About $4.1 billion of the Universal Service Fund’s $6.6 billion disbursements in 2006 went to “high-cost” rural subsidies, according to a report issued Monday by the Federal-State Universal Service Joint Board. The staff report said schools and libraries support was $1.7 billion, low-income was $808 million and rural health care was $41 million. High-cost support increased by $300 million from the year before, which the report attributed to more subsidies going to competitive carriers. The USF report tracks a variety of telecom trends and is the only document that includes statistics from all incumbent local telephone companies in the U.S., the FCC said in a news release accompanying the joint board report. For example, the report shows Bell access lines declined to about 118 million in 2006, compared with 127 million in 2005, while fiber installations grew.
FCC action on early termination fees (ETFs) is expected early in 2008, with the commission expected to refocus at least in part on telecommunications issues following a major fight over media consolidation. The Universal Service Fund, 700 MHz auction, future use of the broadcast white spaces, and 800 MHz rebanding also are expected to get agency attention.
The Benton Foundation blasted the Bush administration for failing to achieve universal broadband access by 2007. Mostly completed in September, the report was held until now so it could include material on a November Joint Board on Universal Service decision to include broadband as a supported service, said Charles Benton, foundation CEO and founder. The board ordered the FCC to create a specific broadband fund under the program, a “critical first step,” but not enough unless the “FCC acts immediately,” the report said. And the $300 million proposed annual broadband fund is “woefully inadequate for tackling the challenge at hand,” the report said. With broadband deployment costing $1,000 a line, a $300 million yearly fund at most would add 300,000 broadband connections, boosting penetration “only about 1 percent,” the report said. The National Exchange Carrier Association pegs annual costs at closer to $3 billion. The Bush administration should have drafted a strategy for universal broadband deployment, the report said. Nearly 60 percent of households with incomes above $150,000 have broadband, compared with less than 10 percent of households with incomes below $25,000. Broadband deployment should be covered under the Universal Service Fund, especially for rural areas, the report said. “Making the transition to broadband can, over the long run, save consumers tremendously,” the report said. Broadband service costs could be lowered through a “modernized” USF program and policies allowing municipalities to offer the service, it said.
FCC Commissioner Robert McDowell on Thursday questioned the need to vote for a proposal to put an interim cap on Universal Service Fund subsidies for competitive telecom companies. The commission already may have acted by default on the interim measure in setting caps as a condition to its approvals this year of several acquisitions, McDowell told reporters at a press event. “The same goal may already have been accomplished,” he said. It might make more sense to move directly to long- term USF reform, he told reporters. Asked if his comments indicate he would vote no on the interim cap, McDowell said, “the question is have we already voted?”
The FCC should move quickly to approve an interim cap on universal service support to competitive rural carriers, so it can address longer-term reform, TracFone Wireless said in an ex parte letter filed Tuesday at the FCC. The company wants an interim cap on both incumbent and competitive carriers, but “time is of the essence” and a cap on competitive carriers might be approved faster, it said. It’s been seven months since the Federal-State Joint Board on Universal Service recommended capping competitive carriers to halt Universal Service Fund growth, TracFone said. By acting now on that proposal, the FCC could stabilize the fund and advance wider reform, it said. TracFone isn’t a facilities- based provider, so it doesn’t get USF support. But it seeks status as an “eligible telecom provider” so it can get universal service money for providing Lifeline service.
The proportion of long distance revenue carriers must contribute to the Universal Service Fund in first quarter 2008 fell 10.2 percent from 11 percent this quarter, 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 $1.9 billion in first 2008 quarter subsidies, $1.14 billion is for the rural high-cost program, with $535.6 million for the E-rate program, $209 million for low-income support and $25 million for the rural health-care program.
The FCC asked for comments by Jan. 14 on Virgin Mobile’s request for regulatory forbearance so it can be eligible for universal service subsidies (CD Dec 7 p11) in New York, Pennsylvania and Virginia. Virgin Mobile wants the FCC to refrain from applying a requirement that an “eligible telecommunications carrier” must use its own facilities to offer service. Virgin Mobile, a reseller, wants USF money to provide Lifeline and Link Up services. The agency also wants comments by Jan. 14 on a request by Tracfone Wireless for ETC status in Delaware and New Hampshire, again to get USF subsidies for the limited purpose of providing Lifeline service. Replies are due Jan. 29 in both cases.
The Universal Service Fund should be shut down, but until then a temporary cap on USF outlays would be a good stop-gap, the National Taxpayers Union said Tuesday in a letter to FCC Chairman Kevin Martin. The USF “is a textbook example of taxation and redistribution via regulation,” the group said. USF disbursements are “part of a multi-billion- dollar wealth transfer,” the group said.
NARUC urged House Appropriations Committee leaders to adopt language in a Senate bill to extend an exemption for the Universal Service Fund from Antideficiency Act controls. Without the exemption, phone rates could rise “unnecessarily,” Tony Clark, chairman of NARUC’s Telecommunications Committee, wrote Appropriations Committee Chairman David Obey, D-Wis., and Ranking Member Jerry Lewis, R-Cal. The Universal Service Administrative Co. could “lose millions in safe government-backed securities” and the E-rate program could be disrupted for nearly six months, said NARUC’s letter Friday. Congress has passed temporary exemptions for three years, and the current one expires Dec. 31, the letter said. The Senate version of the fiscal 2008 Financial Services and General Government Appropriations bill would extend the exemption a year, but the House version has no exemption, Clark wrote. “Allowing the temporary exemption of USF from the Antideficiency Act to lapse could unnecessarily complicate efforts underway at the FCC to enact comprehensive reform of the Universal Service program.”
FCC file room security needs beefing up, the agency’s Office of Inspector General said in a report based on six months of investigations that ended in September. The inquiry came after news reports on a file containing “non- confidential contract documents” relating to telecommunications service between the U.S. and Haiti was lost from the FCC’s Reference Information Center, the IG said.