The FCC denied BellSouth and Arya International petitions seeking reconsideration of universal service fund contribution obligations the FCC set in 1999. That order, made on remand from the Fifth Circuit U.S. Court of Appeals, established a “limited international revenues exemption.” LIRE stipulates that carriers with interstate revenue comprising less than 8 percent of combined interstate and international revenue base their USF contribution only on interstate revenue. In December 1999, BellSouth and Arya filed for reconsideration of the order. Last week, the FCC rejected Arya’s argument that the 8 percent threshold was “arbitrary and capricious.” In 1999, 8 percent “provided sufficient margin of safety based on the contribution factors,” and fixing that figure kept the agency USF contribution factor “specific and predictable,” the FCC said. In 2002, the FCC raised the exemption threshold to 12 percent to reflect market changes, it added. The FCC also rejected BellSouth and Arya demands that the FCC refund all USF contributions collected from Jan. 1, 1998 to Oct. 31, 1999, and based on intrastate or international revenue exceeding the 8 percent LIRE. “Requiring refunds of this magnitude would compel” increased USF fees and might not be feasible, the FCC said. “That would cause manifest injustice for today’s consumers, as they shoulder higher bills while bearing no culpability for the refund problem.”
The Internet voice industry is divided on a popular proposal to base universal service fund contributions by carriers on phone number count rather than interstate revenue. Vonage and other interconnected VoIP carriers support a numbers approach as making the fund technology- neutral. Others say a numbers world would force overhaul of business models at Google’s GrandCentral and other enhanced service providers. That shouldn’t be, Feature Group IP CEO Lowell Feldman said in an interview. Ten-digit phone numbers represent “1970 technology, not 2008 technology,” he said. “The numbers scheme is really a sleight of hand to try to force the industry to always use numbers.”
All major parties to the Texas Public Utility Commission’s review of the state’s universal service programs agreed to a settlement proposal for the high-cost fund that would reduce fund 36.5 percent -- $144 million annually -- in steps over three years. The proposal (Case 34723) would reduce the universal service surcharge on landline and wireless phone bills to 3.4 percent from 4.4. Signers included AT&T, Verizon, the PUC staff, Office of Public Utility Counsel, the USF Reform Coalition of cable and wireless telecom providers, Embarq, Windstream and rural landline competitive carriers. The PUC, complying with a legislative mandate, opened a comprehensive review of the fund in the fall. The PUC staff had recommended cutting the $395 million high-cost fund 60 percent to $165 million -- but competitive carriers supported deeper cuts and incumbents called for roughly doubling the fund. The PUC urged negotiations. Other provisions of the agreement would end universal service subsidies in deregulated exchanges with population higher than 30,000. Subsidies in deregulated exchanges with fewer than 30,000 people could continue if market rates exceeded “reasonable” levels specified. Large incumbents would be allowed rate increases to offset the reduction in universal service subsidies. The pact also would increase the Lifeline discount. The signing parties agreed to not seek any changes to high-cost or Lifeline programs from the PUC or state legislature before 2012.
CapTheFund.org had collected 1,509 consumer comments by Feb. 7 supporting a cap on universal service fund high-cost support, it said Tuesday. The comments also support proposals to use reverse auctions and limit the ‘identical support’ mechanism that bases USF subsidies on the cost of running incumbent telecom companies. The FCC deadline for comments is April 17.
LAS VEGAS -- The pending FCC order approving a Universal Service Fund cap does not have a sunset date, as was recommended by the Federal-State Joint Board on Universal Service, sources said Thursday. The order grants more than 40 pending applications for eligible telecom carrier (ETC) status. It also caps the fund at March 31 levels. FCC Chairman Kevin Martin has yet to circulate text of the order, complete with proposed edits, but is expected to do so in days. Sources said the order will likely have at least three votes if it contains expected language, with Martin and Commissioners Robert McDowell and Deborah Tate in support.
LAS VEGAS -- FCC Chairman Kevin Martin told CTIA attendees he expects to move quickly to adopt a cap on payments to competitive eligible telecom carriers (CETCs), now that Commissioner Robert McDowell is a likely third vote in favor (CD April 1 p1). Martin said he still plans an en banc hearing of the commission to look more closely at early termination fees (ETFs) often imposed by wireless carriers and other regulated companies. Martin also said he was starting to circulate an order dismissing a Skype petition seeking Carterfone rules for wireless.
LAS VEGAS -- FCC Commissioner Robert McDowell sent FCC Chairman Kevin Martin a list of edits on an order that would cap Universal Service Fund payments to competitive eligible telecom carriers (CETCs) at end-of-year-2007 levels, agency sources said. McDowell backs a carve-out for tribal lands in all 50 states, including Alaska, but without language specific to Alaska carrier GCI. McDowell proposed language saying that the FCC would make an earnest effort to undertake comprehensive USF reform.
An economic slowdown means opportunity for alternative phone companies, as well as curtains for some VoIP companies, industry officials said in interviews. Meanwhile, former Bell companies and other wireline incumbents dismissed notions that their businesses are vulnerable.
FCC Chairman Kevin Martin aims to fast-track a TracFone request to become an eligible telecommunications carrier (ETC) for the Universal Service Fund (USF) LifeLine and LinkUp program, he told a Thursday press conference. Approving TracFone’s request would “add an additional service option” for low-income consumers, he said. The request had been held up because it was included in the USF cap proposal, Martin said. Last month, he circulated it as a separate order, he said. “The cap has not moved forward yet, and as a result I don’t think it’s fair to hold the grant of this particular application up any longer,” Martin said. Meanwhile, Martin didn’t know if the interim cap proposal would progress soon, he said. “But I hope so.”
The proportion of long distance revenue carriers must contribute to the Universal Service Fund in the second quarter of 2008 increased to 11.3 percent from 10.2 percent in Q1, the FCC said Friday. To get the “contribution factor,” the agency divides projected carrier revenue by expected USF subsidies for the quarter. Of an estimated $1.91 billion in Q2 subsidies, about $1.15 billion is for the rural high-cost program, $532.53 million for the E-rate program, $208.08 million for low-income support and $61.18 million for the rural health-care program. Rural wireless carriers are to blame for the “hike” in phone bill USF fees, said Tom Tauke, Verizon public affairs, policy and communications vice president. He urged the FCC to vote for an interim cap. “Consumers will thank the FCC when three commissioners finally call a halt to funding windfalls for some companies from the Universal Service Fund,” he said. A wireless source shot back: “If you really want to do something about controlling fund growth, then a good place to look would be to change the rules that allow the incumbent’s support to grow even after the incumbent wireline carrier loses customers.”