Clarification: The Progress & Freedom Foundation said the study of the Universal Service Fund (USF), titled “Universal Service Policy: At the Crossroads,” detailed several possible solutions to USF problems but made no specific policy recommendations (CD Sept 29 p6).
The Progress & Freedom Foundation (PFF) released a study on the universal service fund (USF) that said the program was “ill-defined” and threatened by new technology. The study, written by Raymond Gifford and Adam Peters, outlined several possible solutions, but said “both regulators and legislators would be well-advised to take a step back and reconsider what the universal service fund is really supposed to pay for before determining which mechanisms should be employed.” One proposed solution is “phone stamps,” a voucher program to offset costs in rural areas for low income people. At a PFF panel discussion on Fri., several speakers discounted that idea. Nanette Thompson, Alaska PUC Comr., said such a “means-based” approach isn’t realistic because the expense for providers is in building the network. “It’s not a question of affordability of service, but of the cost to provide the service,” she said. Other ideas included an offset similar to the earned income tax credit and using a “reverse auction” as a distribution method. The paper also suggested abandoning charges on interstate services with an across-the-board surcharge on all communications service revenue. Thompson, who’s also the state chmn. on the joint federal-state board on USF, said the state side of the board favors that approach. Matt Brill, aide to FCC Comr. Abernathy, the federal chmn. of the joint board, said such an approach would likely require legislation. John Rose, OPASTCO pres., said reform of USF should focus on 4 issues: (1) The public interest standard. (2) An increase in accountability. (3) Distribution based on actually costs. (4) A broader base of support to draw from. John Stanton, Western Wireless chmn., said wireless companies should be included in the distribution of USF funds since that technology is well suited for rural areas and since it’s becoming the only line for many consumers. He said while wireless company contributions make up 30% of the USF, wireless companies receive only 2% of the distributions.
Careful not to step on the toes of the House Commerce Committee, House Small Business Rural Enterprise Subcommittee Chmn. Graves (R-Mo.) said he would be working with Commerce Committee Chmn. Tauzin (R-La.) as they examined the problems and potential solutions for the Universal Service Fund. After a subcommittee hearing Thurs. that focused mainly on eligible telecom carrier (ETC) designation, Graves said he had many concerns about the fund -- particularly how it was applied to rural small businesses -- and said he would work with Tauzin and the Commerce Committee as each panel examined USF issues. The House Telecom Subcommittee held its own hearing on USF issues Wed. (CD Sept 25 p1).
In the first of 3 days of House activity on the universal service fund, the House Telecom Subcommittee took a broad look at the program as most members and witnesses said something had to be done to fix the program before it becomes insolvent. But agreement ended at that point, as an array of witnesses offered competing suggestions for a fix.
Senate Communications Subcommittee Chmn. Burns (R-Mont.) led an industry summit on Universal Service Fund (USF) designed to draw consensus on a new contribution method to USF. Sens. Stevens (R-Alaska) and Dorgan (D-N.D.) also participated, along with FCC Comrs. Martin and Adelstein. Burns said participants were “closer than they even they think” on reaching a consensus for contribution methods. USTA Pres. Walter McCormick told us he expects legislation soon from Burns. Participants at the summit, which wasn’t open to the public, said the conversation stayed mostly on contribution methods. But McCormick said he emphasized that distribution of USF funds could be used to regulate competition as more entities are vying for USF funds.
Industry sources said the Wed. summit on the Universal Service Fund could lead Senate Communications Subcommittee Chmn. Burns (R-Mont.) to introduce USF legislation shortly. Burns and Sen. Dorgan (D-N.D.) will host the summit of “stakeholders” in the USF debate. The meeting is scheduled to examine contribution methods, with Mont. PSC Chmn. Bob Rowe as moderator. It also will include analysis of what contribution methods are most feasible to adopt and which are the most troublesome. Sources said depending on the tone of the summit, Burns could file USF legislation this week. A source said he was likely to want USF legislation in the public record before a potential USF hearing later this month. One industry source said a USF bill was likely to be limited in scope and would deal with contribution methods. A source said Burns might push for including intrastate calls in addition to interstate calls as a contribution source. Another source said Sen. Stevens (R-Alaska) would push for including facility-based broadband, such as cable modem, as a USF contributors. The meeting isn’t open to the public, but is scheduled for this morning in Rm. 192, Dirksen Bldg.
The Iowa Utilities Board (IUB) opened a proceeding to consider rules for wireless universal service carriers involving service area and service quality. The new docket (Case RMU-03013) applies to any wireless carrier that is or wants to be an eligible telecom carrier (ETC) for federal universal service funding. The IUB proposed a rule that would define a wireless carrier’s universal service area as the area licensed by the FCC, regardless of landline exchange boundaries. The IUB also proposed applying its basic service quality rules to wireless services supported by universal service funds. Hearings are to begin Dec. 10.
AT&T told the FCC that BellSouth’s proposals to exempt ILECs’ broadband service from cost allocation rules and mandatory universal fund (USF) contributions were “frivolous” and should be “summarily rejected.” In a July 31 ex parte letter, AT&T told the Commission that cost allocation rules were “vital accounting safeguards and eliminating them or creating an arbitrary exemption for broadband services would only enhance the Bells’ already significant opportunities to harm consumers and competition through discrimination and cross-subsidization.” AT&T also argued that BellSouth basically was seeking deregulated status for broadband service except for cost allocation rules where it “paradoxically claims that such services should, for those purposes only, still be considered ‘regulated.'” AT&T said it didn’t support the idea of deregulating broadband services, but “if broadband services are to be deregulated, then the only nonarbitrary conclusion would be that broadband services must also be deemed ‘nonregulated’ under the Commission’s cost allocation rules.” AT&T said that under FCC rules, classifying a service as nonregulated triggered the cost allocation rules, which require ILECs to separate the costs of nonregulated services from regulated services. “Making this distinction between regulated and nonregulated services is the critical first step in the Commission’s accounting safeguards,” AT&T said. It also disagreed with BellSouth’s proposal to remove wireline DSL revenues from the USF contribution base to gain parity with cable broadband providers, which don’t contribute. Said AT&T: “BellSouth is simply mistaken in contending that it cannot be required to contribute to universal service based upon the interstate revenues from its wholesale transport offerings unless cable broadband providers also contribute to universal service.”
The Senate Commerce Committee approved a permanent Internet tax moratorium Thurs., although a few senators expressed concern that the definition of Internet access needed to be more precise. The Committee passed on voice vote a substitute bill (S-150) that was supported by Sens. Allen (R-Va.), Wyden (D-Ore.), Stevens (R-Alaska), Sununu (R- N.H.), Brownback (R-Kan.) and Dorgan (D-N.D.). But Dorgan also emphasized that language in the bill needed to be tweaked so it couldn’t be interpreted to apply to telecom services as well as Internet access. And the bill included provisions supported by rural telecoms that would protect the universal service fund (USF.)
“Regulators must resist the urge to regulate [voice- over-Internet-protocol -- VoIP] unless and until there are compelling reasons to do so,” Richard Whitt, WorldCom dir.- federal law & public policy, said at an FCBA lunch Wed. in Washington. He said telecom service regulatory policies, in particular the current intercarrier compensation regime, were “bloated, untenable and inequitable and harm the public interest in numerous ways… The worst thing to do is to extend this bloated mess to nascent, innovative IP-based technologies such as VoIP.”