The House today (Wednesday) is set to debate an appropriations bill (HR-2829) that would give the FCC $2 million to design a program explaining the shift from analog to digital TV. The FCC originally sought $1.5 million, but the Financial Services Subcommittee upped the sum out of concern about “low” public awareness about the transition. The overall bill could face a veto, since it contains provisions dealing with pay raises for members of Congress.
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.
Five telecom groups back the Federal-State Joint Board’s proposal to cap universal support to competitive eligible telecom carriers (CETCs), they told Senate Commerce Committee leaders in a June 25 letter. A cap “is a necessary first step toward comprehensive reform of the Universal Service Fund (USF),” said the International Telephone & Telecommunications Alliance, Western Telecommunications Alliance, National Telecommunications and Cooperative Association, USTelecom and OPASTCO. During 2001-2006, CETC support ballooned $15 million yearly to nearly $1 billion, the groups said, while funding for incumbent carriers has remained flat since 2003. CETC funding burdens consumers, the groups argued, adding that the money “is being spent inefficiently” by underwriting multiple wireless carriers vying to serve the same geographic areas.
Arguments against capping universal service subsidies to competitive carriers are based on “short-term self interest rather than long-term public interest,” OPASTCO told the FCC. “Excessive growth in the High-Cost program that is threatening its sustainability is attributable solely to competitive ETCs,” said OPASTCO in reply comments on the cap proposal. On the other hand, extending the interim cap to all rural telecom companies would “seriously threaten” wireline rural carriers, OPASTCO said. “At greatest risk would be continued service to subscribers in the most remote and highest-cost regions that may not have other reliable service options,” said the group, which represents wireline LECs.
A revived net neutrality debate could block passage of telecom bills gaining momentum this Congress, Rep. Boucher (D-Va.) told Pike and Fischer’s Broadband Policy Summit Thurs. In the “hiatus” on major legislative activity, network operators and content providers should be talking, he said. Citing discussions with both sides, Boucher said he thinks there’s “potential common ground” and that the issue should be resolved.
Wireline and wireless carriers lined up on opposite sides as comments accumulated Wed. at the FCC on capping USF subsidies to competitive rural carriers. The cap was recommended by the Federal-State Joint Board on Universal Service as an interim measure to slow the rampant growth of the Universal Service Fund. But the recommendation to apply it only to competitive eligible telecom carriers (CETCs), generally wireless carriers, has created a sharp division among rural carriers.
The FCC should create a pilot program that pays for broadband deployment in rural areas with “a specified amount of funding, such as $1 billion per year,” AT&T recommended Thurs. in comments on Universal Service Fund (USF) reform. A 2nd program could provide money for mobile wireless service in those areas, the company said. “Rather than attempting to use the current federal high cost [USF] mechanism to achieve its broadband deployment objectives, the Commission must approach the problem head-on,” AT&T wrote.
A federal court Fri. vacated part of an FCC order under which VoIP providers must contribute to the Universal Service Fund (USF). A 3-judge panel of the U.S. Appeals Court, D.C., said it found “the Commission’s explanation wanting as to the pre-approval of traffic studies and the suspension of the carrier’s carrier rule.” Judges Harry Edwards, David Tatel and Merrick Garland heard the case brought by Vonage and CCIA (CD Feb 12 p1), with Tatel writing the opinion.
Capping universal service support to competitive eligible telecom carriers (CETCs) may be seen now as an interim measure but easily could become the norm, Rep. Allen (D-Me.) told FCC commissioners in a May 22 letter opposing the proposal. “My worry is that this action will act as a pressure valve and decrease the urgency for broader reform,” Allen said. Me. has 2 wireless ETCs “that have productively used universal service funds to expand service to remote areas in our largely rural state,” Allen said: “It is not fair that residents in rural Maine should lose the access to modern telecommunications services under a one-size-fits-all cap.” Comments to the FCC on capping Universal Service Fund (USF) subsidies to CETCs are June 6, replies June 13. The Federal-State Joint Board on Universal Service recommended the cap. The comment deadlines awaited Wed. Federal Register publication of a notice of proposed rulemaking based on the joint board proposal (CD May 15 p9).
The Mont. PSC is eyeing retail or wholesale rate cuts for Qwest to ensure its ratepayers benefit from sharp increases in the company’s federal universal service subsidies the last 10 years. In 2005 the PSC opened an inquiry on Qwest’s use of universal service high-cost support funds (Case D2005.6.105). In the latest docket report, the PSC said Qwest’s annual universal service subsidy jumped from $1.3 million in 1996 to $16 million yearly for 2004-06. Qwest said universal service subsidies go to add, upgrade and maintain network facilities in its high-cost areas; the PSC noted Qwest’s gross network investment statewide fell from $52.6 million in 1996 to $24.6 million in 2005. The PSC said Qwest’s gross construction cost has fallen more than 50% since 1996, as its universal service subsidies “have increased dramatically.” Qwest said universal service support doesn’t offset its rural network construction expenses so its rates should stay the same. But the PSC said that while there’s no evidence Qwest improperly uses universal service subsidies, “it is difficult to pinpoint exactly where the USF money is going,” or verify that Mont. customers get maximum benefit from the subsidies. The PSC said it may order direct ratepayer benefits of $8-$10 million via a cut in basic exchange rates, killing Qwest’s monthly extended area calling surcharge, or implement MCI’s proposal to cut Qwest intrastate access charges. The PSC hired a consultant to study these and other alternatives for using Qwest’s universal service revenue to benefit ratepayers. The consultant’s report is due June 12; Qwest’s response, July 19. Data requests must be completed by Aug. 30, and hearings will open Sept. 26.
FCC Chmn. Kevin Martin plans to proceed as soon as the fall on a proposal to change how telecom providers contribute to the Universal Service Fund, he said Mon. after a speech. Martin told reporters he is waiting for a U.S. Appeals Court, D.C., decision on a related universal service issue before teeing up a proposal to replace the revenue-based contribution system with one relying on phone numbers.