Three House Commerce Committee members “strongly oppose” using reverse auctions to set high-cost universal service subsidies, they told Chmn. Martin. “Using reverse auctions to disburse universal service funds would be a mistake that threatens to cripple the availability of reliable telecommunications services to rural Americans,” said Reps. Boucher (D-Va.), Terry (R-Neb.) and Pickering (R-Miss.). In an April 10 letter, they gave 3 reasons for their fears about the impact on rural areas: (1) It’s doubtful that reverse auctions can guarantee “quality service at reasonable and affordable rates,” as required by the Communications Act, they said: “The mere fact that the service provision would go to the lowest bidder makes the reverse auction concept suspect in its ability to fulfill the mandate of Congress.” (2) “Least cost funding incents paring service quality levels to absolute minimums,” they said. If rural service ends up worse than that in urban areas, the FCC can’t meet its Communications Act mandate of assuring rural services are “comparable” to urban. (3) Reverse auctions might not meet a Communications Act requirement that universal service support be “specific, predictable and sufficient,” they said: “A reverse auction raises questions about predictability because support to eligible providers would be temporary. It implicates sufficiency because a reverse auction would create incentives to underbid.”

An AT&T plan to “stabilize” the high-cost universal service program (CD March 28 p17) is on target because it focuses on wireless competitors, main source of the program’s growth, OPASTCO said in a March 22 letter to the FCC. The proposal offers the FCC and the Federal-State Joint Board on Universal Service “a well-reasoned, easy-to-implement” way to “gain control over the excessive and unnecessary growth in the High Cost program” while working on long-term reforms, the rural telecom group said. It’s “entirely appropriate” to cut subsidies to wireless competitors, since much high cost program growth stems from increased competitive access to the universal service subsidies, OPASTCO said. The AT&T proposal at the same time “correctly avoids negatively impacting rural ILECs and their customers, which have posed no additional burden on the fund in several years,” OPASTCO said.

Adversaries in the free-call fracas are moving their dispute to the FCC. AT&T wants the agency to stop “traffic pumping scams.” Small LECs want the Commission to stop the big carriers from blocking their calls. The sides are setting up meetings with agency officials, the latest round in the rumpus between Ia.-based free calling services and major phone companies that say they're footing the bills through unusually high access charges. Rural LECs collect the access charges, passing part of the money to the calling services that spur phone calls through free conferencing, international calling and adult content.

The Universal Service Fund high cost program has all sorts of problems, and simply curbing its size isn’t enough, Windstream told the Federal-State Joint Board on Universal Service Mon. in an ex parte filing. Windstream, formed in a merger between Valor and Alltel’s spun-off wireline business, isn’t “heavily reliant” on USF support, so implementing its ideas wouldn’t significantly change how much money it gets, it said. Among problems it cited: (1) The program inadequately targets high-cost, rural areas. (2) Based on embedded costs, it “provides higher levels of support to less efficient providers.” (3) Competitive eligible telecom carriers (CETCs) can get support based on incumbent wireline carriers’ costs, often “unrelated to the CETCs’ costs and based on different technologies.” Broader reform is needed, starting with how CETCs are funded, Windstream said. The joint board should recommend limiting USF support to one mobile and one wireline ETC per area, the company said. Windstream said support to CETCs should be based on their costs or a reverse auction. Reverse auctions to set support levels should be viewed with “caution,” but if the joint board goes that way it should take Verizon’s suggestion and start with auctions for mobile CETCs, Windstream said. The FCC shouldn’t designate any more CETCs until reform is finished, said Windstream. Other recommendations: (1) Target support to smaller areas, such as wire centers, to be sure support goes to the highest-cost rural areas. (2) Change how high-cost support levels are calculated by using forward-looking costs, if possible. Forward-looking cost models “may not be efficient or practical” for very small rural companies, Windstream conceded. (3) Consider using money “available from eliminating multiple mobile CETCs to support under-funded high-cost areas.” (4) The joint board should set an “affordability” benchmark to encourage comparable rates nationwide.

An FCC report to Congress on violence in TV network programming that’s due within 2 weeks raises more questions than it answers, Comr. McDowell said during a news briefing Wed. He also fielded questions on a wide range of wireless and wireline issues. McDowell said the 700 MHz auction may face delays if the Commission adopts a proposal by Frontline Wireless. Chmn. Martin was expected to start circulating a 700 MHz order as early as Wed. McDowell also said he was frustrated with 800 MHz Transition Administrator’s (TA) lack of progress on rebanding.

FCC Chmn. Martin has some questions to answer on the Universal Service Fund (USF), House Telecom Subcommittee Chmn. Markey (D-Mass.) said in a letter sent Mon. to the Commission. Markey wants a “blueprint for achieving affordable broadband service” for all Americans and plans to study proposals aimed at that goal, he told Martin in the letter. “I am eager to get your thoughts,” Markey said, voicing concern at the fund’s “explosive growth” to $7.2 billion so far this year, largely due to the uncapped high- cost fund. Martin said at the FCC oversight hearing (CD March 15 p1) that he favored capping the fund. Markey’s letter seeks specifics: “Will you ask the Joint Board to place a ‘cap’ or ‘freeze’ on the high cost program in its entirety, or on some portion of the program, such as the funding provided to a certain class of telecommunications carriers?” Markey asked Martin to quantify the effect of the FCC decision to treat DSL as an information service. Contributions for the service ended Q3 2006. “Does the Commission plan to take any action to broaden the contribution base to reduce the contribution factor and the corresponding burden placed on consumers?” Markey asked. The FCC policy shift on USF “portability” funding had a profound effect on the fund, causing incumbents to retain support for lines they lose to a competitor while the competitor also receives support, resulting in double payments, Markey said, noting that a Joint Board member testified to the committee that the rule change has added $1 billion to the fund since 2003. “Do you agree? Please explain your answer,” Markey said, asking Martin if the Commission is reviewing “whether it would be meritorious” to revive the portability rule. Markey also asked Martin if he would support enforcing the primary line restriction if Congress lifted a ban on the policy. Markey told Martin he has no position on reverse auctions, but is “intrigued” and wants to understand Martin’s criticism of a reverse auction that distributes support to more than one winner for a particular high cost area. “Does your reverse auction proposal encompass ‘bids’ that offer a more robust package of services, including affordable broadband access to the Internet” along with bids for subsidy for voice services? Markey asked Martin. He asked if Martin favors adopting such “attributes” in a reverse auction plan, and whether he favors lifting the E-rate program cap, now $2.25 billion. Finally, he asked Martin to clarify the rules for E-rate funding and to outline recommendations he would make to improve the appeals process. Markey asked Martin to answer by May 4.

State legislatures rushing to finance health IT networks and electronic health record (EHR) systems often don’t think through legal liability issues, a Dept. of Health & Human Services (HHS) advisory board meeting near Washington was told Fri. Speakers warned governors and other State E-Health Alliance members that health IT may offers many benefits but also could pose legal risks for doctors and network providers.

Congress’s promised oversight of telecom issues has resulted in many hearings but little legislation the first 3 months of the 110th Congress. For telcos, cable and related telecom companies, that’s a good thing, lobbyists and industry sources told us. Democrats are taking their time studying issues before framing an agenda, and oversight hearings have helped tighten operations at the FCC and NTIA, sources said.

ORLANDO -- If the FCC imposes a cap on competitive eligible telecom carrier (CETC) participation in the USF program it will likely be short-term, said 2 members of the Federal State Board on Universal Service, including FCC Comr. Tate, Wed. at CTIA’s Wireless 2007 show. A source said the cap could be lifted this year. Recommendations of the joint board are expected shortly.

A new Nev. phone deregulation bill would repeal a price cap scheme that has regulated rates of large incumbents there for 10 years. HB-518 would deregulate rates for all retail services other than basic exchange, which would stay under a temporary cap. Basic exchange would be capped at current rates through July 2008, then deregulated. The bill would leave incumbents with fewer than 60,000 lines under their current rate of return regime, but would let those telcos petition the PUC for rate deregulation provided they face substantial competition. The PUC would have 180 days to act on such petitions; inaction would be deemed a denial. Deregulated incumbents could price their services to market without restriction, except that they would have to publicize rates and terms for basic services in some generally available manner. No tariffs or price lists would be required, but carriers would have to file an advice letter with the PUC describing rate and service changes when made. Financial reporting would be eliminated, except for filing an annual financial summary. The bill would retain the state universal service fund and authorize the PUC to keep assessing and collecting universal service fund contributions on telecom carriers. The bill’s first stop is the House Commerce & Labor Committee.