Rural telecom carriers fear that political pressure for a cap on Universal Service Fund (USF) support could revive when the bill (HR-5252) goes to the Senate floor, industry sources said. Rural carriers also are concerned that amendments might be introduced limiting USF support to primary lines only, which could harm small rural businesses dependent on USF support for multiple lines, sources said.

Rural telecom carriers are pleased with HR-5252’s proposed “broadband for unserved areas program,” which would allocate up to $500 million for broadband deployment. The bill passed the Senate Commerce Committee 15-7 last month (WID June 29 p1) and is headed for the floor. The Universal Service Administrative Company will run the broadband program subject to FCC oversight. OPASTCO said the broadband program will help rural telecom carriers achieve full coverage throughout their service areas. Right now, some parts of the country are so remote and “prohibitively expensive to serve” that without Universal Service Fund support it would be impossible, Rose told a Senate hearing June 13. “Targeted support” for rural carriers that haven’t been able to achieve coverage so far would help bring the U.S. closer to the goal of full deployment, Rose said. The bill also includes “competitive neutrality” language, which means USF rules can’t be used to unfairly advantage one provider over another. This section of the bill has been highlighted many times in recent days by net neutrality advocates, who think it’s hypocritical to have such language for voice services but not video or data.

The FCC released an order late Fri. that requires prepaid calling card services to pay regulatory fees, but not retroactively. The order has long been anticipated because the FCC voted on it June 1 (CD June 2 p2). An AT&T spokesman said the order offers certainty for providers and “a degree of stability for the Universal Service Fund.” The action requires providers of prepaid cards, including the so-called menu-driven cards and those using IP transport, to pay access charges and contribute to the USF based on interstate revenue. The Commission said payment is required because these cards qualify as telecom services. AT&T and Verizon had lobbied hard against retroactive treatment and in a separate statement FCC Comr. Adelstein said he had concerns about not applying retroactivity. The decision is a follow- up of a Feb. 2005 ruling requiring AT&T to pay regulatory fees on its first enhanced card. The company had sought regulatory guidance for newer cards that it said could be considered information services and thus exempt from fee payments.

Close votes on key amendments dealing with net neutrality and buildout requirements signal a tough fight ahead on the Senate floor for the Senate telecom bill (HR- 5252), lobbyists and industry sources said. Senate Commerce Committee Chmn. Stevens (R-Alaska) has acknowledged the difficulty he faces and said at the end of Wed.’s markup that he’s considering introducing a slimmed-down bill.

The House Thurs. passed the appropriations bill containing $294 million in funding for the FCC. The Science- State-Justice-Commerce bill (HR-5672), which passed 393-23, also provides $3 million to be transferred from the Universal Service Fund to monitor the program and conduct audits to prevent waste, fraud and abuse. The Office of the Inspector General would be in charge of the investigations. The bill included funding for a number of other agencies including $18 million for NTIA, $1.77 billion for the Patent & Trademark Office should offsetting fee collections not be sufficient, $467 million for scientific and technical research at the National Institute of Standards and Technology, $4.7 billion for research at the National Science Foundation, $651 million to the State Dept.’s Bcstg. Board of Governors and $213 million for the Federal Trade Commission.

The Cal. PUC is reviewing the state’s $400 million High- Cost Fund B, which subsidizes phone service to high-cost rural areas. The PUC said Thurs. this universal service program’s rules and regulations, set up over a decade ago, needs a look because telecom markets and technologies have undergone major changes such as wireless service replacing landline and the emergence of other forms of intermodal and direct competition. The review aims to see if support can be cut yet still meet its goals of available, affordable phone service, ensuring competitive neutrality, reducing rate disparities between urban and rural areas and making the program more efficient. The procedural schedule will be set later.

Wireless carriers using traffic studies as an alternative to paying USF safe harbor percentages must submit the studies to the Commission, the FCC decided. There was doubt last week as to whether the FCC would toughen its stance in this area, when the Commission approved a report and order and NPRM addressing interim steps the agency is taking to shore up the USF. Text of the order was released at our deadline. “We take an additional step to ensure the accuracy of reported revenue data,” the FCC said: “Mobile wireless providers have incentives to bias any traffic studies to minimize their amount of interstate and international end-user revenues and thereby minimize their fund contributions; there are no countervailing market forces to offset these incentives. Consequently, we now require any mobile wireless provider that uses a traffic study to determine its interstate end-user revenues for universal service contribution purposes to submit the study to the Commission and to USAC for review.” In the order the Commission also raised the wireless safe harbor from 28.5% to 37.1%. Carriers are allowed to submit traffic studies to show the actual percentage of interstate calls versus intrastate calls made by subscribers falls below the safe harbor.

People under 25 would be hit hard if the FCC adopted a system based on phone numbers or “connections” to fund universal service, the Keep USF Fair Coalition warned Tues. The coalition, made up of consumer groups, said younger people tend to have more communications devices, each with a phone number or telephone line. The group, a long-time foe of the proposal, has issued similar warnings about the impact on the elderly and the poor of basing Universal Service Fund (USF) contributions on numbers. The current system is based on interstate revenues.

The FCC moved 2 universal service responsibilities from the Wireline Bureau to the Inspector Gen. and Managing Dir. Oversight of an annual outside audit of the Universal Service Administrative Co. was moved to the Inspector Gen. and the calculation of the quarterly Universal Service Fund contribution factor went to the Managing Dir. The Commission said the changes “better align these USF functions with the divisions within the Commission that can execute them most effectively.”

Rural telecom providers oppose capping the Universal Service Fund (USF) due to the “serious impact” that could pose to rural carriers’ 18 million consumers, said a letter sent Senate Commerce Committee Chmn. Stevens (R-Alaska). “Mandating a cap on the fund will prevent many companies from continuing to build out and upgrade their networks throughout their service territories,” the Coalition to Keep America Connected, which includes NTCA, OPASTCO, the Independent Telephone & Telecom Alliance and the Western Telecom Alliance, said: “Rural telecom providers respectfully call upon you to publicly take every step possible to dispel the idea that a cap of any sort on the universal service program is a positive development.”