Congress faces a choice between acting quickly to preempt states from regulating VoIP or taking more time to tackle the Internet service in a broader rewrite of the Telecom Act, House Telecom Subcommittee members said Wed. At a hearing on VoIP, industry witnesses disagreed. The preference seemed to be what some committee members considered impossible: A more comprehensive Telecom Act rewrite done quickly. House Commerce Subcommittee on Commerce Chmn. Stearns (R-Fla.) told us after the hearing, however, that the debate is more complicated than that. “Some of them [Commerce Committee members] don’t want to do anything at all,” he said. Full Committee Chmn. Barton (R- Tex.) didn’t take a position on the best approach, but he did predict “VoIP is going to be huge. I think it’s going to make cell phone expansion look like wagon trains.” Barton told the witnesses Congress will preempt states on VoIP regulation: “There should be only one, federal set of rules that apply to VoIP.”
A federal appeals court ruled the Tex. PUC can’t include proceeds from interstate and international calling in the revenue base on which a telecom carrier’s state universal service fund assessment is figured. The U.S. Appeals Court, Dallas, was ruling on an Oct. 2002 AT&T suit against the PUC, in which AT&T argued it shouldn’t have to pay the 3.6% state universal service assessment on interstate and international calling revenues because that money already is subject to FCC assessment for the federal universal service fund. AT&T won in lower court March 2003, but the PUC appealed. AT&T continued to recover its universal service assessments from its customers but put the disputed portion into escrow while the PUC’s appeal was being considered. If the appeals court’s decision stands, AT&T said it will refund the money to customers. The decision will cost the state fund about 18.5% of its annual revenues, or about $100 million yearly -- and possibly more because the state may have to reimburse other telecom carriers for unlawful assessments. The state has until July 15 to seek reconsideration by the 5th Circuit or until the end of Sept. to appeal to the U.S. Supreme Court. The PUC said it will meet to discuss funding options, including raising the state telecom excise tax on local and intrastate calling.
The U.S. Appeals Court, D.C., affirmed the FCC’s June 2002 decision to allow increases in the cap on ILEC subscriber line charges (SLCs) to take effect as scheduled in the Commission’s CALLS order. Acting on the National Assn. of State Utility Consumer Advocates (NASUCA) v. FCC case (02- 1261) Tues., the D.C. Circuit denied NASUCA’s petition for review and held “the Commission acted reasonably and in conformity with the 1996 Act.”
House Telecom Subcommittee Chmn. Upton (R-Mich.) said he would encourage Rep. Terry (R-Neb.) to urge Senate approval of universal service fund (USF) legislation before addressing it in the House (CD June 24 p10). Terry and Sen. Smith (R- Ore.), who have introduced legislation that would change USF distribution so that more western states would receive part of the “non-rural” fund, said Wed. they would try to find ways to move the bills through legislative riders. Upton said Thurs. that the House has passed several bills that the Senate hasn’t acted upon. Upton said he supported the changes and wouldn’t be opposed to addressing these issues in a stand-alone bill (as opposed to comprehensive USF reform that’s expected next year), but said the Senate should act first.
Sponsors of legislation designed to bring more universal service fund (USF) dollars to western states said Wed. they would seek to attach the bills as riders to other legislation in an effort to see it passed this year. Sen. Smith (R-Ore.) (S-1380) and Rep. Terry (R-Neb.) (HR-1582) said while time was running out this congressional session, their bills enjoyed considerable support and could find passage as a rider to another legislative vehicle. Terry said House Commerce Committee Chmn. Barton (R-Tex.) was now a co-sponsor of the bill and Smith said Senate Commerce Committee Chmn. McCain (R-Ariz.), an original co-sponsor, was “pushing aggressively” to have the measure moved through the Senate. The bills are designed to redistribute the so-called “non- rural” section of USF, about $230 million yearly, to more states. The non-rural fund goes to ILECs (including some non-RBOC ILECs) that serve rural customers. Currently, the lion’s share of the funding goes to Miss., which receives about $120 million, and the rest is split among 7 other states, leaving 42 states ineligible for funding. Smith, Terry and other supporters of the bills have called the funding formula “unfair” and the 10th U.S. Appeals Court, Denver, remanded the funding scheme to the FCC. Both Qwest (which has made the most vigorous push for the bill) and SBC have challenged the FCC’s recently revised scheme, which doesn’t significantly change the distribution pattern. Smith and Terry were optimistic about the chances that the bill could be added to another legislative vehicle and an industry source said the lawmakers have reached out to key members on appropriations and other committees to help move the bill forward. Things have improved for Terry’s bill since Rep. Tauzin (R-La.) vacated his chmn. position. Tauzin, as have some others, said the issue should be dealt with in comprehensive USF reform. “This bill should be adopted today,” Terry said. USF reform, which will be a hot topic in Congress next session, will be a long process, Terry said, but there’s support for this legislation now. But Terry alluded to one “Mississippi representative” who didn’t understand the inequities of the issue. Terry was likely referring to Rep. Pickering (R-Miss.), the vice chmn. of the Commerce Committee. The House bill has 79 co-sponsors, while the Senate version has 31, including the recent addition of Senate Minority Whip Reid (D-Nev.). Neither bill has been marked up or even had a hearing, though the measures have been addressed in other USF-related hearings. Smith said it would have been preferable to have the bill marked up, but said in the Senate, “it doesn’t seem to matter.” He said there were at least 2 appropriations bills that it could be attached to and that the “political season” could produce other bills suitable for attachment.
House Commerce Committee ranking Democrat Dingell (Mich.) urged the FCC to reject “immediately” an AT&T petition asking that its enhanced prepaid calling card services be classified as interstate information services. In a letter to FCC Chmn. Powell last week, he expressed concern that “until the Commission acts, AT&T will continue its apparent practice of improperly withholding payments it should be paying into the Universal Service Fund (USF), as well as withholding appropriate payments of intrastate access charges.” In a petition filed more than a year ago, AT&T asked the Commission to rule that its “enhanced” prepaid calling card services were “interstate communications subject to interstate, rather than intrastate, access charges.” It also argued that services were information, rather than telecom services, because calling card users heard recorded ads when placing calls. Dingell called the claims absurd and said he was “troubled by the implications of the relief AT&T seeks.” He said ruling in AT&T’s favor would “upset the present balance which permits lower consumer phone rates,” because the company sought to “avoid its obligation to pay lawful intrastate access charges… on calls in which the calling and called parties are located within the same state.” He also urged the Commission to reject AT&T’s claims that its prepaid calling card services were information services, saying that granting such claims would “only free AT&T of any obligation to contribute to the USF in connection with these services” and create an “enormous loophole for other carriers to avoid supporting universal service.” Consumer Federation of America (CFA) Research Dir. Mark Cooper said in an interview CFA was “concerned” about AT&T trying to avoid paying access charges and USF contributions. “The FCC should make sure that everybody who benefits from the public switched network should make fair contributions to recover costs” of maintaining it, he said.
The FCC Wireline Bureau announced the proposed universal service contribution factor for the 3rd quarter is 8.9%, up 0.2 percentage points from 2nd quarter. The Commission calculates the contribution factor based on the ratio of total projected quarterly costs of the USF to contributors’ total projected interstate and international telecom revenue.
Supported by at least 2 Bell companies, USTA urged the FCC in comments to leave the IP-enabled services market free of economic regulation. But some consumer groups argued the Commission should subject VoIP to Title II regulation to protect consumers, and use its authority to exempt such services from unnecessary regulations. The Local Govt. Coalition reminded the FCC it had “no power to adopt a comprehensive scheme for regulating information services independent of Title II, Title III or Title VI” of the Communications Act. Meanwhile, states pressed for a technology-neutral functional approach to VoIP oversight. “Regulators should not be choosing technology winners and losers,” NARUC Gen. Counsel Brad Ramsay told us. More comments were expected after our deadline Fri.
The organization that administers the universal service program reportedly is planning an audit of the prepaid calling card business to see if providers are contributing enough to the universal service fund (USF). A spokesman for the Universal Service Administrative Co. (USAC) said he can’t comment on whether audits are being conducted, but sources close to the process said the board recently approved funding to conduct such an audit.
SBC has joined Qwest’s court case against the FCC’s rules for determining the distribution of the “nonrural” universal service fund (USF), distributed to larger ILECs that serve rural areas, an industry source said. The 2 RBOCs have filed a petition with the 10th U.S. Appeals Court, Denver, to throw out the rules for the $260-million fund. Qwest has argued that the rules aren’t fair, since most funding goes to a few states, notably Miss. and Ala. The FCC determines funding levels on a statewide basis. Advocates for the Qwest approach have said that’s unfair to Western states, which have large land areas and sparse populations. Sen. Smith (R-Ore.)(S-1380) and Rep. Terry (R-Neb.) (HR-1582) have introduced legislation to change the system. The 2 bills have 110 co-sponsors, and nearly 75 independent groups have also signed onto the approach. However, an industry source said that while SBC is supporting Qwest on the court petition to abandon the old rules, SBC still isn’t actively supporting the bills.