The FCC Inspector Gen.’s Office said more than $1.9 million in “inappropriate” e-rate disbursements had been recovered as the result of investigations of the first 3 years of the program, which began in 1998. The audits, which have been going on for several years (CD June 4 p8), are conducted by accounting firms contracted by the Universal Service Administrative Co. (USAC). In the latest report, Inspector Gen. Walker Feaster said USAC had initiated action to recover more than $2.3 million more and planned soon to issue “recovery letters” for another $6.98 million. The e- rate program, which offers schools and libraries discounts for projects to upgrade their computer infrastructure, has been criticized for not having strict enough controls over the contractors doing the work and their prices. Repeating concerns expressed earlier about lack of funding, the report concluded that “until such time as resources and funding are available to provide adequate oversight for the USF [Universal Service Fund] program, we are unable to give the Chairman, Congress and the public an appropriate level of assurance that the program is protected from fraud, waste and abuse.” In other areas, audits still continuing at the time of the semiannual report included one on financial management of auction proceeds. “This audit is being conducted to evaluate any potential duplicative efforts in the operation and management of the auction’s process,” the report said. Language in the House version of omnibus appropriations legislation would limit the FCC to $85 million of auction revenue to fund the program, rather than the current practice of funding the administrative costs of spectrum auctions from the money raised in the auctions.

FCC Comr. Abernathy lauded the approval of regulatory best practice guidelines this week at the ITU’s Global Symposium for Regulators (GSR). The 4th annual conference, sponsored by the ITU’s Development Bureau, drew regulators from 90 of 123 ITU member countries, Abernathy told us from Geneva. “The focus of this meeting was on universal access - - how do we as regulators move forward to promoting universal access for all parts of the globe, whether urban or rural,” Abernathy said. The GSR’s universal access best practice guidelines are scheduled to be delivered to the World Summit on the Information Society (WSIS) this week in Geneva. The ITU said the best practice guidelines called for support for regulatory reform “at the highest level of government,” including treating information and communications technology as a development tool, not a revenue source. Abernathy said regulators backed best practices that included technologically neutral licenses, independent telecom regulatory bodies and clear and transparent rules. She said they marked “all the themes that the U.S. has been pushing globally.” She said the lessons of competition in the wireless arena -- including the possibilities created by unlicensed competitors and the potential for multiple competitors -- were cited by regulators as applying more broadly to universal access. “The fact that the regulators now agree to these kinds of guidelines and regulators sends a strong signal,” Abernathy said. Among the topics discussed was the extent to which unlicensed spectrum through Wi-Fi could address last-mile issues, she said. The 2-day meeting, which ended Tues. in Geneva, made clear the extent to which a wide range of countries had embraced competition and regulatory reform, with an emphasis on the need for an independent regulatory authority “so that you can’t have undue pressure exerted by an incumbent,” she said. Even 6 or 7 years ago, those themes wouldn’t have been on the table, she said. Toward the end of the conference, discussion turned to funding mechanisms for universal access, including the possibility of an auction approach in some cases, she said. The ITU said that “the regulators agreed that the lessons learned from developing countries’ initial experiences with mobile cellular services should now be applied to a broader range of ICT services to foster universal access.”

More than 10 voice over Internet protocol (VoIP) providers led by the Voice on the Net (VON) Coalition are getting together to create an unprecedented group to encourage a public policy that refrains from applying traditional telecom regulation to Internet voice communications. The ad hoc coalition, expected to be announced formally before the end of the year, will try to form voluntary agreements on some key common carrier obligations, such as universal service, E911, disability access and law enforcement monitoring of VoIP calls. “These legitimate concerns can be addressed without imposing heavy regulation on VoIP and… if they are addressed successfully the political pressure to regulate VoIP will dissipate,” said VON Coalition Chmn. Tom Evslin, who represents the ad hoc group.

FCC Chmn. Powell said it was necessary to “rethink” the social goal of universal service when applying it to Voice over Internet Protocol (VoIP) services. Speaking at a telecom forum sponsored by U. of Cal., San Diego, and the San Diego Telecom Council Tues. in San Diego, he said the first consideration was the program’s goal: “The purpose of the universal service program is… to get consumers ubiquity and affordability of services… If that goal is achieved you don’t need any money. You don’t need a govt. program just because it’s cool to have one.” Powell said he was “intrigued” by companies like Vonage that offered unlimited local and long distance calling for $35 monthly: “That is a better price proposition than a universal service program ever produced in a hundred years.” Powell said while consumers had to pay additional charges for the universal service program, “every technological innovation is creating more affordable alternatives for me without any of that help.” He said while the main goal remained to ensure that “every American should get access to the services in the digital revolution… you got to look at whether there is a new way to make sure they” do. Powell said the Commission would ensure that the universal service was protected during a transitional period, “but if every American tomorrow has voice over IP for 30 bucks then what’s the fund for? That’s not to say we won’t need it, we might still want it. But I challenge people to stop talking about ‘look what they do to the fund.’ Forget the fund.” He expressed concern that consumers ended up paying for the fund: “I am sure you would like to see that line on your bill to go away. There is a cost to consumers of the fund. So if you had VoIP and none of those charges, you'd have a pretty good deal.” Powell said with many questions remained unanswered, “we have a lot of learning to do before we start making decisions” on VoIP. He said there were 2 ways to approach the new technology: “turning Internet into a telephone and argue down… or you can start” from scratch “and regulate up to the extent that’s necessary. I am a huge believer that the ladder is the only reasonable thing to do, because [VoIP] is not a telephone. It is a new technology. I don’t want it treated like a 100- year-old common carrier model.” However, he clarified that it did “not mean I won’t be convinced that there are important public policy concerns that have to be regulated on top of it. But the burden should be on the government to prove that need.” Powell said if VoIP was defined as a telephone service, “you don’t believe what horrible [consequences] may fly out of that one definition. We'll spend the next 30 years trying to get rid of that.” He acknowledged it was important to solve problems related to 911, CALEA and others, but said: “I think that list is small -- we talk about 4 or 5 critical items that probably have to be addressed, versus hundreds of pages that you'd try to forbear from” otherwise. Powell also said he believed VoIP was an interstate service: “I don’t know whether it’s Internet or telephone, but I know it’s not local.” He said the FCC, not states, was the “principle regulatory authority” for VoIP: “We are working with states, but… the FCC is first in line to set the initial regulatory environment.”

Public TV favors mandatory cable carriage of all free multicast digital programming, but if the FCC is so inclined, it would be within its authority to tailor digital cable carriage rules to the “unique statutory, factual, economic and historical circumstances of public television,” public broadcasters said in a letter to FCC Chmn. Powell. The Assn. of Public TV Stations (APTS), CPB and PBS said in the joint letter that carriage rules tailored to PTV’s unique position also would be consistent with current law and congressional intent and would be constitutionally permissive.

FCC Comr. Martin said Fri. he would be “inclined” to turn away incumbent LEC arguments that they couldn’t build out broadband until they got more deregulation of legacy systems. In a speech at a Practising Law Institute-FCBA telecom conference, Martin said ILECs told the Commission they couldn’t build out broadband infrastructure until they had investment incentives. He said the Commission gave them those incentives in the UNE Triennial Review Order’s broadband provisions so now it was up to the ILECs: “For years, incumbents have been saying ‘Deregulate our provision of broadband and we will invest.’ But now that broadband deployment is deregulated, they are saying ‘Deregulate our provision of historically monopoly service -- basic phone service -- and we will invest in broadband.’ They essentially are saying ‘Free us and we will invest.’ We have responded ‘Invest and you will be free.'”

The omnibus appropriations bill (HR-2673), expected to clear the House today (Mon.) (see separate story, this issue), would require the FCC to fund any audit of the Universal Service Fund (USF) E-rate program. The conference report on the bill adopts language from the Senate Commerce Justice State (CJS) appropriations bill (S-1585) conference report that prevents appropriations to the FCC be used to audit E-rate. Instead, Congressional appropriators said the money should be taken from the USF. Currently, the FCC Inspector General (IG) is prohibited from using USF money to fund audits through his office. FCC IG Walker Feaster said the result of the bill would likely require the FCC to hire independent auditors to evaluate the E-rate program. The report language showed that the FCC had asked for $3 million to review the E-rate program. The program, which funds telephony and Internet access for schools and libraries, has been under fire from Congressional members. House Commerce Committee Chmn. Tauzin (R-La.) has raised concern about fraud in the $2.2 billion E-rate program. Last week, Tauzin asked the General Accounting Office to examine the policies of the E-rate program (CD Dec 3 p5). That review is in addition to the investigation being conducted by the House Commerce Oversight Subcommittee.

Congress will attempt to fix a “broken” FCC next year, 2 senior Hill staffers told a Public Law Institute conference Thurs. A bill by Senate Commerce Committee Chmn. McCain (R- Ariz.) and ranking Democrat Hollings (S.C.), S-1264, already has cleared that committee, and the House Commerce Committee will be playing catch-up, said Howard Waltzman, telecom counsel for House Commerce Committee Chmn. Tauzin (R-La.). Kevin Kayes, Democratic staff dir. for the Senate Commerce Committee, said he could envision as a follow-up in the next Congress an attempt to rewrite the Telecom Act. That would be popular in this town, he said: “I think there’s a tremendous interest by lobbyists and lawyers and everybody to do a new Act because it’s a huge amount of business.”

FCC Comr. Adelstein reiterated Thurs. his concern about the pressures on the Universal Service Fund (USF) caused by the growth of competitors seeking support from it, and recommended a new process that could place limits on competitive use of USF support. Speaking at a telecom conference sponsored by FCBA and the Practising Law Institute, Adelstein said the Telecom Act intended multiple carriers to be eligible for support or it wouldn’t have created the eligible telecom carrier (ETC) process for additional carriers to gain funding. However, he said he wondered whether Congress had anticipated the size of the demand that was emerging. “It may come to a choice of financing competition or financing network development in rural areas,” he said.

In addition to his own committee’s investigation of the E-rate program, House Commerce Committee Chmn. Tauzin (R-La.) asked the General Accounting Office (GAO) Tues. to conduct an E-rate probe. Tauzin repeatedly has expressed concerns about alleged fraud and abuse in the program. The investigations would complement a hearing on the E-rate program the committee plans early next year. E-rate is financed through the Universal Service Fund for Internet and telecom services for schools and libraries.