FCC is expected to act by mid-Dec. on interim changes aimed at improving way carriers make contributions to Universal Service Fund (USF). Sources said Commission had planned to act by end of Nov. but decided to delay action until Comr.-Designate Jonathan Adelstein was sworn in.
Protection of universal service will be top priority for NTCA in next session of Congress, but bankruptcy and spectrum management also will be on its agenda. In news conference Wed., NTCA officials said Assn. would lobby for “fair and stable contribution methodology” for universal service fund (USF) and modifications of portability and identical support rules to prevent competitive carriers from claiming funds to detriment of local rural incumbents.
Verizon Wireless proposed to FCC methodology for wireless carriers to ascertain percentage of their revenue that was interstate and international for purposes of universal service fund (USF) contributions. Carrier joined CTIA, Qwest, USTA and Verizon in offering compromise on revising USF contribution methodology (CD Oct 28 p7). In separate filing, Verizon Wireless said safe harbor played key role in minimizing complexity of wireless carrier contributions to USF. Challenge for wireless carriers is in separating end-user revenue into interstate and intrastate categories, it said. Carriers can use software, system upgrades and baseline assumptions to track interstate and intrastate minutes of use, filing said. That can create “reasonable proxy” for allocating wireless revenue for USF contributions, it said. “A safe harbor, updated to reflect current wireless calling activity, furthers the policy objectives of promoting equitable contributions, fund stability and administrative simplicity,” it said. Verizon Wireless said because calling patterns could vary among states and carriers, operators should be able to file interstate/international revenue calculation based on company-specific calling patterns if they had system to track such traffic. Carriers could create such systems based on FCC-approved methodology and Commission could require retention of records that were used to develop company- specific levels. Proposed methodology would: (1) Track min. of use from call records, dividing all interstate and international min. by total min. over certain time period to come up with percentage of interstate and international min. of use. (2) Multiply that percentage of interstate/international min. of use by qualifying service revenue to come up with total revenue base that would count toward USF contribution.
Voice on the Net (VON) Coalition said it supported connections-based approach to funding universal service, concept backed by several telecom industry groups. FCC is considering changing current revenue-based method of assessing universal service contributions. “A connections- based contribution methodology will ensure that USF [Universal Service Fund] payments are assessed in a fair and economically efficient manner,” group said. VON Coalition includes companies offering products and services for use on Internet or IP networks, including Intel and Microsoft.
Fourteen representatives of National Telecom Coop Assn.’s (NTCA) ILECs met Wed. with congressional and FCC officials to discuss universal service, implications of recent bankruptcies on rural telephony, current broadband legislation issues. They expressed concerns about portability of universal service support, redefinition of universal service basis for assessment of contributions. They said, as mentioned in NTCA petition for reconsideration in MAG order, that FCC should suspend “identical support” rule. They said Commission couldn’t block competitive eligible telecom carriers’ (CETCs) use of ICLS funds and couldn’t comply with sufficiency requirements in Sec. 254(e) of 1996 Telecom Act, “so there is the potential for unfair competitive advantage.” Attendees said equal access to long distance carriers should be requirement to receiving universal service support. “Wireless carriers have an unfair advantage,” Valley Telephone Co-op CEO Judy Bruns said: “We serve the customers that no one else can serve… Costs for wireless carriers are different than for wireline.” NTCA said wireless consumers should be able to select long distance carrier for wireless calls, and FCC “should correct this inequity when it reviews equal access and the definition of universal service.” NTCA said existing revenue-based Universal Service Fund (USF) contribution methodology should be modified by eliminating wireless safe harbor percentage and expanding list of contributors to include all interstate service providers, such as cable, satellite and wireless broadband Internet access providers. They said they were considering extending USF to financing broadband services in rural areas. NTCA said it didn’t have “formal position to move in that direction.” However, gen. mgr. of Golden West Companies in S.D. said local carriers were considering that idea, providing they would receive financial support. Said NTCA: “In carrying out… broadband deployment objectives, policymakers must remain cognizant of what the rural carriers have already done and work to ensure that any legislative approach will actually result in additional deployment, will address the lack of consumer demand and will target the highest cost deployment challenges.” As for bankruptcy implications, NTCA said “it is imperative that the courts’ actions do not reward debtors for situations of their own making, while penalizing other segments of the industry, lest they face bankruptcy as well.”
Kan. Corporation Commission opened biennial review of access charges of rural incumbent telcos. Agency is required by state law to reduce rural telcos’ access charges by March 1 of each odd-numbered year as long as amount can be recovered from Kan. Universal Service Fund. KCC said it was opening case (03-GIMT-126-GIT) now in order to allow changes to be included in annual USF support calculation process that begins in Nov. to give IXCs time to figure out how to flow through their access savings to their customers. Telcos must submit proposed access reductions by Sept. 6, with staff comments due Sept 20. Hearings will be Oct. 14 and final decision is due by mid-Nov.
Unicameral Neb. legislature’s Appropriations Committee advanced bill (LB-37) that would allow state treasurer to borrow from state universal service telephone fund if needed to cover general state expenses. Transfers would be allowed up to point where fund’s reserve equaled 60 days of financial obligations. Bill was advanced in special session convened to address state budget crisis. Transfers from state USF would have to be repaid within 30 days or would accrue 5% interest annually. State projects $232 million budget shortfall for 2002-2003 fiscal year, and needs to find minimum of $100 million to meet mandatory financial and legal obligations. Bill now goes to legislature’s floor. Bill is successor to defeated proposal that would have transferred $10 million from USF to state’s general fund.
Md. PSC ruled state didn’t need its own universal service fund. Because of that determination, it ordered Verizon to reduce its intrastate access charges $13.6 million by lowering local switching rate and residual interconnection charges. PSC said local service wasn’t being subsidized so there was no need to maintain access charges above cost. PSC (Case 8745) also ordered amendments in other tariffs to CLECs and retail customers to alter rates and rate components that had been approved to cover potential costs of any state USF. Agency ordered interexchange carriers to pass along their access savings through lower rates. It also ordered Verizon to set aside $5 million for refunds to toll customers for fees they had been paying toward state USF. Method of refund will be determined later. Verizon has until Aug. 16 to file tariff changes. It condemned access cut decision, saying any rate break for long distance customers would be short-lived. Carrier also said that, given investors’ current distaste for telecom industry, access charge cut would hamper its ability to raise network investment capital.
Universal Service Fund (USF) is threatened by mismanagement and confusion of assistance to schools and libraries with traditional function of reaching underserved markets, executives of small telcos said Tues. “There’s a cancer in USF called USAC [Universal Service Administrative Corp.],” said A.J. Passarella of Loretto (Tenn.) Telephone Co. National Exchange Carriers Assn. owns USAC but has no control, said NECA board member Robert Eddy of Sherburne County (Minn.) Telephone Co. “I'm not sure who does.” He said wireless carrier claiming USF payments reported number of lines in county almost equal to population and after being challenged shifted thousands of those lines to another county. Overall, unequal USF burdens and benefits favor wireless carriers and burden rural telcos, said Eddy and Wheat State Telephone’s (Kan.) Archie Macias. Passarella said school districts received USF money for poor schools, shifted purchased resources to rich ones, then got more funds for poor schools.
SAN FRANCISCO -- Internet not only is undercutting rural telcos’ regulatory-based revenue sources, but also is shifting their policy focus away from states, industry conference heard here Mon. As e-mail, instant messaging and Web-based services, along with cell calls, increasingly supplant wireline voice and fax communications, local incumbents’ access revenues plunge correspondingly, compounding regulatory reductions in access rates, Chmn. Robert Riordan told convention of OPASTCO.