The National Telecom Cooperative Assn. (NTCA) raised concerns with Sen. Sununu (R-N.H.) about his VoIP legislation (S-2281), pointing out that VoIP services would have a competitive advantage over traditional phone carriers. NTCA, which mainly represents rural local phone carriers, wrote Sununu Mon. to present 4 primary concerns with the bill: (1) The exemption from access charges that VoIP would get could cripple rural carriers. NTCA said a recent survey showed a “bill and keep” regime as proposed in the bill would cost rural carriers $2 billion annually. “The bill also encourages private negotiations for access compensation, which is an approach that has not worked in the past and has resulted in the loss of millions of dollars in rural carrier cost recovery from the wireless industry,” the letter said. (2) Universal service fund (USF) burdens would be shifted towards rural carriers, because the bill proposes a connections-based USF contribution methodology. “The impact of the flat-fee nature of this approach would be particularly harsh on low-volume users such as rural and elderly residential consumers,” the letter said. (3) VoIP providers would have the same requirements to open their networks to law enforcement as “information service providers.” “Yet, the law enforcement community is not certain it has the statutory authority to require information service providers to comply with such laws,” the letter said: “This would provide such carriers with a competitive advantage over incumbent carriers.” (4) An exemption of VoIP from state and local tax would also prove to be problematic because it “offers VoIP providers a competitive advantage over ILECs that currently do pay state and local taxes on their voice service.”

Stepping in again for the Va. State Corp. Commission, the FCC said late Mon. it designated Highland Cellular as an eligible telecom carrier (ETC) in parts of its service area. In doing so, the agency further outlined its views on what factors regulators should weigh in determining whether cellular companies are eligible to get universal service funding when they compete with rural ILECs. Although ETC designation is primarily the job of state regulators, the FCC can step in when a state believes it lacks jurisdiction, an option Va. regulators have taken in several instances. In an earlier case involving Virginia Cellular (CD Jan 26 p3), the FCC’s action set a standard for ETC designations and related public interest questions that state commissions have been using. The vote was 4-1, with Comr. Martin dissenting, as he did in the Virginia Cellular case. Although released April 12, the order was adopted Feb. 24.

More than 100 local telephone companies urged every senator to encourage the FCC to reject AT&T’s petition to the FCC to exempt VoIP from access charges. The letter, sent Mon. on USTA letterhead and signed by 121 carriers, said “allowing AT&T to continue to improperly avoid payment of access charges subsidizes AT&T stockholders at the expense of ordinary telephone rate payers who must make up in telephone rates the revenue lost because of AT&T’s failure to pay what it legally owes.” The letter urged senators not to be swayed by AT&T’s arguments that VoIP is an Internet service and that rejecting AT&T’s petition is tantamount to “taxing the Internet to subsidize the telephone network.” The current rules are clear and don’t create an exemption in the access charge regime for IP traffic, the letter said. “The FCC’s continued inaction places USTA member companies at risk because access charges account for more than $2 billion in rural company revenues alone,” the letter said. Exemption of access charges for IP telephony would threaten the financial viability of small- and mid-sized rural carriers and threaten the universal service fund, the letter said. The carriers asked senators to urge the FCC to take quick action to reject AT&T’s petition.

The National Exchange Carrier Assn.’s (NECA’s) board placed 3 top executives, including Pres. Bob Anderson, on administrative leave after an audit revealed questions about their compensation. The board said it hired an independent law firm to conduct a review. A NECA statement didn’t explain the compensation issue being questioned, and a spokesman declined to comment on it. However, the problem reportedly involved bonuses paid to the executives by NECA Services Inc., a separate, for-profit company that administers the e-rate and rural health care programs as a contractor for the Universal Service Administrative Co. (USAC). The other executives placed on leave were Gen. Counsel Ken Levy and CFO Ron Cook. NECA emphasized that the concerns didn’t involve regulatory matters such as NECA’s access charge pooling and Universal Service Fund collection responsibilities, which are done on a quasi-governmental basis. “Further, no FCC compliance issues have been identified,” the group said. The board appointed NECA Board Chmn. Bill Hegmann as interim pres. Hegmann is gen. mgr. of Southwest Ark. Telephone Cooperative.

Inflexion’s petition on applying access charges to its VoIP services should be considered in the FCC’s recently announced VoIP rulemaking on IP-enabled services, parties agreed in comments filed with the FCC Wed. They said in that proceeding, the Commission specifically asked for comments on, among other things, the extent to which access charges should apply to VoIP or other IP-enabled services and on whether providers that aren’t interexchange carriers must pay for use of LEC switching facilities.

Five people were indicted, and 4 of them arrested, in connection with a scheme to defraud the FCC’s e-rate program, the Dept. of Justice (DoJ) announced. DoJ said they were charged with conspiracy, mail fraud and money laundering after falsely claiming to have provided e-rate goods and services to 2 schools in Milwaukee and one in Chicago. Haider Bokhari, his wife Kelly Bokhari and his mother Shahida Bokhari, all of Kenosha, Wis., and his brother Qasim Bokhari of St. Petersburg, Fla., were arrested April 1. A 3rd brother indicted, Raza Bokhari, is believed to be in Lahore, Pakistan, DoJ said. The e-rate program helps poor schools fund Internet access, telecom services and internal computer networks. “Those who try to rip off and illegally profit from this important program will be prosecuted,” said Asst. Attorney Gen. Hewitt Pate. According to the indictment, in 2001 Haider and Qasim Bokhari submitted invoices and other documents to the Universal Service Administrative Company (USAC), which administers the e-rate program and in return were paid more than $1.2 million for goods the schools did not receive. The brothers then conspired with other family members to “conduct numerous financial transactions… to conceal and disguise the unlawful activity,” DoJ said. The investigation was conducted by DoJ’s Antitrust Div., the FBI, the IRS’s Criminal Investigation Div., the FCC’s Inspector Gen.’s Office and the U.S. Attorney’s Office in Milwaukee.

Cingular Interactive (CI) filed an application for review last week of the Universal Service Administrative Co.’s (USAC) assessment of universal service fund (USF) contributions from CI. In a filing at the FCC, CI said it owes no past due USF contributions: “The only services CI provided during the time period for which USAC has sent invoices claiming USF contributions are information services, which are not subject to USF contribution requirements,” CI told the FCC. The company said it reported to the USAC in 2002 its services had been reclassified as information services. “The reclassification was based on the FCC’s evolving interpretation of the difference between information services and telecommunications services,” CI said. In part, CI argued USAC lacks authority to make a determination that it is providing telecom services, contending only the FCC can reverse “existing precedent.” CI said the FCC’s Wireline Bureau can take corrective action on the USAC decisions under delegated authority. “CI"s services could be found to constitute telecommunications services only by adopting new policies and overruling or departing from the Commission’s authoritative case law, which cannot be accomplished under delegated authority,” CI said. If a decision that favors Cingular isn’t handed down, CI said it wants the petition to be referred to the full Commission.

The Kan. Corporation Commission (KCC) said Western Wireless may owe a refund of some universal service subsidies it received. Money that was supposed to be used specifically for rural service apparently went instead to general improvements in its non-rural wireless network, it said. The KCC said it wasn’t accusing Western of intentionally misusing funds. KCC telecom chief Janet Buchanan said she would meet with Western Wireless officials this week to determine how much money was involved. She said the amount could reach 7 figures. She said the money at issue was received in 2001 and 2002, and unsuccessful attempts were made in 2003 to address KCC concerns. Western officials said they were reviewing the KCC’s claims. They said they might have to reevaluate deployment of services and facilities in Kan. if Western lost universal service subsidies. Western was the first wireless company in Kan. to qualify as an eligible telecom carrier for universal service funding.

The FCC is expected to call for comments “in a month or 2” on a proposal by the Federal-State Joint Board on Universal Service (CD March 1 p1) to make changes in the funding program’s operation, including a controversial plan to limit funding to one line per customer.

FCC 8th-floor wireless advisers stressed the complexity of the pending 800 MHz proposals at the FCC, at a CTIA panel, although several noted they were heartened by the level of economic analysis in data submitted to the FCC in the proceeding. “The FCC needs data to do its job,” said Paul Margie, aide to FCC Comr. Copps: “The reason this has taken so long is because we had to figure out is there interference, how much interference is there, where is the interference, what is the delta between the interference we have now versus the two different plans, how much is it going to cost. And all of this took a certain amount of time because we didn’t know it beforehand.” Asked by CTIA Asst. Vp-Regulatory Policy Christopher Guttman-McCabe how spectrum overlays could be “policed,” Margie said most of the time it’s good to have additional flexibility. “But the more flexibility you give to somebody to operate in different ways, the more chance you have that those ways are going to conflict with one another. Across the band we've been adding more flexibility to people’s licenses. May we -- by doing that -- be creating other 800 [MHz-type] issues at other places around the spectrum? There’s a possibility we might be doing that.” Among the concerns that have surfaced repeatedly at the CTIA show here this week is the possibility of a patchwork of new state regulations to address issues such as service quality. Asked by Guttman-McCabe what role the FCC could play in this area, Jennifer Manner, adviser to Comr. Abernathy, said “unfortunately, we don’t have preemption authority, which is a problem.” The industry’s voluntary code of best practices, addressing issues such as trial periods for new service and billing, has been a “good response.” Manner said: “Your success should guide the states. You have to do a lot of education and be responsive. That’s not really something the Commission could step in and do.” Asked about the extent to which the FCC does cost- benefit analysis of the financial impact of rulemakings it considers, Sheryl Wilkerson, Chmn. Powell’s wireless aide, said it’s “one of the first things we look at when an item does come up to us.” Industry has been helpful in providing data on the costs of proposals such as those under consideration to mitigate public safety interference at 800 MHz and a recent International Bureau item on orbital debris, Wilkerson said. Barry Ohlson, aide to Comr. Adelstein, said the record assembled at the FCC on the 800 MHz proceeding has been among the better ones before the agency “in terms of economic analysis.” While there has been different information submitted by competing sides in the 800 MHz proceeding, Ohlson said the data submitted still has been helpful. Separately, FCC Chief of Staff Bryan Tramont asked what the regulatory implications were of wireline company ownership of wireless companies. “The wireless industry is incredibly competitive,” said Cingular Wireless Vp-Federal Regulatory Affairs Brian Fontes. “With respect to any wireline affiliation that any wireless carrier would have, if there’s any opportunities to behave irrationally in the marketplace, I think that would be remedied very quickly just by the competitive nature of the marketplace.” -- MG