ORLANDO -- Wireless will have a major role in the USF program, FCC Chmn. Martin reassured wireless carriers Tues. Sources said after Martin’s remarks to the CTIA conference here that they're having trouble reconciling Martin’s advocacy of caps on reimbursements to competitive eligible telecom carriers (CETCs) with his insistence Tues. that USF be technologically neutral.

AT&T proposed a plan to “stabilize” the Universal Service Fund (USF) by calling a one-year moratorium on new carriers’ applications for USF money, freezing the number of lines for which wireless carriers can get USF support and making about $200 million in targeted reductions to USF programs. AT&T emphasized the plan isn’t “a crude cap” on funding, as proposed by Verizon. “Simply freezing the fund is neither an appropriate nor a sufficient goal,” AT&T said in a March 22 filing with the Federal-State Joint Board on Universal Service. “This interim stabilization step must be seen not only as a means of providing the Joint Board with time to conduct its review of longer-term proposals, but as the first step on the path to such fundamental reform,” the company wrote. AT&T said the plan targets “the source of runaway fund growth [which] has come most significantly from new ETCs [Eligible Telecommunications Carriers] and new ETC lines.” ETC is a regulatory term for carriers eligible to get USF subsidies. Much of AT&T’s plan would hit competitive ETCs, many of whom are wireless carriers. For example, the $200 million in reduced funding would occur through a 25% reduction in the USF funding that’s used to replace access charges. The money would continue to be available to rural ILECs whose access charges were replaced but not to competitive “ETCs that neither have, nor have ever had, an entitlement to access charges and thus do not share incumbents’ historical reliance on such support,” AT&T said.

Regulators should reject proposals that would reduce universal service funding by singling out wireless carriers, Alltel told the Federal-State Joint Board on Universal Service in a filing Tues. Doing so would conflict with goals of increasing rural phone penetration and getting advanced services to underserved areas, Alltel said. A wireless- specific cap or a freeze on the number of wireless customers able to get subsidized service would hurt rural consumers, the company said: “Alltel recognizes the widespread interest in controlling the growth of the universal service fund. But such controls can and must be accomplished without compromising the principle of competitive neutrality or interfering with consumers’ access to wireless and broadband services.” If the joint board insists on a cap, it should look at a proposal by Bill Jack Gregg, W.Va. Consumer Advocate and a joint board member, that “would impose an inflation-adjusted cap on the support distributed to all carriers receiving universal service support in each geographic area,” Alltel wrote. Gregg’s proposal “would prevent undue growth in the overall level of funding while also spreading the impact of the fund growth limitation proportionately among all ETCs, including ILECs as well as wireless,” the company said.

The growth of the Universal Service Fund (USF) could be stemmed by creating a separate sub-fund for wireless carriers, based on their own costs, not rural ILECs'costs, the Independent Telephone & Telecom Alliance (ITTA) told the FCC. Competitive eligible telecom carriers (CETCs), which mainly are wireless, are “key drivers” of huge USF growth since 2001, the ITTA told agency staff in a March 22 ex parte meeting. USF outlays to wireless competitors were about $1 million in 2000 but more than $1 billion in 2006, ITTA said in materials given FCC staff. CETC funding is pegged at $1.28 billion this year and projected to reach nearly $2 billion in 2008, said ITTA, which represents midsized rural carriers. Subsidies to wireline carriers were flat 2000-2006 at about $2 billion, plus $1 billion to offset access charge reductions, ITTA said in a chart. As an option to a separate wireless universal service fund, ITTA proposed requiring wireless companies to assume “carrier of last resort” obligations if they kept getting universal service support based on ILEC costs and ILEC study areas. ITTA told the FCC the wireline network is the best vehicle for expanding broadband service to rural areas, with other service providers relying on it. So it’s important to have a “stable and predictable” USF to support ILEC broadband deployment, the association said.

Regulators should consider something other than a cap to slow Universal Service Fund (USF) growth, 5 Senate Commerce Committee members told the co-chairmen of the Federal-State Joint Board in a March 21 letter. In the belief that the joint board and FCC “won’t adopt any serious reforms of the program without a cap,” several witnesses at a recent committee hearing recommended capping the USF, the senators told FCC Comr. Tate and Ore. PUC Chmn. Ray Baum: “We reject that notion.” The joint board is expected to urge an “emergency cap” soon, said Sens. Rockefeller (D-W.Va.), Pryor (D-Ark.), Dorgan (D-N.D.), Klobuchar (D-Minn.) and Smith (R- Ore.): “We urge you to consider other more thoughtful measures to limit the growth of the USF instead of arbitrarily capping the fund.” Instead, the joint board should weigh “competitively-neutral proposals, ensure accountability for how funds are used, and promote build-out of advanced services in rural regions through effective targeting of funds to high cost areas,” the letter said. The cap has been described as a temporary measure, but “we are concerned that it would become a de facto permanent cap,” the senators said.

The FCC overturned decisions by the Universal Service Administrative Co. (USAC) reducing or denying E-rate funds to 182 schools and libraries. The FCC at its Thurs. meeting remanded the applications to USAC, demanding a new review in either 90 or 120 days, depending on the initial denial. “In each case, USAC had denied the applications based on minor errors or technicalities,” an agency release said. “Rigid adherence to the rules in these cases resulted in outcomes conflicting with the statutory goal” of making sure schools and libraries have access to advanced telecom services, the agency said.

The FCC overturned decisions by the Universal Service Administrative Co. (USAC) reducing or denying E-rate funds to 182 schools and libraries. The FCC at its Thurs. meeting remanded the applications to USAC, demanding a new review in either 90 or 120 days, depending on the initial denial. “In each case, USAC had denied the applications based on minor errors or technicalities,” an agency release said. “Rigid adherence to the rules in these cases resulted in outcomes conflicting with the statutory goal” of making sure schools and libraries have access to advanced telecom services, the agency said.

The deadline for comments on an amendment to the Missoula Intercarrier compensation plan has been delayed until March 28, and for replies until April 12. Comments had been due Mon. and some parties, such as OPASTCO, filed anyway. OPASTCO endorsed the amendment which adds a “federal benchmark mechanism” (FBM) designed to ease rate shock in states that already have reduced their intrastate access rates. “The original Missoula Plan recognized the need for an ‘Early Adopter Fund'” for such states, OPASTCO said: “The Plan’s supporters worked with state commissions to develop the FBM, which would target additional funding to states with very high end-user rates and/or state universal service funds that are presumably the result of intrastate access charge reform…. The FBM would not only promote equity for ‘early adopter’ states but would also improve end-user rate comparability for customers across all states.” Now that the early adopter problem has been dealt with, the FCC “should proceed expeditiously with adoption of the Missoula Plan,” OPASTCO said. Alexicon Consulting said its rural telecom clients “have several concerns” with the amendment, though they supported the initial Missoula Plan idea of an early adopter incentive plan. The original plan proposed incentives through reduction of intercarrier compensation charges; the new proposal calls for changes in local rates to customers, which concerns the telcos, Alexicon said: “We are concerned that the addition of any intrastate local service rates into the intercarrier compensation review process will only exacerbate the resistance of state regulators toward the Missoula Plan.”

Landline, wireless and cable telecom service providers urged the Minn. PUC to put on a pending access charge reform rulemaking and a related case for creation of a state universal service fund, until the FCC completes its pending dockets on intercarrier compensation reform and universal service fund reform. The Minn. Telecom Alliance, Minn. Independent Telecom Coalition, Minn. Cable Telecom Assn. and several individual telcos all said the issues in the state access and universal service dockets (Cases P-999/R-06-50 & 51) will be affected by the FCC’s decisions on intercarrier compensation and universal service. They said state action now risks conflict with the eventual FCC orders or unintended revenue shifts affecting the state’s carriers. A few companies, though, urged the PUC to continue. Sprint Nextel said current intrastate access charges are very high and the PUC should look into why intrastate charges are so far above the rates for comparable interstate access services. AT&T said the PUC should look into the high access charges of CLECs. AT&T also said establishment of a state universal service fund is an important feature of intrastate access reform.

A hefty increase in the amount of money telecom carriers, and ultimately consumers, must contribute to the Universal Service Fund beginning in April has triggered renewed calls by industry groups for USF reform. The FCC late Thurs. raised the so-called “contribution factor” -- the proportion of interstate and international revenue that telecom carriers must donate to the fund -- to 11.7% from 9.7% for the 2nd quarter, starting in April. The industry money goes to USF subsidies.