by the end of the year but that action on a Senate counterpart would take longer. Before it tackles telecom reform, Pickering said, the House Commerce Committee would try to move leftover bills that weren’t enacted last year, including those on broadcast decency, junk faxes and spyware.
Chmn. Powell announced Fri. he will leave the FCC in March. With key issues pending for all communications sectors, sources agreed the next chmn. is likely to maintain Powell’s policies in the broadest sense, including an emphasis on competition and on promoting new technologies.
Universal service fund (USF) programs that target low-income households are more effective in addressing USF goals than overly broad subsidies, said a report released Tues. from the Progress & Freedom Foundation (PFF). The report said more residents in so-called “high cost” areas are adopting alternatives to subsidized landline phone service, although USF high-cost spending continues to increase. Through its report, “The Myths and Realities of Universal Service: Revising the Justification for the Current Subsidy Structure,” PFF said it was offering data to lawmakers without offering specific recommendations for USF reform. The report found that rural and urban households had remarkably similar phone use patterns. Nationwide, 51.7% of homes have both wireless and wireline service, while only 6% use just wireless. The report said 45.2% of rural households use both wireline and wireless phones and 5.3% of rural households are strictly wireless. The report said households with annual incomes of only $25,000 have 94% wireline use rate, but 40% of those homes also have a wireless service and 57% have cable TV. The report also found that more service providers are receiving subsidies, including many competitors in the same markets. The high-cost USF program to ensure service in rural areas is growing at an accelerating rate, the report said. From $2.6 billion in 2001, the fund was expected to grow to $3.6 billion in 2004 and surpass $3.9 billion this year. USF charges on telephone bills surpassed 10% for the first time this year, the report said. USF also suffers from inconsistencies from state to state, said Richard Levine, report co-author and researcher for the Law and Economics Consulting Group (LECG). Cal. has self-certification for its distributions of the “lifeline” program for low-income users, he said. Accordingly, Cal. has 3.2 million lifeline subscribers of the 6.6 million nationwide that receive the funding. Levine said Cal. has far more lifeline recipients than Miss., a much poorer state. While the report doesn’t give specific recommendation, co-author Randolph May said USF is “fixable.” Reform can be undertaken without jeopardizing universal service goals, including rural area’s access to reasonably priced telephone service,” said May, PFF senior fellow and dir.-communications policy studies. May said PFF would eventually make specific recommendations to Congress and regulators on USF reform. Another study co-author, Joseph Kramer of LECG, said there was no incentive in the USF program to hold costs down. “The higher the costs, the more money you get,” Kramer said -- www.pff.org/issues-pubs/books/050118usfreport.html.
Rep. Dingell (D-Mich.) urged the FCC to make a decision “expeditiously” on whether AT&T’s enhanced prepaid calling card is subject to intrastate access charges and universal service fund (USF) contributions. Dingell, ranking Democrat of the House Commerce Committee, said if the FCC finds AT&T violated Commission rules by withholding these payments it should require AT&T to make retroactive as well as future payments -- and the retroactive payments should carry interest “to compensate the USF and affected local exchange carriers for the loss of funds that resulted from AT&T’s withholding of payments.” Dingell criticized AT&T for lobbying for a decision against payment by raising concerns about the cost of providing cards to military users: “AT&T’s campaign… seeks to generate opposition to any effort by the FCC to require AT&T to comply with the Commission’s regulations based on concerns that doing so would increase costs to U.S. military personnel… I do not favor increasing the cost of making telephone calls for U.S. forces stationed overseas. [However], if it truly wishes to help the troops, AT&T can offer military personnel pre- paid calling cards at discounted rates or it could offer calling card services to such personnel for free… AT&T’s cynical campaign should in no way cause the FCC to turn a blind eye to AT&T’s unilateral decision to exempt itself from the FCC’s regulations and shortchange universal service.”