Universal Service Said To Be Main Issue For Congress to Address

Intel Dir.-Communications Policy Peter Pitsch said most of the issues could be dealt with within the FCC, but he said there were 3 that required a legislative rewrite: Universal service, spectrum reform and “where is the market power and how you deal with it.” Vonage CEO Jeff Citron said he hoped universal service and intercarrier compensation would be resolved before they go to Congress. “I think there is a possibility to have a very narrow- focused bill that would clear away many of the regulations that are no longer necessary,” he said. NAB Pres. Eddie Fritts said he hoped the Senate Committee would hold a series of town meetings across the country before Congress makes any changes to the act, and seek views from the interested parties on what should be changed. Verizon Vp- Federal Govt. Relations Peter Davidson said he expected the rewrite wouldn’t be as complicated as many think and could be done within a year. “I think if this is the bill that addresses changes in technology, including universal service and broadband, [as well as] spectrum issues, that’s a package that is digestible for Congress and something that [would] unleash an incredible amount of investment,” he said. Comcast Vp-External Affairs Joe Waz said the main principle Congress should keep in mind when looking at the Telecom Act is “do no harm.”

MCI Senior Dir.-Global Policy & Planning Richard Whitt said the telecom bill next year “can be relatively small in terms of what kind of changes you are making, but with major impact.” He said the legislative approach MCI had suggested was “not to get rid of [regulatory] silos necessarily, because they are going to be coexisting for many years,” but “to create, at least temporarily, a separate silo for the new IP-based services and broadband networks and treat them in a highly unregulated way.” He said over time, silos would become “less important” as the industry moves to the IP-based networks. “To me, [the Telecom Act rewrite] could be more of a surgical strike, rather than drastic revamping of the entire Act,” he said.

Pitsch said there was a need for “a competitively- neutral, technology-neutral” universal service funding mechanism. He said that could be done at the FCC, but “ideally, that would be done in the telecom rewrite. I think what we need is a system that defines a minimum level of service, and then any carrier who qualifies, can get that [funding].” Davidson said the “good news [within] bad news” was that starting in Jan., the line charge on the universal service bills is going to go up to 12% from 9%. “The bottom line is that Americans are going to see increased universal service bills starting in January and they will start calling that Capitol Hill… I am optimistic that because of the universal service and the pace of technology, Congress will take efforts to update telecom laws fairly quickly next year.” “It makes me cringe when any of the folks in our industry call for fundamental reform of the telecom laws,” Waz said: “After all the regulatory uncertainty we had for so long, we are finally at a point where we are getting a regulatory ability to move forward… But the universal service reform has to be done.”

Intercarrier compensation is another issue that needs to be resolved immediately, the speakers agreed. But their opinions differed on whether the FCC or Congress would better deal with it. “I don’t think Congress is an entity equipped to deal with intercarrier compensation,” Davidson said: “I really don’t want 535 members debating and creating a law dealing with intercarrier compensation.” But he noted there were “issues that Congress should address in terms of updating wireline rules to keep up with technology.” Waz said “the unfortunate thing” about intercarrier compensation was that “there are implicit subsidies built into it… This is why I'd rather not see Congress jump right into the bridge. I'd like to see someone give this a big [think] and factor in the implicit as well as the explicit subsidies, so that we can figure out how to fix the universal service.”

Citron agreed that Congress wasn’t the right place to fix the intercarrier compensation problem. “If you are looking for an effective model, look at the Internet itself -- it’s a very effective model,” he said: “All Internet networks in the world are interconnected, there is a payment system involved and it worked out very well for most carriers.” But Whitt said it would be impossible to keep Congress away from intercarrier compensation. “You can’t talk about intercarrier compensation without talking about universal service. They are really two sides of one coin.” Citron agreed: “Yes, it’s universal service again. You fix universal service, you'll fix a lot of these problems.”

On broadband deployment, Waz said “the biggest problem” was that “we can’t keep up with the demand.” Davidson said the way the industry was going to reach the Bush Administration’s goal on broadband deployment was to clear regulatory underbrush for broadband services and let the market work. Pitsch said: “We need to encourage companies to invest in risky [broadband] facilities, and if we do that, we'll see more penetration.” Whitt said the question was “what is broadband?” For example, he said Japan had leapt ahead of the U.S. in speed. “The first problem is that we don’t have broadband out there… 10 megabits per second is the minimum we'll need.” But Waz said U.S. networks were all capable of greater speeds, and cable networks, for example, tripled the speed they offer the past few years. “As there is demand for more speed and as applications will come along,” we'll have greater speeds, he said. Citron said the problem was with the quality of broadband, not just speed. He said cable modem and DSL offer “terrible quality broadband.” He said he was “sure” that “wonderful” applications would emerge as soon as quality high-speed broadband is available.