The FCC said it adopted additional mandatory requirements for eligible telecom carrier (ETC) designation proceedings pursuant to Sec. 214(e)(6) of the Communications Act, consistent with the recommendations of the Federal-State Joint Board on Universal Service submitted a year ago. ETC status allows a carrier to get high-cost universal support funding. The agency also encouraged, but didn’t require, states that exercise jurisdiction over ETC designations to adopt the requirements when deciding whether a common carriers should be designated an ETC. The rules are mandatory only in cases where the FCC makes the ETC designation. While the order applies to both wireline and wireless companies entering the high-cost, mostly rural markets, the majority of incoming ETCs have been wireless carriers.

The 10th U.S. Appeals Court, Denver, once again remanded the FCC’s rules for nonrural, high-cost universal service support, saying the agency hadn’t fully met the requirements of the court’s first remand in 2001. In a Feb. 23 order, the court ruled: “The FCC relied on an erroneous, or incomplete, construction of [Sec. 254 of the Telecom Act] in defining statutory terms and crafting the funding mechanism for non- rural, high-cost support. That construction of the statute is fatal to the cost support mechanism at issue in this case.” The court upheld one part of the FCC’s order that created a mechanism to encourage states to implement their own universal service programs, an area the court found lacking in 2001. The court acted on appeals filed by Qwest, SBC and the Vt. Public Service Board. The original remand found the FCC didn’t adequately define terms, including “reasonably comparable” and “sufficient” and didn’t properly justify the 135% benchmark that determined eligibility for universal service funding. The court last week concluded the FCC still has “failed to reasonably define these terms.” The court also criticized the FCC’s effort to justify its eligibility benchmark: “The Commission established a cost benchmark of two standard deviations above the national average cost per line… We did intimate [in the first remand] that we would be inclined to affirm the FCC’s cost-based funding mechanism if it indeed resulted in reasonably comparable rates. However, we expected the Commission to return to us with empirical findings supporting this conclusion… Once again, we find no evidence in the record before us to support the FCC’s pairings of rates to costs in this context. In other words, the FCC based the… cost benchmark on a finding that rates were reasonably comparable, without empirically demonstrating a relationship between the costs and rates surveyed in this context.” The court turned down petitioners’ request for a deadline of no more than 180 days for the FCC to act on the 2nd remand, saying such a deadline would be “an extraordinary remedy.” The Coalition for Equitable & Affordable Rural Service (CLEAR), which has been working for legislation to change the way the FCC treats nonrural, high-cost carriers, said it hoped the FCC “will give greater consideration to the needs of high-cost rural areas in all of the 50 states, not just a lucky few.” The last time the court remanded the rules, “the FCC ignored the court’s guidance and reaffirmed its unfair, unlawful approach,” a CLEAR spokesman said Mon.

The FCC hadn’t issued a decision on universal service support and eligible telecom carrier (ETC) designation at our deadline Fri. The Commission wasn’t required to vote until the Sun. (Feb. 27) deadline but sources said all commissioners probably would cast votes by Fri.’s end. The item involves a controversial recommendation by the Federal- State Joint Board on Universal Service to limit support to one line per customer. The board also recommended the FCC adopt “permissive federal guidelines” for states to use when deciding whether to designate competitive carriers as eligible telecom carriers (ETCs), which permits them to receive universal service funding.

Cal. PUC Comr. Susan Kennedy -- a national leader among deregulatory policy makers -- is pushing for the states to assert themselves on communications policy, even in gray jurisdictional areas, based on an “Internet freedom” principle to ensure access to VoIP. She’s also proposing her commission undertake a sweeping, possibly fast-tracked remake of the basic state regulatory structure. Kennedy is emboldened by the emergence of IP-based and other competitive services; growing receptivity among fellow state regulators to market-based premises; and what she sees as an FCC “void” creating an opening for state activism, she indicated in a speech this week.

At least 3,000 consumer letters were filed in the FCC’s universal service docket (96-45) Wed. urging the FCC to reject a proposal to move to a flat fee for universal service fund (USF) contributions by carriers. The letters, all the same, appear to be written by a lobbyist group. At our deadline, its identity couldn’t be confirmed. However, one of the letters indicated a link to a website -- http//keepusffair.org -- sponsored by a consumer coalition that includes the Telecom Research & Action Center (TRAC). Signed by individuals from throughout the country, the letters told the FCC: “I do not want to pay more for my telephone service! I urge you to reject a flat fee proposal that would change how contributions are made to the Universal Service Fund… Under the flat fee you are considering, people who make few long distance calls would pay the same as people or businesses that make many calls… This is unfair.” The letter also makes reference to wireless service: “I use my wireless phone for safety, security and convenience. I don’t want to lose those benefits so big businesses can pay less than their fair share.”

AT&T acted “unlawfully” when it failed to pay millions of dollars in universal service contributions and other fees on revenue from its enhanced prepaid calling cards, the FCC ruled in an order issued Wed. AT&T had asked the FCC for a ruling that withholding the fees was proper because the calling cards provided an “information service,” rather than telecom service, because they contained advertising. However, the FCC disagreed and said the insertion of advertisements in the calling card service didn’t change the regulatory status of the cards.

Verizon’s top southeastern-region executive urged the Tex. legislature to pass legislation this year to “fully and unconditionally” embrace free market competition for all telecom providers, but not necessarily the specific bill currently pending. Steve Banta, Verizon’s SE region pres., testified during House Regulated Industries Committee hearings on HB-789, a bill that would deregulate rates for nearly all retail telecom services. Banta urged the legislature to look to the “proven model” of the competitive wireless industry, which has delivered lower prices and technological benefits to consumers without state regulation. Banta had some issues with HB-789, which the committee may address through amendment. He said he opposed a provision that would allow incumbent telcos to take advantage of deregulation only if they forego participation in the state universal service fund. He said this provision would put Verizon and other incumbents “in an impossible Catch-22 situation” of having to absorb all costs of serving rural and high-cost areas if they wanted pricing freedom in their densely-populated markets. He also took issue with a provision that he said would give cable companies “special advantages over other telecom providers” by impairing telcos’ ability to offer competitive video services. He also objected to wording that would require all telecom carriers, including wireless, to pay a state gross receipts tax that would replace local right-of-way levies. He said wireless carriers don’t use terrestrial rights of way so they shouldn’t be subject to a tax levy that’s imposed in lieu of right-of-way fees. State Rep. Phil King (R), chmn. of the Regulated Industries Committee, said he planned to amend HB- 789’s universal service provisions. Instead of barring deregulated telcos from the state fund, he said he'll propose alternative language directing the PUC to study the $600 million Tex. universal service subsidy system and recommend changes to the 2007 legislature. The Tex. legislature meets only in odd-numbered years. King also indicated he’s willing to review whether wireless carriers should be included in the proposed state right-of-way tax.

The National Telecom Co-op Assn. (NTCA) approved a resolution expressing concern about the impact on rural telecom companies of “mega-mergers” such as Verizon-MCI and SBC-AT&T. NTCA’s resolution, passed at its annual meeting in San Antonio, urged the Dept. of Justice, the FCC and state regulators to require the new “conglomerates” to provide service to small, rural telecom companies at reasonable rates. NTCA also urged regulators to prohibit “non-disclosure agreements in contracts involving access to the IP backbone, video content and the interconnection of networks.” The resolution said these mergers pose a “significant threat to rural consumers,” possibly enabling the bigger companies to dictate prices and terms for a variety of communications services. “Additionally, these new conglomerates will possess the ability to control both content and distribution facilities in the markets they serve and have the means and opportunity to manipulate those markets, engage in predatory pricing and implement discriminatory practices against their competitors, particularly small independent carriers.” Another NTCA resolution said the association would work to assure its members had “nondiscriminatory access to video content, equipment and pricing to enable the membership to become major video service providers and to compete in the cable television marketplace.” In another resolution, NTCA said it would aim its advocacy efforts at passing laws and regulations to insure its member companies receive cost recovery for investment in a variety of technologies: “Providers serving rural, insular and high cost areas require many different technologies, products and services to address the needs of their customers and appropriate policies are needed to ensure those carriers can provide access to advanced services and new technologies.” The resolution reflected the fact that there are now limits on the kind of technology eligible for universal service funding.

The Clear Coalition, which supports Sen. Smith’s (R- Ore.) bill (S-284) to redistribute the $292 million “non- rural” fund in the universal service fund (USF), delivered flowers and a Valentine’s Day message to the 80 senators representing 40 states that don’t receive any of the money. The message said: “Look which states get NO LOVE this Valentine’s Day.” Miss., Ala. and W. Va. are leading recipients of the fund. The fund goes to larger ILECs that serve rural consumers. Supporters of the fund have argued there are more rural consumers served by large ILECs in the leading states, which is why these states get much of the money.

The NARUC Telecom Staff Subcommittee advanced an intercarrier compensation resolution signaling the states’ general agreement the time has come for overhaul of the entire intercarrier compensation (ICC) system. The resolution, advanced unanimously at the NARUC winter meeting here, urged the FCC in its new ICC reform docket to “carefully consider” the most recent version of an ICC reform proposal developed from more than a year of consensus-building effort by NARUC’s ICC Task Force.