Regulators should consider something other than a cap to slow Universal Service Fund (USF) growth, 5 Senate Commerce Committee members told the co-chairmen of the Federal-State Joint Board in a March 21 letter. In the belief that the joint board and FCC “won’t adopt any serious reforms of the program without a cap,” several witnesses at a recent committee hearing recommended capping the USF, the senators told FCC Comr. Tate and Ore. PUC Chmn. Ray Baum: “We reject that notion.” The joint board is expected to urge an “emergency cap” soon, said Sens. Rockefeller (D-W.Va.), Pryor (D-Ark.), Dorgan (D-N.D.), Klobuchar (D-Minn.) and Smith (R- Ore.): “We urge you to consider other more thoughtful measures to limit the growth of the USF instead of arbitrarily capping the fund.” Instead, the joint board should weigh “competitively-neutral proposals, ensure accountability for how funds are used, and promote build-out of advanced services in rural regions through effective targeting of funds to high cost areas,” the letter said. The cap has been described as a temporary measure, but “we are concerned that it would become a de facto permanent cap,” the senators said.
A hefty increase in the amount of money telecom carriers, and ultimately consumers, must contribute to the Universal Service Fund beginning in April has triggered renewed calls by industry groups for USF reform. The FCC late Thurs. raised the so-called “contribution factor” -- the proportion of interstate and international revenue that telecom carriers must donate to the fund -- to 11.7% from 9.7% for the 2nd quarter, starting in April. The industry money goes to USF subsidies.
The FCC is to vote at its March 22 agenda meeting on an item addressing proper regulatory treatment for access to the Internet using wireless networks. That item is one of 13 set for a vote. The FCC is to take up almost 180 requests for waiver or review, or both, of USAC decisions on USF funding, and an amendment of Part 101 of Commission antenna requirements for the 10.7--11.7 GHz band. The FCC will consider its congressionally required report on competition in satellite communications, it said. The Satellite Industry Association has pressed the Commission to treat other platforms as competing with satellite. The FCC shouldn’t leave in the final document market distinctions listed in the notice of inquiry lest they give Congress a distorted view, SIA said. An order on the ABC-Citadel merger and another on FM digital broadcasting also are set for votes at meeting. The Commission will take up 2 other media items. One deals with exclusive contracts for video service providers in multiple dwelling units. The other evaluates about 200 applications to build new or modified noncommercial educational FM stations.
“Congress must act to restore our global leadership in broadband networks,” Sen. Smith (R-Ore.) said Tues. in prepared remarks to the Fiber to the Home Council annual meeting. Internet services, not voice, fuel innovation, he said, urging Congress to pass a bill (S-711) he co-sponsored with Sens. Dorgan (D-N.D.) and Pryor (D-Ark.) to allow annual use of $500 million from the Universal Service Fund (USF) to extend rural broadband. Smith introduced the bill Feb. 28. Smith also supports S-234 to bolster wireless broadband and municipal investment in Wi-Fi networks. Smith said he and Sen. Kerry (D-Mass.) will introduce a bill to push broadband by providing credits for research, depreciation for broadband equipment and credits for deploying broadband services to charitable and local emergency response entities. The bill would require a Dept. of Treasury study of depreciability of fiber equipment used in telecom services, Smith said: “All of these tax incentives will be temporary in order to spur broadband deployment over the next few years.”
The Satellite Industry Assn. has been meeting with FCC aides to lobby for reverse auctions to be instituted for distributing universal service subsidies, according to several filings. The satellite industry has been paying into the Universal Service Fund, SIA Exec. Dir. David Cavossa said, but won’t be eligible to receive subsidies until the FCC declares broadband services eligible. If satellite operators ask for subsidies only for the customer dish and modem, the service could be less expensive than running cable, fiber or telephone lines to rural, remote areas, said Cavossa. SIA is proposing a pilot USF program to test its hypothesis in the market, Cavossa said.
Mass. consumers will benefit if the FCC shifts universal service contributions from a revenue base to phone numbers, a pro-numbers group said Fri., challenging predictions of harm to consumers by the Mass. Consumer Coalition and the Keep USF Fair Coalition (CD March 9 p10). Opponents used “incorrect data and ‘funny math,'” said the USF by the Numbers Coalition. The opposing group “exaggerates how high numbers- based assessments would be” and overstates what Mass. customers now contribute to USF, said USF by the Numbers, composed of AT&T, CTIA, NCTA, USTelecom, Verizon, VON Coalition, DSL.Net, GCI and IDT Corp.
Mass. consumers stand to lose $158 million a year if proposals to shift federal universal service contributions from a revenue base to a numbers or connections base are adopted, according to the Mass. Consumer Coalition and the Keep USF Fair Coalition. The groups, at a news conference in Boston, said the shift would hurt most the rural, minority, low-income and elderly phone customers who make few long distance calls. They said universal service contributions from Mass. would jump to $266 million a year on a connection- based assessment, from $108 million under the current system based on long distance revenues, assuming a fee of $1.50 a connection. The groups said those who use little long distance would suffer mammoth increases in their USF contributions, with the result that those who don’t make long distance calls will be subsidizing those who use lots of long distance.
Witnesses were in general agreement on reforming but maintaining the Universal Service Fund (USF), at a House Small Business Committee hearing on “advancing the innovation agenda” via telecom and IT. The 2-panel hearing featured exclusively company executives or lobbyists, so there was little disagreement. Main issues were USF reform, the research & development tax credit, Sarbanes-Oxley reform and net neutrality; after the hearing, Committee Chmn. Velsquez said moving forward on tech issues is on the Democratic agenda, but other issues will take precedence in the short term.
The FCC should reject M2Z’s proposal to build a 20 MHz national broadband network in the 2155-2175 MHz spectrum band, CTIA said Fri. The spectrum should be auctioned, not given to one company, it said. But M2Z got potentially significant support from the Media Access Project. And M2Z gave the FCC a study finding economic benefits to consumers of as much as $25 billion in 2007 dollars should it build its network.
Auctions can be a workable, effective way to disburse universal service subsidies, panelists at a Progress & Freedom Foundation seminar said Thurs. “Our knowledge of how to run auctions in complex situations has grown,” said Stanford U. Economics Prof. Paul Milgrom, considered a national expert on the design of govt. auctions. “I'm astonished how far we've come in auction design since the 1970s,” added Vernon Smith, George Mason U. economics professor and auction expert.