Competitive telecommunications providers increasingly are serving rural towns but they are not going to surrounding areas where providing service costs more, said a study of universal service funding sponsored by four telecommunications companies that operate in rural areas. Competition in small towns boosts the need for Universal Service Fund (USF) support in surrounding areas because it cuts incumbent phone companies’ ability to ease financial burdens by averaging, consultants Balhoff & Rowe said in the report. CenturyTel, Consolidated Communications, Embarq and Windstream filed the study with the Federal-State Joint Board on Universal Service, now studying ways to improve the universal service program. The four companies serve small and midsized communities nationwide. The study, based on Texas Universal Service Fund operations, concluded that competitors “appear unlikely to offer services” in outlying areas soon, with significant potential effects on the universal service program. “Competitors are making the financially rational choice to avoid serving high-cost areas altogether, but carriers of last resort, like the four sponsors of the study, are compelled to serve the areas outside rural towns -- often at a significant loss,” the companies said in a release. With increased competition in towns taking lines from rural incumbents, “internal cross- subsidy systems” used to average costs “will prove inadequate,” the study said. “Historically, policymakers have relied at least in part on monopoly-based support systems founded on internal company cross-subsidies to maintain affordable rates in uneconomic service areas,” the study said. “Those internal cross-subsidy systems almost certainly will prove inadequate to cope with emerging competitive patterns.” A wireless industry representative, speaking on condition of anonymity, said the study did not provide data on wireless costs or coverage patterns, relying mainly on data about cable and competitive wireline overbuilders.
The National Association of Regulatory Utility Commissioners (NARUC) faced a heaping plateful of telecom resolution proposals at its summer meeting in New York City, set to open Sunday, July 22. Proposed resolutions address Universal Service Fund (USF) reform, VoIP number use, broadband over power lines, wireless termination fees, the digital television transition and IP relay fraud.
Qwest on Monday gave the FCC details of its plan to reform the Universal Service Fund (USF). Qwest wants to divert USF subsidies from rural wireless carriers by limiting distribution to a grant per household rather than per connection, and use the proceeds to fund rural broadband deployment (CD June 28 p6).
The FCC should impose the proposed temporary cap on subsidies to competitive carriers from the high-cost Universal Service Fund (USF), several members of Congress said in letters to the FCC the past few weeks. The letters came as wireless carriers worked the Hill seeking political support for encouraging the FCC to tweak a May 1 Federal- State Joint Board proposal to place an interim cap on funding for competitive eligible telecommunications carriers (CETC), who mostly are wireless providers. Most lawmakers writing the FCC said consumers will see higher costs without the cap.
Verizon agreed to pay $500,000 to the U.S. Treasury as a “final settlement” of a case involving debt to the Universal Service Fund and other regulatory funds owed by MCI before its 2005 merger with Verizon. Announcing the decree Tuesday, the FCC said MCI voluntarily reported the deficits in January 2006 after an internal review. Verizon has made payments to cover MCI deficits since 2003 owed the USF and Telecommunications Relay Service Fund, plus unpaid numbering administration, local number portability and regulatory fees. Verizon agreed to create a “compliance training program” and audit controls on its revenue reporting process, the basis for assessing such fees.
AT&T’s acquisition of Dobson Cellular likely faces few regulatory hurdles at the FCC or Justice Department, analysts and industry sources agreed Monday. AT&T announced a deal late Friday to buy Dobson for $2.8 billion. Dobson sells service to some 1.7 million customers under the Cellular One brand. Both use GSM-based technology, simplifying system integration. And Dobson has 850 MHz spectrum well-suited to serving rural areas, analysts said. AT&T and Dobsons hope to close the deal this year.
Consumers will face rising phone bills unless the Federal-State Joint Board imposes a cap on the Universal Service Fund (USF) high-cost support for competitive eligible telecommunication carriers (CETCs), said Sen. Robert Casey, D-Pa. In a letter sent to the FCC Friday, Casey said the fund’s growth is due to subsidies for wireless carriers. Without a cap, USF funding will rise as much as $500 million this year, Casey said. Pennsylvania paid $124.9 million more into the fund than carriers received in 2006, he said. “It is a major concern that without a freeze on CETC support distributions, Pennsylvania’s net contributor role to the federal USF will greatly increase.”
Colleges’ Universal Service Fund (USF) costs will rise “astronomically” if the FCC moves fund contributions from a revenue- to a numbers-based approach, universities and a higher education group told Communications Daily. Colleges could have to choose between removing dormitory phones and paying the drastically higher fees, they said. Either way, there will be “negative financial, technical and social impact,” said Jeri Semer, executive director of the Association for Communications Technology Professionals in Higher Education (ACUTA). FCC chairman Kevin Martin last May said he has “long favored” a numbers-based model and plans to propose to reform USF contribution this fall (CD May 15 p1).
Windstream and CenturyTel asked the Arkansas Public Service Commission to suspend Alltel’s petition for wireless eligible telecom carrier (ETC) status because of doubts about its merits and the petition’s potential to affect the swelling federal high-cost universal service fund. The incumbents (Case 07-028-U) said Alltel didn’t show it needs universal service subsidies to build out wireless service in the rural territories at issue, and that Alltel already serves rural markets without subsidy. The PSC should look at how more ETC designations such as Alltel seeks may exacerbate problems from explosive growth in the federal universal service fund, they said.
To encourage rural broadband deployment, the FCC should redistribute rural wireless Universal Service Fund (USF) subsidies, Qwest said Wednesday. The Bell filed a plan with the FCC to alter the USF to bring broadband to unserved areas without raising USF fees and surcharges shown on phone bills. The plan would divert money from wireless competitive eligible telecommunications carriers (CETCs) by distributing CETC subsidies per household instead of per connection. About $1 billion of the $4 billion “high-cost” portion of the USF goes to wireless CETCs, but half of wireless customers are on family plans, averaging three lines per household, said Steve Davis, Qwest public policy senior vice president. A per-household system would free funds for use in upping broadband deployment, he said.