LAS VEGAS -- Whether VoIP’s success is due to “regulatory arbitrage” or “superior technology” remains a key question, according to state PUC commissioners speaking Tues. at the USTA convention here. Commissioners said improper regulation could increase regulatory arbitrage. Meanwhile, other speakers predicted state retail rate regulation would largely fade out by decade’s end.
The Federal-State Joint Board on universal service released its most recent monitoring report, which reflects information filed with the FCC through May 2004. The report said the universal service fund (USF) distributed 61.1% for high-cost support, 25.1% for schools and libraries, 13.4% for low-income support and 0.4% for rural health care support. Total industry revenue for telecom services provided to end users in 2003 rose to $234 billion from $232 billion in 2002. Low-income support increased to $716 million in 2003, up from $676 million. High-cost support increased to $3.3 billion from $2.9 billion in 2002.
Chmn. Powell responded Thurs. to Senate questions about whether the FCC’s recent work on E-rate was politically motivated. “That is ridiculous and unfounded,” Powell told reporters. “I've been here 7 years. This program has been run as effectively and efficiently by us as by anyone else. I don’t think it’s politically motivated to make sure govt. money, $2.25 billion of taxpayers’ money, complies strictly with the govt. accounting and auditing standards.” Powell added he also didn’t view as political a decision to keep the USF contribution rate low in light of funding shortfalls that led to an Aug. 3 suspension of the program. “The Commission worries about all consumers,” he said. “The contribution factor gets paid by somebody, It gets paid by individual bill payers.” Powell said he hopes Congress will look at changing the law if it has concerns about how FCC has handled the program. “If we all care about the program, what we ought to be worried about is how to fix it,” he said. “Let’s talk about legislation that would either exempt or modify the [USF] program so it didn’t have to comply with the Antideficiency Act.” Powell said he was ready to appear before the Senate on the issue if called: “I work for them and I'll participate as they choose.” HB
FCC Chmn. Powell said Wed. the Commission acted properly in ordering the Universal Service Administrative Corp. (USAC) to change how it accounts for money in the federal E-rate program fund, the subject of a Senate Commerce Committee hearing yesterday. The issue has gotten considerable national attention in recent days, including coverage in the N.Y. Times and across the country. But the FCC’s 2 Democrats sharply criticized Powell over the way the Commission handled the issue.
Responding to a WilTel complaint, AT&T told the FCC in a letter Mon. that it isn’t improper for AT&T to exclude universal service contributions from its enhanced prepaid card revenues. WilTel had asked the FCC to deny the Wireline Bureau’s proposed 8.9% universal service fund (USF) contribution factor because it doesn’t include AT&T enhanced prepaid card revenues. The request became moot Sept. 30 because the time period for the FCC to halt it expired, but the FCC in a different proceeding has been considering possible action against AT&T’s handling of its prepaid card revenues. AT&T argued in the letter that USF contributions aren’t required because the card is an information service and “WilTel’s suggestion that AT&T is not living up to its universal service obligations is absurd” because “AT&T is the single largest contributor to the USF.” AT&T criticized WilTel and BellSouth assertions “that AT&T is enjoying an unfair, discriminatory competitive advantage” by not paying universal service contributions. “Other providers are free to qualify their prepaid card services as information services, outside of the duty to contribute to the USF,” AT&T said. If the FCC adopts a numbers-based approach to USF contributions, “the regulatory classification of a service as an ‘information service’ or ’telecommunications service’ will no longer be determinative, because providers of both sets of services will be required to contribute to the USF based on their end-users’ assigned telephone numbers.” The company also noted that the “predominant users” of the enhanced prepaid card are military, low-income, minority, immigrants and retirees who depend on the cost-effective nature of the card. Requiring USF contributions “would shift the USF burden from more affluent consumers to individuals who are least able to afford it.”
The Universal Service Administrative Corp. (USAC), which administers the $2.25 billion federal E-rate program, acknowledged at a Senate Commerce Committee hearing Tues. it had lost $4.6 million as a result of an accounting change requiring the corporation to have cash on hand to meet commitment letters. The change forced USAC to sell off high interest Treasury bills (T-bills) and other assets, paying significant penalties.
Wireless carriers acknowledged Fri. they seem to be making little progress on getting the FCC to change course on upcoming Auction 58, the major PCS auction slated for Jan. Carriers led by CTIA have been pushing the Commission to changes the rules of the auction to eliminate the set-aside for “designated entities” of more than 1/2 the 234 10-MHz licenses up for sale.
The Mo. PSC declined to certify 2 rural incumbent telcos as qualified to continue receiving federal universal service funds. The PUC notified the FCC that it was decertifying Cass County Telephone and New Florence Telephone, both run by an executive that the FBI alleged has ties to organized crime. The PUC said there were unanswered questions about whether the telcos had knowingly overpaid for data services provided by a firm the FBI alleged had Mob connections, thereby misrepresenting their costs of doing business. The FBI in July arrested Kenneth Matzdorff, alleging he was a front man for the Gambino crime family in a fraud scheme that involved deliberate large overpayments for business services from Mob-connected companies. Matzdorff still is CEO of Cass County Telephone but quit New Florence Telephone in Aug. The telcos serve about 8,500 lines total, and last year received about $3.2 million in universal service subsidies. Officials of the telcos denied any improper spending. They said a pending 3rd- party audit will show the subsidy money was spent properly. They said once the audit vindicates them, they will move for reversal of the PUC decision.
Cellular One, a subsidiary of Western Wireless, said Wed. the S.D. PUC had designated it an eligible telecommunications carrier (ETC) in the state, qualifying it for USF support.
The Internet Innovation Alliance (IIA) officially kicked off Mon., as its leaders said “promoting VoIP services” and “educating people” were top goals of the new group. Unlike other VoIP organizations, such as the VON Coalition, the IIA will focus primarily on regulatory and economic rather than social policy VoIP issues, its leaders said.