State regulators asked the FCC Friday to suspend an updated method of determining high-cost support from the USF (http://xrl.us/bnsr4j). The motion comes after months of debate and allegations from national and state entities that the year-old reform will hurt companies due to its unpredictability. “Clearly [the FCC model] is going to have the most impact on high-cost, rural-type carriers,” NARUC Telecom Committee Chair John Burke told us. It will impact states differently depending on how many such companies they have, he said. The FCC’s methodology of quantile regression analysis was introduced in its November USF/intercarrier compensation order, adjusted in April and determines more than 700 companies’ high-cost support as of this July. Other NARUC telecom committee members are “concerned,” Burke said.
Federal Universal Service Fund
The FCC's Universal Service Fund (USF) was created by the Telecommunications Act of 1996 to fund programs designed to provide universal telecommunications access to all U.S. citizens. All telecommunications providers are required to contribute a percentage of their end-user revenues to the Fund, which the FCC allocates for four core programs: 1. Connect America Fund, which subsidizes telecom providers for the increased costs of offering services to customers in rural and remote areas 2. Lifeline, which directly subsidizes low-income households to help pay for the cost of phone and internet service 3. Rural Health Care, which subsidizes health care providers to offer broadband telehealth services that can connect rural patients and providers with specialists located farther away 4. E-Rate, which subsidizes rural and low-income schools and libraries for internet and telecommunications costs The Universal Service Administrative Company (USAC) administers the USF on behalf of the FCC, but requires Congressional approval for its actions. Many states also operate their own universal service funds, which operate independently from the federal program.
Broadband ISPs excoriated the FCC for adopting unrealistic standards for its Section 706 report on the state of broadband deployment, in comments filed Thursday and Friday in docket 12-228. In response to a notice of inquiry asking what factors the commission should consider for its ninth report (http://xrl.us/bnqtzn), the telcos and cable companies aired some longstanding grievances about the commission’s findings the last three years that broadband was not being deployed on a “reasonable and timely fashion” (CD Aug 22 p1). States spoke of the need for the commission to tweak its USF rules to enable faster deployment of broadband, and interest groups expressed a need for a faster definition of broadband to enable more data-hungry applications.
Rep. Jeff Landry, R-La., introduced a bill to neuter the FCC’s USF reform order. The Restore Effective Statistics to the Calculation of USF Expenditures (RESCUE) Act would ensure that the order on the commission’s Connect America Fund and high-cost USF support would no longer have force or effect and require the FCC to prepare a report on alternatives. The bill introduced Friday said the order will “invariably” lead to the closure of many small businesses, was made in direct conflict with the USF mandate, relies on unpredictable regression models and “unfairly manipulates” federal support for carriers. The bill’s a “significant step to correct the FCC’s deeply flawed method for limiting USF support for rural telecommunications providers,” NTCA CEO Shirley Bloomfield said in a news release. “This bill highlights three of the most significant shortcomings of the commission’s new statistical caps on universal service support: their disregard for statutory mandates requiring that federal universal service support be predictable; their alarming inaccuracy; and their retroactive nature that penalizes prior commitments made in good faith by job creators all over this country.”
The FCC’s budget for salaries and expenses would be cut 8.2 percent, equal to roughly $28 million, if a Congress doesn’t act to stop sequestration before Jan. 2, the White House said. The news came in the administration’s much anticipated sequestration report Friday, which detailed sharp across-the-board cuts to the budgets of most federal agencies. An industry group and a union representing FCC employees said the report shows the negative impact that sequestration will have on federal employees, private industry and the economy as a whole.
Allband, the first telco to get a waiver of new rules limiting universal service support in high-cost areas, said a three-year waiver isn’t enough to prevent loss of voice and broadband service throughout its service territory. The rural Michigan cooperative asked the FCC Wireline Competition Bureau (WCB) to extend the time period of the waiver of the $250 per-line-per-month cap to 15 years because it can’t reduce its expenses to meet the cap, it said in an application for review Friday (http://xrl.us/bnm2w5). Absent the extension, Allband will “soon be forced to again file a waiver” in late 2013 or early 2014, at an estimated cost of $50,000, and a drain on FCC staff time of “many hours” to review the petition, Allband said. The telco also requested a waiver of the regression-based caps on high cost loop support. The bureau had found this request moot, because under the quantile regression methodology ultimately adopted, Allband was not capped (CD July 27 p6).
Comments filed on USF contribution reform show little agreement and point to the need for more discussion, Verizon and Verizon Wireless said in FCC reply comments. That conclusion was seconded by many companies and groups filing replies this week. Though many suggested short-term fixes, most agreed there is little consensus to move to a numbers-based or connections-based approach.
All three of this summer’s NARUC telecom resolutions passed the association’s telecom committee unanimously Tuesday. The resolutions will preserve state authority to tax and charge VoIP providers for state USF funds, relay service and E-911; urge the FCC to continue pursuing rural call termination issues and enforcing penalties against violators; and question the agency’s use of what the resolution says is an “arbitrary and capricious” methodology of determining USF funds. The resolution on the FCC’s methodology proved the most controversial, and faced much debate and revision in both the telecom subcommittee and committee. USTelecom voiced multiple objections based on feared delays. Objectors feared delays would result from a resolution provision demanding the FCC refer to the Federal-State Joint Board on Universal Service for many of its decisions (CD July 25 p8). “The FCC needs to get this [USF fund] model right,” said California Public Utilities Commissioner Catherine Sandoval. Resolution sponsor Commissioner Larry Landis of Indiana discussed USTelecom’s concerns at the Tuesday vote and said last-minute revisions had led the organization to be “satisfied” with the changes, which “may assuage the concerns of USTelecom if not all of their members.” The telecom committee clapped upon passing this third controversial resolution. Telecom Committee Chairman and Vermont Public Service Board Commissioner John Burke said voting was “smoother than usual” given the unanimity of all three votes.
State utility commissioners will consider four potential telecom resolutions at NARUC’s midyear meeting in Portland, Ore., on July 22-25. The resolutions ask the FCC to revisit telecom rules, sometimes lauding the federal commission but often asking it to take action. NARUC posted both the resolution drafts (http://xrl.us/bng7ny) and the conference’s final agenda (http://xrl.us/bng7n6) online, the association said late Monday. The resolutions will, according to NARUC, be debated throughout the Portland conference and may become a part of the association’s policy if they are voted out of the telecom committee and are approved by the board July 25.
More than 650 telecom providers signed a letter to commissioners “to ensure” the FCC and Congress “have clear and unambiguous notice of our collective concerns with the ‘regression analysis'-based caps” on USF support (http://xrl.us/bngrm9). A NTCA spokeswoman said the letter was an industry-wide effort in which several national and state associations, other groups and individual members “all reached out collectively to raise the visibility of this issue among policy makers in Washington.” The commission has received eight waiver petitions dealing with support reductions, of which one has been granted interim relief, a spokesman said. The commission also got two expedited waiver petitions dealing with boundary data, which it granted.
Of the dozens of comments filed this week in response to the FCC’s rulemaking on USF contribution reform, there was little agreement about whether to stick with a revenue-based system for assessing contribution fees, to move to a system that uses connections or numbers, or even whether to assess fees on broadband service. The only universal sentiment that might be teased out of the plethora of comments filed is that, as AT&T put it, the current system is “dysfunctional.” Carriers differed, but generally supported a modified revenue-based system, while VoIP providers preferred a connections-based system.