Federal Universal Service Fund

Rep. Cubin (R-Wyo.) introduced a bill (HR-2533) late Mon. that permanently would exempt the Universal Service Fund (USF) from Antideficiency Act (ADA) accounting standards. The bill is a companion to S-241, introduced by Sens. Snowe (R-Me.) and Rockefeller (D-W.Va.). The ADA bars federal agencies from incurring obligations in advance of appropriations. The FCC last year ruled the ADA applies to the USF, meaning the fund administrator would have to have cash on hand before sending commitment letters to fund recipients. The immediate impact was on the E-rate program, but rural ILECs fear their payments also could be affected. Congress in Dec. passed a bill exempting the USF from the ADA through 2005.

Congress will weigh key technology issues this year. Some bills will stir fierce fights, while industry will get quick wins on others, Rep. Boucher (D-Va.) told the Computer & Communications Industry Assn. (CCIA) Wed. The Congressional Internet Caucus co-founder predicted easy decisions on sweeping patent reform, a hard deadline and subsidy model for DTV transition and Internet-specific Telecom Act updating. But the broadcast flag and digital content reproduction and fair use issues will be more contentious.

More than 100 rural telecom executives hit Capitol Hill Tues. to start 2 days of lobbying for universal service and broadband issues as part of an annual event sponsored by OPASTCO. In a morning briefing, OPASTCO staff told rural ILECs Antideficiency Act (ADA) legislation should top their agendas as they visited representatives and senators from their home states.

Senate Commerce Committee Chmn. Stevens (R-Alaska) said Mon. he fears federal funding for school internet services, rural telephone service and library computers could be threatened temporarily. Stevens said a tight calendar could keep Congress from fixing problems the Anti-Deficiency Act creates for the Universal Service Fund, in turn suspending USF payments.

The FCC defended its management of the E-rate program as consistent with its historical organizational structure but said it could make changes to the administrative structure in light of the Govt. Accountability Office’s (GAO) critical review. On Wed., the GAO presented the House Commerce Oversight & Investigations Subcommittee its report on the FCC’s management of E-rate, which funds Internet and information technology equipment for schools and libraries. The GAO concluded there were structural flaws in the FCC’s management of E-rate, but the FCC said its use of a private organization to manage the program was similar to its establishment of the National Exchange Carrier Assn., which manages the access charge assessments. “Congress was well aware of that practice when it enacted the Telecommunications Act of 1996,” the FCC said in its written response to the GAO report. The FCC said it believes its current management structure of E-rate -- part of the universal service fund -- was consistent with congressional intent. The FCC also disagreed with GAO’s assessment that the FCC never conducted a comprehensive study of federal policies that would apply to E-rate. The FCC cited several separate reviews of policies relating towards USF and E-rate. The FCC acknowledged the GAO’s conclusion that performance measurements for E-rate weren’t comprehensive. It said the FCC has assigned additional staff to review the performance measurements. The FCC also said it has brought on more staff to catch up on back appeals, another flaw cited in GAO’s review. During the hearing, House Commerce Committee Chmn. Barton (R-Tex.) said E-rate fraud, waste and abuse, which has been investigated for nearly 2 years by the Oversight & Investigation Committee, was out of control and Congress must consider a legislative fix. House Commerce Committee ranking Democrat Dingell (Mich.) also agreed, saying he looked forward to joining with Committee leadership to “enact the reforms that the FCC either cannot, or will not, implement.”

Senate Commerce Committee Chmn. Stevens (R-Alaska) laid out new communications-related ideas Wed. at a breakfast forum held by The Hill newspaper. He suggested changing sunshine rules for the FCC and the system for auctioning spectrum. Stevens clarified positions on indecency regulation and said he remained open to ideas for guarding children from raunchy TV. He left open how the proposed telecom mergers might affect universal service fund distribution.

Sen. Smith (R-Ore.) was expected at our deadline to again introduce legislation designed to distribute a portion of the universal service fund to more states. The bill will likely be similar to his legislation introduced last year, S-1380, which would change the distribution formula for the USF’s so-called nonrural fund, used to fund larger carriers’ networks in rural areas. Industry sources said the bill would have 19 co-sponsors. Rep. Terry (R-Neb.) introduced similar legislation last year (HR-1582). The bill is supported by Qwest, which serves many rural states that don’t receive funding. “Under the FCC’s latest estimates, a single state will receive more than half of this fund, and 40 states -- including many of the most rural and remote parts of the country -- will not receive a dime. This is clearly unfair and unacceptable, and we support Senator Smith’s efforts to fix it,” said Gary Lytle, Qwest senior vp-federal relations. The CLEAR Coalition, which also supports the Smith bill, released data Thurs. that said Miss. -- served by BellSouth -- received more than half the $290 million fund. The study said 3 states in 2005 would receive about 75% of the fund. Only 10 states receive funding, the report said. Since 2000, Miss. has received about $726 million from this one USF account, the report said.

House members representing rural districts need to be ready to fight for rural communication concerns when the House considers telecom reform, said Rep. Gutknecht (R- Minn.), chmn. of the Congressional Rural Caucus Telecom Task Force (TTF). The TTF held a forum Wed. that reviewed rural telecom issues and included large and small carriers’ representatives. “It is clear that rural concerns, especially reforms related to the USF, must be addressed when we rewrite the telecom bill,” Gutknecht said. “It is my hope that we can create a House ‘farm team’ that will advocate these concerns as we update this policy.” USTA Chmn. Gene South told lawmakers that landline service providers are hampered by “extensive day- to-day government micromanagement of our business.” He said cable and wireless providers don’t face the same kind of regulations, and some services, including cable and satellite services, aren’t paying into the universal service fund (USF). South said regulations are keeping smaller wireline companies from offering video service to compete with cable. CTIA Pres. Steve Largent said wireless services, and the broadband services they can now provide, could help bridge the digital divide. But Largent also said myriad state regulations threatened the industry. He also said IRS rules on equipment depreciation were increasing the cost of deployment in rural areas. On USF, Largent said wireless carriers should be allowed to compete for funds. He said wireless service is more expensive to provide to rural areas, but “the wireless industry nonetheless believes that wireless carriers can be a cost effective solution for consumers in these areas.” Lawrence Sarjeant, Qwest vp-federal legislative & regulatory affairs, said USF needed a fairer distribution system. Sarjeant said the Bell serves vast rural areas but receives little help from USF fund because it’s defined as a “non-rural” company. Qwest has supported legislation introduced last session by Rep. Terry (R-Neb.) and Sen. Smith (R-Ore.) to rectify the situation by changing the funding formats. Smith was expected to reintroduce the legislation Thurs. (see separate item, this issue).

CTIA Pres. Steve Largent predicted an active year on Capitol Hill and at the FCC for wireless carriers in 2005. Largent said Tues. that after the battles that ended 2004, including passage of the spectrum transition bill (HR 5419), he sent a warning note to CTIA’s 90 staffers.

With the incoming 109th Congress expected to pass telecom reform legislation, wireline and wireless lobbyists see issues of state jurisdiction playing a role in the debate. Edward Merlis, USTA senior vp-govt. and regulatory issues, said state jurisdictional concerns are one reason he believes Congress, not the FCC, is the only body able to make the needed changes to the telecom regulatory regime. Bobby Franklin, CTIA vp-govt. affairs, said the issues raised in the VoIP debate during the last Congress are likely to be raised in other telecom contexts next year, including wireless.