Ad hoc group of Neb. ratepayers asked Neb. Supreme Court for ruling that 7% monthly phone bill surcharge that supported state universal service fund was illegal tax. Plaintiffs say fee set by PSC in 1999 is unconstitutional tax that should have been imposed by legislature, not agency. Suit also alleged local exchange companies were misusing money from fund on general network upgrades rather than subsidizing service in high-cost areas. Surcharge, which generates more than $50 million annually, applies to all intrastate services except Internet access and covers costs above state’s $17.50 residential and $27.50 business benchmark rates. Some 26 of state’s 50 LECs draw from state USF.
ISPs could benefit from industry proposal to revise way it collects contributions from telecom carriers for universal service fund (USF), Information Technology Assn. of America (ITAA) told FCC in comments filed late Mon. Commission had asked for comments on proposal to move to connection-based methodology, meaning carriers’ contributions would be based on end-user connections -- generally wires to homes and offices or wireless phone numbers -- rather than based on interstate revenue. While proposal involves rather technical adjustments, it has elicited strong feelings because it would require wireless and local exchange carriers to contribute more and long distance carriers less. Under current system, long distance carriers are main contributors. In both scenarios, customers ultimately pay because carriers pass costs on to them in form of fees on bills.
FCC proposal to change way it assesses contributions from carriers for universal service fund (USF) isn’t competitively neutral as required by Telecom Act, Verizon said in comments filed Mon. at agency. Commission has proposed assessing contributions on flat, per-connection basis (CD Feb 15 p11), which means long distance companies would be freed from having to contribute, Verizon said. Companies collect USF fees from their customers to cover those contributions but size of those customer fees can affect their overall bills and thus, some say, their competitiveness. Verizon said per-connection plan would mean ILECs and wireless carriers would have to collect bulk of money because long distance companies didn’t have many “connections” -- lines to home or business or wireless phone numbers. FCC is looking at possible change in current system because carriers such as AT&T with declining revenue have complained that they're assessed too much and thus are collecting too much from their customers. Assessments are based on future revenue and AT&T has said it keeps finding itself collecting fees based on former, higher revenue. Verizon said that problem could be solved by basing contributions on estimated future revenue, with true-up feature, which is proposal AT&T made in another proceeding. Among others weighing in late Mon., American Assn. of Paging Carriers (AAPC) said proposal would result in “unjustified increase in USF assessments” for paging carriers. AAPC recommended that 2-tiered fee structure be established for paging carriers, with less charged to one-way pagers than to advanced paging services. “Converting USF assessments for paging carriers to a flat, per pager charge would be a desirable modification… if implemented properly,” AAPC said. “However, the proposed charge of [25 cents] per pager per month is grossly excessive and unjustified and inconsistent with statutory requirements.” USTA urged FCC to “to look at the larger picture” and develop long-term plan for collecting universal service contributions. “The failure to adopt a contribution mechanism that allows for the full funding of the high-cost universal service support mechanism in a competitively neutral manner is contrary to law and would be bad public policy,” USTA said. OPASTCO and National Rural Telecom Assn. said they supported idea of flat fee but not connection-based method proposed by agency earlier this year. Organizations said plan would violate mandate that contributions be made on nondiscriminatory basis: “The proposal would practically exempt from making contributions providers whose principle offering is the interstate transmission that actually gives any telecommunications service its interstate character… If LECs are to contribute under a flat-fee mechanism, then the IXCs must pay monthly contributions of at least the same amount for each of their interstate customers.”
If telcos don’t like FCC’s proposed “connection-based” method of collecting contributions to universal service fund (USF), they could help FCC by suggesting alternative, FCC Comr. Abernathy told USTA members Thurs. Speaking at group’s Washington Leadership Conference, she said she was convinced current contribution system “isn’t sustainable” so something would have to replace it. Abernathy told group it probably would take “a good 2 years” for FCC to replace current collection system and agency would welcome ideas from carriers. Explaining recently opened wireline Internet access proceeding, she said FCC’s proposed definition of Internet access as information service could mean that “most provisions of Title 2 [of Telecom Act] would not apply to Internet access.” She said there also was universal service angle to that proceeding because USF contributions were assessed only on telecom services. Under assumption that DSL was telecom service, USF contributions now are assessed on DSL provision. Proposed new definition for wireline Internet access services as information service could be interpreted as excluding DSL from universal service base because it’s no longer telecom service, she said. And that could have “significant impact” on money available for universal service support for high-cost carriers, she said. Asked about time frame for broadband proceedings, she said desire was by end of year but that would be “rocket speed.” She said she thought some parts would be completed, perhaps with further notice of proposed rulemaking on remaining issues.
National class action lawsuit alleges AT&T is charging long distance customers surcharge “significantly in excess” of what it contributes to Universal Service Fund (USF). Suit, filed Wed. in U.S. Dist. Court, L.A., said AT&T was billing customers fee equal to 11.5% of long distance charges, while FCC currently required carrier to contribute 6.808% of long distance revenue to USF. Lawsuit calls fee “huge secret profit center” and said it gave AT&T unfair advantage in highly competitive long distance market: “By hiding revenue in the Universal Connectivity Charge, AT&T is able to advertise lower per-minute rates than it is effectively charging,” suit said. Class plaintiff Roger Gerdes is represented by Stanley, Mandel & Iola, LLP, Law Office of Andrew Kierstead, Matthew Rossman P.C. and Keller Rohrback LLP. Counsel estimates class exceeds 60 million people. Lawsuit follows call last month by House Commerce Committee ranking Democrat Dingell (Mich.) for FCC to investigate AT&T’s increase in USF fee (CD Jan 9 p1). Dingell urged FCC Chmn. Powell to “open the books and records” of AT&T while raising questions whether long distance companies in general were using fee to “gouge” customers. AT&T said it raised USF fee to 11.5% from 9.9%, saying FCC methodology to determine how much company should contribute to fund “was flawed.” Commission makes its determination based on company revenue from 6 months ago. AT&T said “lag” problem, “combined with diminished interstate and international telecom revenue,” necessitated increase.
FCC voted at agenda meeting Thurs. to seek comments on changing way it assessed contributions from carriers for universal service fund (USF). Agency asked, for example, whether it should assess USF contributions based on number and capacity of connections carriers provide to customers rather than on their interstate revenue, which was current practice. FCC Common Carrier Bureau Chief Dorothy Attwood said further notice of proposed rulemaking (NPRM) stemmed in part from proposal by coalition of long distance carriers and large business customers (CD Nov 20 p1). Agency said further NPRM offered opportunity to “further develop” comments made last year in response to initial NPRM on how current assessment and recovery of USF contributions should be modified as marketplace evolves. Under connection-based plan, LECs, long distance companies and wireless providers would contribute $1 per month for each connection to public network for residential users. Paging companies would contribute 25 cents per connection. Business connection assessments would be based on maximum available capacity, or bandwidth, of connection. NPRM also seeks comment on whether carriers that choose to recover their USF contributions through line items do so in uniform manner and don’t recover amounts in excess of their actual USF contributions. Agency adopted order that streamlines current contribution system. Attwood told reporters later that current system created some lack of specificity and agency would ask whether there was better way to handle those problems. For example, wireless carriers pay into USF based on 15% of their revenues under “assumption” that they handle that much interstate traffic. However, new calling plans indicate percentage is probably much higher, she said. She emphasized, however, that USF item makes no conclusions. USTA called action “encouraging.”
GAO report shows Universal Service Fund (USF) should be updated to take into consideration new technology such as IP telephony, Rep. Markey (D-Mass.), ranking minority member of House Telecom Subcommittee, said Mon. Report, requested by Markey, said IP telephony wasn’t widespread yet but eventually “could affect the revenue base from which universal service programs are funded.” Under current regulatory structure, providers of IP voice services don’t have to contribute to USF, GAO said. “As these new voice services gain popularity, concerns exist of whether federal funding levels for universal service might eventually decline,” GAO said: “In addition, there is much debate about whether the current federal regulatory framework for funding universal service -- with its reliance on interstate telecommunications revenues -- is appropriate for digital communications, where voice, video and data are carried in the same manner over networks that lack intrastate/interstate designations.” Report was based on views of state and federal govt. officials, academics and industry officials. GAO also reviewed local telephone rates provided by state PUCs, which Markey said revealed wide disparity in prices across country. He said wide differences were found among rural telephone companies’ rates as well as between rural and urban telco rates.
House Commerce Committee ranking Democrat John Dingell (Mich.) called on FCC to investigate AT&T’s recent increase in Universal Service Fund (USF) line-item fee for residential customers, but Chmn. Tauzin (R-La.) is considering congressional action rather than waiting for Commission response. Dingell urged FCC Chmn. Powell in letter dated Jan. 7 specifically to “open the books and records” of AT&T while raising questions whether long distance companies in general were using fee to “gouge” customers. Committee spokesman Ken Johnson said Tauzin “is giving serious consideration to holding congressional hearings” on AT&T decision to raise fees: “He will make a final decision after consulting with [Telecom Subcommittee] Chairman Upton [R- Mich.], but clearly we are very concerned about the impact the fee hike would have on consumers nationwide.”
As it warned in ex parte filing Dec. 13, AT&T raised monthly universal service line-item fee for residential customers to 11.5% starting first of year, from 9.9%. AT&T had asked Commission for permission to change formula used to determine contributions to Universal Service Fund (USF) because falling revenue had skewed it. It said problem was that FCC determined how much a company should contribute to USF using revenue from 6 months ago. When company’s revenue is falling, as AT&T’s is, using that contribution factor on lower current revenue results in larger per-customer fee, company said. It had asked for permission to base its contribution factor on projected revenue rather than 6-month- old revenue and had offered to true up contributions if there were shortfall once actual revenue total was available.
National Telecom Co-op Assn. (NTCA) told FCC it opposed proposal submitted by Ad Hoc Telecom Users Committee, AT&T, E-commerce Telecom Users Group and WorldCom to revise way Universal Service Fund (USF) contributions are collected (CD Nov 20 p1). In Dec. 21 letter to FCC Chmn. Powell, NTCA said proposal’s goal seemed to be to relieve long distance companies “of their obligation to make equitable contributions” to USF. That is “in direct violation” of Sec. 254 of Telecom Act that requires all interstate carriers to contribute on equitable basis, NTCA said. “The proposal is couched as a plan to replace the current USF assessment mechanism with a flat-rated per-line charge,” wrote NTCA CEO Michael Brunner. “It is more than that,” he said: “If adopted, the class of carriers providing interexchange services such as those provided by AT&T and WorldCom would have no obligations to contribute to the mechanisms.”