Rural carriers are gearing up to fight against the proposed cap on the Universal Service Fund and other objections they've found to the FCC’s rulemaking notice, association lobbyists said Tuesday. The cap, which would freeze the fund at 2010 levels, “has to be proven flawed,” Organization for the Promotion and Advancement of Small Telecom Companies Vice President Randy Tyree said on a conference call for members of several rural associations. It’s important that rural telcos and their supporters convince policy makers and legislators that the telcos are handling their USF cash well and that broadband will expand even further if the fund is allowed to expand, too, he said.

Don’t cap low-income Universal Service Fund programs, Rep. Ted Deutch of Florida and 23 other House Democrats said in a letter last week to FCC Chairman Julius Genachowski. The letter was similar to ones sent last week by Florida state legislators (CD Feb 25 p7). Like the state officials, Deutch and the other Democrats opposed caps and mandatory fees for Lifeline users and suggested an eligibility database to stop fraud and abuse.

The FCC should require CenturyLink-Qwest to allow its competitors’ port interconnection agreements and should eliminate CenturyLink’s “reliance on the rural exemption and separate subsidiaries in a single state to avoid statutory obligations,” Charter Communications said in ex parte meetings with commission staff. After CenturyLink buys Qwest, the combined company should also see its Universal Service Fund support drop, Charter said in a filing posted Monday to docket 10-110. “In particular, the merged entity should not receive such support in areas where another facilities-based wireline competitor is providing competing voice service to the public on an unsubsidized basis. Further, in areas where the merged entity still requires High Cost Program support, this support should be set at the non-rural ILEC rates."

FCC staffers met Monday to prepare for a possible government shutdown when the existing Continuing Resolution expires Friday. While House Republicans and Senate Democrats may soon agree to a short-term extension, the threat of a later shutdown lingers, said lobbyists. A shutdown could jeopardize RUS and NTIA broadband projects, delay FCC work on CenturyLink’s purchase of Qwest, and create problems for those with expiring spectrum licenses.

The FCC is seeking comment on a request to let Windstream Lakedale convert from rate-of-return regulation to price regulation. Parent company Windstream said in its request that the change would “'advance the public interest benefits of the Windstream Order’ and that a grant of the requested relief ‘would increase consumer welfare by reducing the overall size of the Universal Service Fund and enabling Windstream to maintain and enhance efficient operations and thereby generate all the competitive benefits of converting Lakedale to price cap regulation,'” the commission said in a public notice on Docket 11-36. Comments are due March 11, replies March 21.

The FCC is waiting to hear from CenturyLink and Qwest about the kinds of conditions they would accept for approval of their deal, commission officials told us. Approval is not “imminent,” but the fact-finding has wrapped up, the officials said. The deal is reaching “the home stretch,” Stifel Nicolaus analyst Rebecca Arbogast wrote Friday, but a government shutdown remains “a threat.” She added, “We expect the FCC will impose duties” on the combined company “in certain areas -- including wholesale performance and broadband deployment/adoption, some of which could resemble previous conditions on CenturyLink-Embarq and Frontier-Verizon -- with additional obligations possible, but not as onerous as critics want.” CenturyLink’s acquisition of Qwest has been approved by all but four states involved, Arizona, Washington, Oregon, and Minnesota. The buyer is confident and has set an April 1 goal for final approval. The companies fully expect to have to comply with broadband deployment conditions, but are waiting for the FCC to lay out other conditions, a company official told us this week. “Further … concessions could speed the process, but extensive wrangling over final conditions -- or even a congressional fiscal impasse and federal government shutdown -- could slow it,” Arbogast wrote. The FCC is considering net neutrality obligations similar to those imposed on the Comcast-NBCU deal and is considering whether to ask the merged company to give up Universal Service Fund money, commission officials and a public interest advocate told us. The acquisition still faces resistance from CLECs including Paetec, which wants guarantees that the combined company won’t discard Qwest’s legacy operating system for at least three years. Negotiations among the companies continue but have not progressed, officials of each told us.

The FCC must not forget rural areas as it seeks to revamp the Universal Service Fund and intercarrier compensation, former Sen. Byron Dorgan, D-N.D., said in an interview Friday. Dorgan, who recently joined the Arent Fox law firm as senior policy adviser, said Congress has worked a long time on USF but “doesn’t seem to be getting it done.” The Senate had worked on the issue, but has shown less interest “the last couple of years,” he said. “The question is, what will the FCC do as it rethinks” USF and intercarrier compensation, “and will it pay as much attention as is necessary to avoid having a digital divide in the future with regard to advanced services?” Dorgan is “tinkering around with an op-ed piece” about USF overhaul discussing the “dramatic changes that have occurred since I've been in Congress and still the urgent need not only for universal service but intercarrier compensation funding” for small telcos in rural areas, he said. “I come from a town of 300 people, and so I've always been concerned that whatever happens … there needs to be an understanding of the buildout of advanced services and the financial capability to do that in the rural areas.” Most high-speed broadband buildout goes to “the biggest cities where there’s the largest income streams,” Dorgan said. But the original idea behind universal service was that a telephone in a rural area is just as important as one in an urban location, he said. “That concept has to continue through the development of these advanced services. Otherwise you will leave a lot of parts of the country behind economically.”

The FCC is waiting to hear from CenturyLink and Qwest about the kinds of conditions they would accept for approval of their deal, commission officials told us. Approval is not “imminent,” but the fact-finding has wrapped up, the officials said. The deal is reaching “the home stretch,” Stifel Nicolaus analyst Rebecca Arbogast wrote Friday, but a government shutdown remains “a threat.” She added, “We expect the FCC will impose duties” on the combined company “in certain areas -- including wholesale performance and broadband deployment/adoption, some of which could resemble previous conditions on CenturyLink-Embarq and Frontier-Verizon -- with additional obligations possible, but not as onerous as critics want."

The FCC appears to be leaning toward Title II-style regulation of broadband through its Universal Service Fund revamp, industry officials told us after examining the commission’s rulemaking notice on USF. “It’s clear to me that when you look at the questions they're asking around support, that seems where they're heading,” Voice of the Net Coalition Executive Director Glenn Richards said. “It’s a way to get broadband providers to agree to Title II-like obligations.” FCC officials didn’t respond to requests for comment.

Physical infrastructure questions, including “pole issues,” are the top priority for FCC Chairman Julius Genachowski, after spectrum and Universal Service Fund issues are addressed, Wireline Bureau Chief Sharon Gillett told an FCBA lunch Thursday. At its April 7 meeting, the FCC will vote on an order for make-ready deadlines for pole attachers, Keller and Heckman telecom lawyer Thomas Magee told us. After meetings with aides to four of the five commissioners and with several other staffers Thursday, Magee said he has “serious concerns” about that proposal. Those deadlines would force the coalition of nine utility companies he represents, including Allegheny Power and Baltimore Gas, to “lose control over the electric distribution system,” Magee said. Bingham telecom lawyer Andy Lipman said he'd like to see the pole issues addressed and said they're the “building blocks for broadband.” By lowering pole attachment rates, the FCC can “facilitate more broadband,” he said. The FCC will “come up with some sort of streamlined enforcement proceeding” regarding resolving disputes between pole owners and users to further broadband deployment, particularly in rural areas, Lipman said.