New Mexico regulators told a federal court that their authority to impose state universal service fund surcharges on Vonage’s interconnected VoIP service hasn’t been preempted by the FCC, and it’s possible to separate intrastate VoIP revenue from interstate. The Public Regulation Commission in June sought a declaratory judgment from the U.S. District Court in Albuquerque that Vonage is subject to state authority for universal service assessment purposes (Case 08-CV-00607). Vonage filed a counter motion seeking dismissal on grounds that all state authority over VoIP was preempted by the FCC and that it’s impossible to jurisdictionally separate VoIP traffic or revenue. The dispute began late last year, when Vonage refused to comply with a commision order to collect and pay the state universal service surcharge on its intrastate revenue. The commission told the federal court that Vonage was relying on obsolete or inappropriate FCC and federal court pronouncements and ignored more-recent developments that undercut its position. The PRC said it’s possible to jurisdictionally separate interconnected VoIP traffic by using the FCC’s safe-harbor formula that estimates intrastate revenue by deducting from 100 percent the interstate percentage that’s subject to the federal universal service assessment. The state commission said the FCC also prescribes alternative methods for jurisdictionally separating VoIP traffic by revenue allocations or with a traffic study. On preemption, the state commission said Vonage inappropriately cited a March federal district court decision in Nebraska finding the state was preempted by federal policy from imposing a VoIP universal service surcharge. The PRC said that decision was stayed by the 8th U.S. Circuit Court of Appeals in St. Louis pending the outcome of Nebraska’s appeal, and said the FCC this month in a brief to the 8th Circuit stated that it did not preempt states from assessing universal service fees on VoIP providers. The PRC said nothing in its universal service contribution order affected VoIP rates, terms or entry requirements, matters in which the FCC did preempt the states.

Comments on the FCC rulemaking on e-rates are due Sept. 18, replies Oct. 3, the agency said in a Federal Register notice. The notice seeks comments on the E-rate program, including the eligibility of certain services for funding under the schools and libraries universal service program.

To sustain investment in their networks, Internet service providers must charge subscribers based on bandwidth use, Maggie Wilderotter, Frontier Communications’ chairman, said at the Progress & Freedom Foundation’s Aspen conference. “Unlimited usage pricing is not a sustainable business model,” she said, citing other ISPs’ experiments with metered service offerings. But providers must make their terms clear to subscribers and provide tools to monitor bandwidth use, Wilderotter said. “We don’t want those who use less [bandwidth] subsidizing those who use more,” she said. Frontier broadband subscribers’ Internet use doubles yearly, she said. “Customers want speed,” she said. “And more speed promotes more usage.” Frontier has avoided partnerships with online content providers besides ESPN and Yahoo, Wilderotter said. “We're not in the content business today,” she said, calling Frontier a content “conduit.” Nor has Frontier tried online behavioral advertising, Wilderotter said. “I understand the opportunity, but it has to be put in place in a way where the customer is in control,” she said. If she overhauled the Universal Service Fund, she would have the fund appropriately help providers of last resort, said Wilderotter. “But you have to close the loophole on the cost structure analysis,” she said. Wireless carriers shouldn’t be compensated based on the cost structure of wireline, she said. And subsidized carriers should have to serve the entire community, she said. About 10 percent of customers in her service area live in places where no broadband service feasible financially, Wilderotter said. The fund could be used narrowly to promote broadband deployment in places like that, she said.

Comments on the FCC rulemaking on e-rates are due Sept. 18, replies Oct. 3, the agency said in a Federal Register notice. The notice seeks comments on the E-rate program, including the eligibility of certain services for funding under the schools and libraries universal service program.

To sustain investment in their networks, Internet service providers must charge subscribers based on bandwidth use, Maggie Wilderotter, Frontier Communications’ chairman, said at the Progress & Freedom Foundation’s Aspen conference. “Unlimited usage pricing is not a sustainable business model,” she said, citing other ISPs’ experiments with metered service offerings. But providers must make their terms clear to subscribers and provide tools to monitor bandwidth use, Wilderotter said. “We don’t want those who use less [bandwidth] subsidizing those who use more,” she said. Frontier broadband subscribers’ Internet use doubles yearly, she said. “Customers want speed,” she said. “And more speed promotes more usage.” Frontier has avoided partnerships with online content providers besides ESPN and Yahoo, Wilderotter said. “We're not in the content business today,” she said, calling Frontier a content “conduit.” Nor has Frontier tried online behavioral advertising, Wilderotter said. “I understand the opportunity, but it has to be put in place in a way where the customer is in control,” she said. If she overhauled the Universal Service Fund, she would have the fund appropriately help providers of last resort, said Wilderotter. “But you have to close the loophole on the cost structure analysis,” she said. Wireless carriers shouldn’t be compensated based on the cost structure of wireline, she said. And subsidized carriers should have to serve the entire community, she said. About 10 percent of customers in her service area live in places where no broadband service feasible financially, Wilderotter said. The fund could be used narrowly to promote broadband deployment in places like that, she said.

If the FCC cuts access fees as it overhauls intercarrier compensation, the agency will probably include an access charge replacement mechanism for rural local exchange carriers, said Medley Global Advisors analyst Jessica Zufolo in a Monday note. “There is currently considerable sympathy at the FCC toward the RLEC industry,” Zufolo said. But a changing and uncertain political atmosphere means RLECs might be forced to compromise by year end on compensation and the Universal Service Fund, she said. RLEC advocate Sen. Ted Stevens, R-Alaska, may not return to Congress given his recent indictment, while the House is increasingly scrutinizing USF high-cost support, she said.

The FCC should clarify which services qualify for universal service funding under the E-Rate program for schools and libraries, said the E-Rate Service Providers Association. The group commented specifically on e-mail archiving, intranet Web hosting, video on-demand servers and VoIP software user licenses. ESPA agreed that e-mail archiving is ineligible for support under current rules. But it said the distinction between e-mail archiving and e-mail storage -- an eligible service -- is unclear. To be deemed storage, ESPA proposed, a user must be affiliated with the school or library. Storage must be of limited duration, not exceeding a year, and must occur at the service provider or on site at a district-owned building, it said. ESPA also proposed a new way to distinguish between eligible and ineligible content storage. ESPA disputes Universal Service Administrative Co.’s method, which “requires service providers and applicants to allocate a portion of the underlying server” to be ineligible, “rather than the simpler method of determining… the additional storage requirements above and beyond the basic server,” it said. The USAC method is “inherently inaccurate,” and “any potential cost-savings to the program may be outweighed by the administrative burden to applicants, service providers and program administrators,” it said. Intranet Web hosting should qualify for funding, though the USAC says it doesn’t, ESPA said. “Schools have legally-mandated privacy requirements” necessitating intranets, ESPA said. Forcing them to carve that cost out “significantly reduces the utility of the website in question, and makes the process more complex and burdensome,” it said.

Vivendi Universal said it may consider sale of $1.5 billion stake in EchoStar as part of drive to sell 10 billion worth of assets during next 2 years. Vivendi purchased 57 million shares (19.3% stake) of EchoStar stock in Dec., proceeds from which were to partially fund latter’s planned acquisition of Hughes Electronics. Vivendi’s Canal Plus subsidiary also was to development interactive applications for EchoStar’s satellite service. Vivendi is barred from selling EchoStar stock pending outcome of proposed purchase of Hughes, EchoStar spokesman said. Vivendi CEO Jean-Rene Fourtu, however, maintained that sale of stake, “depending on the loss, is something that we could do immediately if wanted.” FCC is expected to complete review of deal this fall. Vivendi also has seat on EchoStar board, that was previously filled by former Chmn. Jean-Marie Messier, who was ousted earlier this year.

The FCC should clarify which services qualify for universal service funding under the E-Rate program for schools and libraries, said the E-Rate Service Providers Association. The group commented specifically on e-mail archiving, intranet Web hosting, video on-demand servers and VoIP software user licenses. ESPA agreed that e-mail archiving is ineligible for support under current rules. But it said the distinction between e-mail archiving and e-mail storage -- an eligible service -- is unclear. To be deemed storage, ESPA proposed, a user must be affiliated with the school or library. Storage must be of limited duration, not exceeding a year, and must occur at the service provider or on site at a district-owned building, it said. ESPA also proposed a new way to distinguish between eligible and ineligible content storage. ESPA disputes Universal Service Administrative Co.’s method, which “requires service providers and applicants to allocate a portion of the underlying server” to be ineligible, “rather than the simpler method of determining… the additional storage requirements above and beyond the basic server,” it said. The USAC method is “inherently inaccurate,” and “any potential cost-savings to the program may be outweighed by the administrative burden to applicants, service providers and program administrators,” it said. Intranet Web hosting should qualify for funding, though the USAC says it doesn’t, ESPA said. “Schools have legally-mandated privacy requirements” necessitating intranets, ESPA said. Forcing them to carve that cost out “significantly reduces the utility of the website in question, and makes the process more complex and burdensome,” it said.

SES Americom and OnSat will extend service to the Navajo Nation until Aug. 22 while OnSat shifts to another provider, OnSat said. “No service will be lost to any of the safety networks,” said OnSat CEO Dave Stephens. OnSat was serving the Navajo Nation via SES transponders, an arrangement that collapsed when OnSat didn’t pay its bills because the Universal Service Administrative Co. hadn’t paid it money owed for servicing Navajo Nation libraries, OnSat said. The Navajo Nation applied for and was approved for E-rate money. Disbursement of the funds has lagged while USAC investigates whether the Navajo Nation adheres to its rules. SES told the FCC earlier this month that it definitely would end OnSat’s service because a customer wanted the capacity (CD Aug 6 p13). SES provides transponder service to OnSat, which provides the gear and runs the Navajo Nation communications network. Non-USAC funds paid for the Navajo safety agency network, but the satellite transponder service for the entire Navajo Nation network was to be covered by E-rate funds, officials have said. SES’s contract with OnSat expired June 30. SES twice extended service after the FCC intervened. A third extension was to expire Friday.