APPEALS COURT GENERALLY UPHOLDS FCC'S ‘CALLS’ REFORM PLAN
Fifth U.S. Appeals Court in New Orleans late Mon. upheld most of FCC’s May 2000 “CALLS” order that reformed universal service and access charges for Bells and other price-cap-regulated telcos. Acting on appeal by consumer groups, court said most of FCC’s order was reasonable. However, it remanded 2 parts of it, saying Commission hadn’t provided enough justification. Court didn’t vacate those provisions but FCC will have to open proceeding to justify them. They are: (1) Size of new universal service fund, which FCC had set at $650 million per year. Court said it wasn’t enough that figure was recommended by interindustry CALLS coalition or that agency chose number between the highs and lows of various industry estimates of how much implicit subsidy had to be converted to explicit funding. (2) FCC’s use of 6.5% productivity factor, called X-factor, which is important part of formula used to set access rates.
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Analysts at Legg Mason said decision was largely victory for FCC and industry coalition that proposed CALLS plan. Firm said in report that it didn’t expect Commission to change basic structure of CALLS plan, speculating that agency would be “very reluctant to upset the structure of a compromise that alleviated one of the FCC’s bigger headaches for several years.” CALLS stands for Coalition for Affordable Local and Long Distance Service, composed of AT&T, BellSouth, SBC, Sprint, Verizon.
Group’s proposal was seen as way to settle long-standing feud about amount of access charges that telcos collect from long distance companies. It also recommended way to adapt monopoly- driven universal service subsidy program to more competitive marketplace. In general, plan: (1) Reduced access charges paid by long distance companies. (2) Folded together presubscribed interexchange carrier charge (PICC) and subscriber line charge (SLC) into one consumer charge that was less than original 2. PICC, though paid by carriers, usually was passed onto consumers as line item on bills. (3) Formed additional $650 million universal service fund to replace corresponding loss in universal service money caused by reduction in access charges.
Case was brought by Tex. Office of Public Utility Counsel and National Assn. of State Utility Consumer Advocates, with Consumer Federation of America intervening. Court said consumers characterized CALLS order “as the product of a surreptitious political deal between” FCC and industry coalition. Group also charged that order betrayed requirements of affordable universal service. Court said, among other things, that agency’s decision to increase SLC “represents FCC’s reasoned attempt to maintain the difficult balance between the principles of ensuring affordability and encouraging competition.” Court also rejected argument that FCC should have conducted forward-looking cost study: “The cost- study requirements of [Telecom Act] do not apply to the interstate access services at issue in this petition.”