House Telecom Subcommittee Chmn. Upton (R-Mich.) said he would encourage Rep. Terry (R-Neb.) to urge Senate approval of universal service fund (USF) legislation before addressing it in the House (CD June 24 p10). Terry and Sen. Smith (R- Ore.), who have introduced legislation that would change USF distribution so that more western states would receive part of the “non-rural” fund, said Wed. they would try to find ways to move the bills through legislative riders. Upton said Thurs. that the House has passed several bills that the Senate hasn’t acted upon. Upton said he supported the changes and wouldn’t be opposed to addressing these issues in a stand-alone bill (as opposed to comprehensive USF reform that’s expected next year), but said the Senate should act first.

Sponsors of legislation designed to bring more universal service fund (USF) dollars to western states said Wed. they would seek to attach the bills as riders to other legislation in an effort to see it passed this year. Sen. Smith (R-Ore.) (S-1380) and Rep. Terry (R-Neb.) (HR-1582) said while time was running out this congressional session, their bills enjoyed considerable support and could find passage as a rider to another legislative vehicle. Terry said House Commerce Committee Chmn. Barton (R-Tex.) was now a co-sponsor of the bill and Smith said Senate Commerce Committee Chmn. McCain (R-Ariz.), an original co-sponsor, was “pushing aggressively” to have the measure moved through the Senate. The bills are designed to redistribute the so-called “non- rural” section of USF, about $230 million yearly, to more states. The non-rural fund goes to ILECs (including some non-RBOC ILECs) that serve rural customers. Currently, the lion’s share of the funding goes to Miss., which receives about $120 million, and the rest is split among 7 other states, leaving 42 states ineligible for funding. Smith, Terry and other supporters of the bills have called the funding formula “unfair” and the 10th U.S. Appeals Court, Denver, remanded the funding scheme to the FCC. Both Qwest (which has made the most vigorous push for the bill) and SBC have challenged the FCC’s recently revised scheme, which doesn’t significantly change the distribution pattern. Smith and Terry were optimistic about the chances that the bill could be added to another legislative vehicle and an industry source said the lawmakers have reached out to key members on appropriations and other committees to help move the bill forward. Things have improved for Terry’s bill since Rep. Tauzin (R-La.) vacated his chmn. position. Tauzin, as have some others, said the issue should be dealt with in comprehensive USF reform. “This bill should be adopted today,” Terry said. USF reform, which will be a hot topic in Congress next session, will be a long process, Terry said, but there’s support for this legislation now. But Terry alluded to one “Mississippi representative” who didn’t understand the inequities of the issue. Terry was likely referring to Rep. Pickering (R-Miss.), the vice chmn. of the Commerce Committee. The House bill has 79 co-sponsors, while the Senate version has 31, including the recent addition of Senate Minority Whip Reid (D-Nev.). Neither bill has been marked up or even had a hearing, though the measures have been addressed in other USF-related hearings. Smith said it would have been preferable to have the bill marked up, but said in the Senate, “it doesn’t seem to matter.” He said there were at least 2 appropriations bills that it could be attached to and that the “political season” could produce other bills suitable for attachment.

The Universal Service Administrative Co. (USAC) said it would award over $92.6 million to 3,352 school and library applicants as part of the 5th wave of year 2004 E-rate funding. It said the 5th wave of letters, to be released today (Tues.), would notify the applicants of receiving funding for “priority one services” -- telecom services and Internet access -- for all discount bands of 20-90%. Funding for “priority two” services, such as internal connections will be issued after the discount level at which they will be funded is determined, it said. USAC said it had committed over $271.3 million in 16,005 letters for funding year 2004 and said it planned to issue additional funding year waves “regularly” until the process is complete. The FCC has set the funding limit for disbursement for funding year 2004 at $2.25 billion, but its rules allow it to carry forward unused funds from previous years, which the Commission may direct.

House Commerce Committee ranking Democrat Dingell (Mich.) urged the FCC to reject “immediately” an AT&T petition asking that its enhanced prepaid calling card services be classified as interstate information services. In a letter to FCC Chmn. Powell last week, he expressed concern that “until the Commission acts, AT&T will continue its apparent practice of improperly withholding payments it should be paying into the Universal Service Fund (USF), as well as withholding appropriate payments of intrastate access charges.” In a petition filed more than a year ago, AT&T asked the Commission to rule that its “enhanced” prepaid calling card services were “interstate communications subject to interstate, rather than intrastate, access charges.” It also argued that services were information, rather than telecom services, because calling card users heard recorded ads when placing calls. Dingell called the claims absurd and said he was “troubled by the implications of the relief AT&T seeks.” He said ruling in AT&T’s favor would “upset the present balance which permits lower consumer phone rates,” because the company sought to “avoid its obligation to pay lawful intrastate access charges… on calls in which the calling and called parties are located within the same state.” He also urged the Commission to reject AT&T’s claims that its prepaid calling card services were information services, saying that granting such claims would “only free AT&T of any obligation to contribute to the USF in connection with these services” and create an “enormous loophole for other carriers to avoid supporting universal service.” Consumer Federation of America (CFA) Research Dir. Mark Cooper said in an interview CFA was “concerned” about AT&T trying to avoid paying access charges and USF contributions. “The FCC should make sure that everybody who benefits from the public switched network should make fair contributions to recover costs” of maintaining it, he said.

A House subcommittee Thurs. railed against waste and abuse in the E-rate program and leveled blame on nearly everyone involved, from federal govt. program managers to vendors and school districts. Misuse in the program is “a crime against children,” said Rep. Markey (D-Mass.), an early E-rate proponent who said he still supports the program but “it just makes my blood boil” to think vendors and others may be making money by misusing the program. The program is administered by the Universal Service Administrative Co. (USAC) under the supervision of the FCC.

Three indicators of regulatory independence are the stability of its leadership, scope of its authority and the independence of its funding, a working paper released by the FCC International Bureau said. The paper, called “Traits of an Independent Communications Regulator: A Search for Indicators” by the Bureau’s Irene Wu, is the first in a Working Paper Series announced by the Bureau Thurs. It said “good indicators” of the regulator’s independence from other government organizations included: (1) An agency leader with a guaranteed term of office, who couldn’t be dismissed for unpopular decisions. (2) Funding independent of political review. (3) A scope of authority distinct from the govt. policy-making agency. It said measures of independence from the industry included whether the incumbent operators were privately owned and whether there was frequent exchange of staff between the regulator and the regulated industry. Indicators of the regulator’s responsiveness to consumer interests include whether there are offices dedicated to consumer affairs and to universal service issues, it said. The paper said since 1990, the number of independent regulatory authorities had grown to 119 from 13, with many countries committing to establishing independent regulators as part of compliance with the WTO’s Basic Telecom Agreement -- www.fcc.gov/ib.

Senate Commerce Committee Chmn. McCain (R-Ariz.) said Wed. he didn’t know if the Senate could complete action this year on Sen. Sununu’s (R-N.H.) VoIP bill, but he hoped at least to mark it up in committee “to give us the opportunity to amend and debate and improve Mr. Sununu’s bill.” Speaking at the committee’s first hearing on the bill, McCain said he’s aware there are “difficult issues” associated with VoIP technology, such as universal service, public safety and CALEA, but Sununu “has introduced a very important, comprehensive piece of legislation.” McCain said he thought VoIP was a “technological breakthrough that will fundamentally change and simplify the ability of Americans to communicate,” but “since it is a breakthrough technology, there’s going to be a lot of china broken.”

The Kan. Corporation Commission (KCC) called for comments by July 1 and replies by July 21 on a staff proposal to allow incumbent telcos under rate-of-return regulation to adjust rates when revenue requirements are affected by state universal service fund audits. The KCC traditionally hasn’t allowed any rate increases between general rate cases, but the agency’s staff proposed allowing a revenue requirement increase of up to 3% of intrastate jurisdictional revenue for universal service support purposes without a full rate case. The KCC (Case 04-GIMT-1080-GIT) also asked parties to comment on whether universal service audits should address the specific rate impacts on telcos.

Buoyed by European 2G mobile penetration rates exceeding 80%, the European Commission (EC) this week meets with industry and other stakeholders to ensure the success of emerging high-speed mobile data services. Europe can’t afford to be complacent about its leading role in mobile communications, Information Society Comr. Erkki Liikanen said Tues. He said Europe must “replicate our past approach by focusing on key enablers” such as R&D, interoperability, the content regulatory environment and spectrum policy.

The FCC’s Inspector Gen. Office (OIG) has become “increasingly concerned” about slowness in resolving audit findings and recovering funds in investigations of e-rate malfeasance, it said in its latest report for the 6 months ended March 31: “We have observed that findings from audits conducted by USAC [the Universal Service Administrative Co.] are not being resolved in a timely manner and that, as a result, timely action is not being taken to recover inappropriately disbursed funds. In some cases, it appears that the delay is caused by USAC. In other cases, findings are not being resolved because USAC is not receiving necessary guidance from the Commission in a timely manner.”