Subsidy caps and reverse auctions proposed to rein in a rapidly growing Universal Service Fund split wireline carriers by geography, in comments to the FCC. While Verizon urged a high-cost cap and auctions, rural groups said the reforms would undermine broadband deployment efforts. Meanwhile, wireline groups didn’t contest a proposal to kill the identical support rule. Wireline groups also expressed mixed feelings on a Universal Service Joint Board proposal to expand high-cost support to broadband and wireless.

Wireless carriers’ advice to the FCC on Universal Service Fund reform varied sharply, as companies and groups commented on three rulemakings on the universal service fund. A general message was that wireless must play a significant role as the fund is restructured. There was broad support for an advanced mobility fund. But wireless players disagreed on the wisdom of eliminating the identical support rule or launching reverse auctions to shrink the fund. Comments came as the FCC poised to approve a fund cap many in wireless fear will hit their sector the hardest (CD April 1 p1).

The FCC sought comment on three IT&E Overseas petitions seeking waivers of filing deadlines for universal service fund receipts. Comments are due May 19, replies on June 3.

LAS VEGAS -- With fewer over-the-air TV viewers after the DTV switch, broadcasters need ways to justify continuance of federal policies ensuring a free U.S. broadcasting system, NBC Universal executives told reporters Tuesday. Over-the- air viewing has been shrinking steadily, and in response to next year’s DTV transition, many more Americans may decide to sign up for pay-TV. “Congress will have to wrestle at that point with whether they're still committed to an over-the-air system,” said Bob Okun, NBC vice president.

LAS VEGAS -- With fewer over-the-air TV viewers after the DTV switch, broadcasters need ways to justify continuance of federal policies ensuring a free U.S. broadcasting system, NBC Universal executives told reporters Tuesday at the NAB convention.

The FCC needs a reverse auction mechanism to curb growth of the Universal Service Fund, said Americans for Tax Reform. The USF, which it called “a revolving multi-billion dollar slush fund,” exemplifies “bloated big government with a heavy dose of entitlement politics,” said the group, headed by Grover Norquist. The high cost program “a monument to inefficiency and waste,” fritters away millions of tax dollars, the group said. Short of killing the USF, the best way to control it is by reverse auctions, it said.

The FCC denied BellSouth and Arya International petitions seeking reconsideration of universal service fund contribution obligations the FCC set in 1999. That order, made on remand from the Fifth Circuit U.S. Court of Appeals, established a “limited international revenues exemption.” LIRE stipulates that carriers with interstate revenue comprising less than 8 percent of combined interstate and international revenue base their USF contribution only on interstate revenue. In December 1999, BellSouth and Arya filed for reconsideration of the order. Last week, the FCC rejected Arya’s argument that the 8 percent threshold was “arbitrary and capricious.” In 1999, 8 percent “provided sufficient margin of safety based on the contribution factors,” and fixing that figure kept the agency USF contribution factor “specific and predictable,” the FCC said. In 2002, the FCC raised the exemption threshold to 12 percent to reflect market changes, it added. The FCC also rejected BellSouth and Arya demands that the FCC refund all USF contributions collected from Jan. 1, 1998 to Oct. 31, 1999, and based on intrastate or international revenue exceeding the 8 percent LIRE. “Requiring refunds of this magnitude would compel” increased USF fees and might not be feasible, the FCC said. “That would cause manifest injustice for today’s consumers, as they shoulder higher bills while bearing no culpability for the refund problem.”

The Internet voice industry is divided on a popular proposal to base universal service fund contributions by carriers on phone number count rather than interstate revenue. Vonage and other interconnected VoIP carriers support a numbers approach as making the fund technology- neutral. Others say a numbers world would force overhaul of business models at Google’s GrandCentral and other enhanced service providers. That shouldn’t be, Feature Group IP CEO Lowell Feldman said in an interview. Ten-digit phone numbers represent “1970 technology, not 2008 technology,” he said. “The numbers scheme is really a sleight of hand to try to force the industry to always use numbers.”

The Internet voice industry is divided on a popular proposal to base universal service fund contributions by carriers on phone number count rather than interstate revenue. Vonage and other interconnected VoIP carriers support a numbers approach as making the fund technology- neutral. Others say a numbers world would force overhaul of business models at Google’s GrandCentral and other enhanced service providers. That shouldn’t be, Feature Group IP CEO Lowell Feldman said in an interview. Ten- digit phone numbers represent “1970 technology, not 2008 technology,” he said. “The numbers scheme is really a sleight of hand to try to force the industry to always use numbers.”

Kansas Gov. Kathleen Sebelius signed a bill to require that interconnected VoIP providers contribute to the state universal service fund. To avoid a potential federal conflict, SB-49 makes the requirement effective only if it’s not preempted by federal law. Similar mandates were adopted in New Mexico and Nebraska, but a federal court in Nebraska this year ruled that federal law preempts imposition of state universal service contributions on interconnected VoIP providers.