The Federal-State Joint Board on universal service released its most recent monitoring report, which reflects information filed with the FCC through May 2004. The report said the universal service fund (USF) distributed 61.1% for high-cost support, 25.1% for schools and libraries, 13.4% for low-income support and 0.4% for rural health care support. Total industry revenue for telecom services provided to end users in 2003 rose to $234 billion from $232 billion in 2002. Low-income support increased to $716 million in 2003, up from $676 million. High-cost support increased to $3.3 billion from $2.9 billion in 2002.

FCC Chmn. Powell said Wed. the Commission acted properly in ordering the Universal Service Administrative Corp. (USAC) to change how it accounts for money in the federal E-rate program fund, the subject of a Senate Commerce Committee hearing yesterday. The issue has gotten considerable national attention in recent days, including coverage in the N.Y. Times and across the country. But the FCC’s 2 Democrats sharply criticized Powell over the way the Commission handled the issue.

The Intercarrier Compensation Forum (ICF) filed a 198-page reform proposal with the FCC on Tues. that promised “enormous public interest benefits” by unifying overlapping industry compensation mechanisms, including those used for access charges, reciprocal compensation and settlements. The cross-industry ICF said the plan is “the best means of resolving the interrelated intercarrier compensation and universal service funding issues” before the FCC. The ICF said the plan will replace “the current, obsolete and broken systems of intercarrier charges with a new, comprehensive and unified system.” The ICF -- composed of AT&T, Global Crossing, General Communications, Ia. Telecom, Level3, MCI, SBC, Sprint and Valor Telecom -- briefed the FCC on Aug. 13 with an outline of the plan, but this is the FCC’s first comprehensive look at it. The ICF is one of several groups that have presented intercarrier compensation proposals to the FCC. Unlike the ICF, the other groups generally represent individual industry segments -- one is made up of CLECs, 2 others represent rural carriers. Most of the other groups were founded by carriers that left the ICF over disagreements about the compromises the ICF required in order to get agreement from competing industry segments. The ICF said its plan is a good solution politically because it exempts low-income consumers from the subscriber line charge and safeguards for rural carriers. It’s also “the most legally sustainable solution” because it “does not affect state regulatory jurisdiction over intrastate end user rates,” the ICF said.

Unbundling requirements stall investment in the economy’s “central nervous system,” the U.S. Chamber of Commerce said Wed., in calling for their phase-out. “The FCC has managed to create a great uncertainty” in the telecom marketplace and “Congress is equal to blame,” Chamber Pres. Thomas Donohue said, announcing the release of a telecom industry analysis commissioned by the Chamber. He said while new technologies carried immense opportunities to offer innovative services and create new jobs, “in many ways, we are wasting our potential because of the stale regulatory system.” Donohue said the Chamber would study the regulatory reform proposals made in the report and how they can be applied.

Experts described the implications of the upcoming presidential election on telecom and technology policy Tues. in the same stark differences that have generally defined the domestic policy divide between the candidates: President Bush favors market forces while Sen. Kerry (D- Mass.) sees a role for govt. Panelists at a Dittus Communications/CNBC discussion on the election focused on how these differences could affect issues such as broadband deployment, spectrum reallocation, tax credits and trade.

Responding to a WilTel complaint, AT&T told the FCC in a letter Mon. that it isn’t improper for AT&T to exclude universal service contributions from its enhanced prepaid card revenues. WilTel had asked the FCC to deny the Wireline Bureau’s proposed 8.9% universal service fund (USF) contribution factor because it doesn’t include AT&T enhanced prepaid card revenues. The request became moot Sept. 30 because the time period for the FCC to halt it expired, but the FCC in a different proceeding has been considering possible action against AT&T’s handling of its prepaid card revenues. AT&T argued in the letter that USF contributions aren’t required because the card is an information service and “WilTel’s suggestion that AT&T is not living up to its universal service obligations is absurd” because “AT&T is the single largest contributor to the USF.” AT&T criticized WilTel and BellSouth assertions “that AT&T is enjoying an unfair, discriminatory competitive advantage” by not paying universal service contributions. “Other providers are free to qualify their prepaid card services as information services, outside of the duty to contribute to the USF,” AT&T said. If the FCC adopts a numbers-based approach to USF contributions, “the regulatory classification of a service as an ‘information service’ or ’telecommunications service’ will no longer be determinative, because providers of both sets of services will be required to contribute to the USF based on their end-users’ assigned telephone numbers.” The company also noted that the “predominant users” of the enhanced prepaid card are military, low-income, minority, immigrants and retirees who depend on the cost-effective nature of the card. Requiring USF contributions “would shift the USF burden from more affluent consumers to individuals who are least able to afford it.”

A bipartisan majority of House Commerce Committee members signed a letter to FCC Chmn. Powell urging the Commission to adopt federal jurisdiction over VoIP as part of the Vonage proceeding. Pushed by House Commerce Committee Vice Chmn. Pickering (R-Miss.), the letter focused on VoIP jurisdictional issues while remaining neutral on other issues such as intercarrier compensation, universal service and public safety. Pickering sponsored comprehensive VoIP legislation that won’t see a markup this session. However, the letter said: “We believe that such an important, but narrow, finding cannot wait for a more comprehensive VoIP bill to work its way through the legislative process.” The letter was signed by 61 House members, including 33 Commerce Committee members. Committee Chmn. Barton (R-Tex.), Telecom Subcommittee Chmn. Upton (R-Mich.) and 8 Commerce Committee Democrats signed the letter, as did Majority Whip Blunt (R-Mo.). An industry source said the letter was a “hell of an accomplishment” for Pickering. The source pointed out that Pickering’s office drew the support in 10 days and got several Democrats to sign. Also, the letter brings together Barton, who traditionally supports policy favorable to ILECs, and Pickering, known for supporting telecom policy favorable to CLECs, the source said. Steve Trotman, CompTel/ASCENT senior vp-state programs & education, said it was important that the jurisdictional question be answered quickly, and CompTel/ASCENT was very pleased with the letter and hoped the FCC would soon rule VoIP an interstate service with federal jurisdiction. Brian Adkins, NARUC legislative dir., said it was encouraging that the letter also said that the FCC should recognize “the legitimate role of state consumer protection and public safety laws of general applicability.” Adkins said he had concerns about the “general applicability” phrase, since it could be interpreted to exclude telecom-specific consumer protection measures. While the FCC might consider this letter when reaching its conclusions on VoIP, Adkins said it should also consider the recent Senate Commerce Committee vote to include in Sen. Sununu’s (R-N.H.) VoIP bill measures that would retain state authority to regulate VoIP for access charges, state universal service funds and E-911 rules.

The Universal Service Administrative Corp. (USAC), which administers the $2.25 billion federal E-rate program, acknowledged at a Senate Commerce Committee hearing Tues. it had lost $4.6 million as a result of an accounting change requiring the corporation to have cash on hand to meet commitment letters. The change forced USAC to sell off high interest Treasury bills (T-bills) and other assets, paying significant penalties.

Wireless carriers acknowledged Fri. they seem to be making little progress on getting the FCC to change course on upcoming Auction 58, the major PCS auction slated for Jan. Carriers led by CTIA have been pushing the Commission to changes the rules of the auction to eliminate the set-aside for “designated entities” of more than 1/2 the 234 10-MHz licenses up for sale.

The Mo. PSC declined to certify 2 rural incumbent telcos as qualified to continue receiving federal universal service funds. The PUC notified the FCC that it was decertifying Cass County Telephone and New Florence Telephone, both run by an executive that the FBI alleged has ties to organized crime. The PUC said there were unanswered questions about whether the telcos had knowingly overpaid for data services provided by a firm the FBI alleged had Mob connections, thereby misrepresenting their costs of doing business. The FBI in July arrested Kenneth Matzdorff, alleging he was a front man for the Gambino crime family in a fraud scheme that involved deliberate large overpayments for business services from Mob-connected companies. Matzdorff still is CEO of Cass County Telephone but quit New Florence Telephone in Aug. The telcos serve about 8,500 lines total, and last year received about $3.2 million in universal service subsidies. Officials of the telcos denied any improper spending. They said a pending 3rd- party audit will show the subsidy money was spent properly. They said once the audit vindicates them, they will move for reversal of the PUC decision.