BOCA RATON, Fla. -- Policy and financial experts offered suggestions Tues. for improving economic woes of telecom industry that ranged from predictable -- dropping govt.’s unbundling rules for new networks -- to unusual -- govt. loans for last-mile infrastructure development. At USTA’s annual convention here, 2 panelists even took aim at conflicting state and federal jurisdictions, questioning whether FCC should have more precedence over state regulators.

Senate Commerce Committee hearing on broadband Tues. stressed importance of wireless technology as 3rd pathway for broadband deployment, with telecom experts painting grim picture of “depression” that had beset sector. While he and others acknowledged that time was running out to take action on broadband legislation this year, Chmn. Hollings (D-S.C.) stressed importance of moving away from “finger-pointing” in Congress. “We need to move beyond the intramurals up here over Tauzin-Dingell and parity,” Hollings said. “If the market demonstrates anything, it is that competition, not deregulation, drives the Bells to invest in their networks and comply with Section 271 to open their markets,” Hollings said. While panelists, which didn’t include telecom company officials, emphasized need to “jump-start” funding for sector, another common theme was how to structure unlicensed wireless rules and spectrum to allow Wi-Fi and other technologies to compete with DSL and cable.

BOCA RATON, Fla. -- USTA at its conference here Mon. called for war against regulations that it said favored competitors, then offered olive branch to those companies by inviting them to appear on panel with USTA Pres. Walter McCormick to talk about possible common ground on policy issues. AT&T Gen. Counsel James Cicconi, one of panelists, told group that there were areas of agreement, but AT&T and USTA simply never had talked about them. This was “first time in many years that AT&T has been at a USTA convention,” McCormick said.

U.S. delegates spent much of the first week of International Telecommunication Union (ITU) Plenipotentiary (Plenipot) in Marrakesh engaging other countries on telecom and Internet issues, said David Gross, U.S. State Dept. coordinator for international communications & information policy. Gross held bilateral meetings with ministers from 10 countries -- Brazil, Kuwait, Cameroon, China, Egypt, Israel, Mali, Mexico, South Africa, and Tunisia -- and has more scheduled, he said in a news briefing Thurs. from the Plenipot.

Competitive telecom and ISP providers urged all 100 senators to oppose Breaux-Nickles bill (S-2430) in any form and discourage FCC from making regulatory changes they said would effectively re-monopolize telecom industry. In sweeping letter distributed by ALTS, 108 CLECs and ISPs asked senators to retain regulatory requirements on Bell companies. Letter borrowed theme of recent telecom lobbying: regulatory changes in telecom can have big effect on economy. Recent Bell lobbying has said FCC must change unbundled network element platform (UNE-P) pricing or eliminate some UNEs to jump-start ILEC investment, but letter from CLECs said such regulatory changes would damage economy. Proposed legislation and FCC rule changes would “alter the existing procompetitive regulatory framework and cost jobs, hurt consumers and damage the national economy,” it said. Letter said that while Breaux-Nickles probably wouldn’t be reported from Senate Commerce Committee this year, “it is possible that its supporters might try to find a different way to move it forward in the waning days of this Congress.” Letter portrayed drastic consequences for CLECs should Breaux- Nickles type of regulatory changes occur. “Simply put, Breaux-Nickles is dramatic and harsh,” letter said: “The Breaux-Nickles bill, and its FCC analogs, would fatally wound competitors by depriving them of the ability to offer broadband.” Letter twice mentions recent announcement by Verizon to bundle local and long distance voice and broadband services at discounted prices, saying rule changes that prevented competitors from offering similar bundles was “tantamount to picking winners and losers.” It said Breaux- Nickles bill ignored monopoly legacy of Bells that posed barriers to competition. “'Parity,’ Breaux-Nickles style, allows the Bells to pull the plug on companies that have none of these advantages, lack a network built with ratepayer funds that reaches every home and office and have no market power to leverage,” letter said. It also said Breaux-Nickles would preempt state regulators from overseeing broadband rollout, including consumer protection efforts. NARUC, NASUCA and Consumers Union “strenuously oppose” bill, letter said. Up to 77,000 CLEC jobs could be lost, in addition to $65 billion in investments, should Breaux-Nickles style approach be adopted, it said. Letter also said recent FCC proposals would “usurp” Congress’ authority by redefining services as “information services,” which wouldn’t fall under Telecom Act, as opposed to “telecommunications services” that were under Telecom Act authority. Such changes could affect universal service because information services aren’t required to contribute to universal service fund, letter said. FCC proposals to reduce list of UNEs could “render useless the advance network of facilities deployed by competitors and eliminate competition for local telecom and Internet services.” Companies predicted that such changes would slow rollout of broadband because loss of competition would make Bells less likely to deploy new services, especially considering low take rate for broadband subscriptions now, letter said. CLEC letter signers included Allegiance Telecom, Covad Communications, EarthLink. Letter contrasted recent one from 104 House members to FCC that urged agency to change pricing structure for UNE-P. Thast letter, whose signers included House Commerce Committee Chmn. Tauzin (R-La.) and ranking Democrat Dingell (Mich.), said Bell companies were losing money on UNE-P, which was stifling investment in telecom market.

AT&T’s push for new loop access technology called electronic loop provisioning (ELP) (CD Sept 3 p6) raises interesting issues, FCC Comr. Martin said Wed. after speech at breakfast sponsored by Alliance for Public Technology and High Tech Broadband Coalition. Martin, who made passing reference to ELP in his speech, said afterward that AT&T made thought-provoking argument about need for better accessibility to loops. He said ELP addressed issue of whether competitors would “still be able to take advantage of current facilities” as new technologies were built. ELP involves software that would digitize and packetize signals, then send them to ATM switch into which all competitors would be connected. In speech, he said one of questions to be asked in FCC’s review of its unbundled network element (UNE) regime is: “How should our standard apply to elements that are readily available from CLECs? Even if a switch is readily available from alternative carriers, is electronic loop provisioning necessary to ensure continued access?” Martin also said in speech that FCC might not be able to complete UNE triennial review by end of year and proceeding could slip to Jan. or Feb., meaning 2 companion orders -- wireline broadband access and performance measurements -- also could slip slightly. He said he favors action by end of this year and Commission is trying hard to make that happen. Martin said he still favored facilities-based competition because alternative of requiring incumbents to share their networks “creates disincentives” to deployment of broadband services. He said UNE review proceeding raised difficult questions such as: (1) If FCC goes to more “granular” approach in eliminating UNE elements, should states have flexibility in devising rules or should there be national standard? (2) What level of granularity should be used -- for example, should rules be applied on company-by-company basis. (3) Should FCC “slowly transition prices up toward wholesale rates.” He said “next 6 to 8 weeks” would be critical in agency’s UNE review and urged parties to contact FCC soon if they had views to express. On broadband, Martin said key goal should be removing financial disincentives to broadband deployment such as excise taxes, franchise fees, regulatory barriers. On another issue, he said he didn’t support requiring Internet access providers to pay universal service fees because they didn’t benefit from universal service fund. TIA praised Martin for stressing facilities- based deployment. It said it had been warning regulators that deployment would lag unless they “foster an environment that encourages all broadband competitors to upgrade, expand and innovate across the wide variety of existing and future communications networks.”

Fourteen representatives of National Telecom Coop Assn.’s (NTCA) ILECs met Wed. with congressional and FCC officials to discuss universal service, implications of recent bankruptcies on rural telephony, current broadband legislation issues. They expressed concerns about portability of universal service support, redefinition of universal service basis for assessment of contributions. They said, as mentioned in NTCA petition for reconsideration in MAG order, that FCC should suspend “identical support” rule. They said Commission couldn’t block competitive eligible telecom carriers’ (CETCs) use of ICLS funds and couldn’t comply with sufficiency requirements in Sec. 254(e) of 1996 Telecom Act, “so there is the potential for unfair competitive advantage.” Attendees said equal access to long distance carriers should be requirement to receiving universal service support. “Wireless carriers have an unfair advantage,” Valley Telephone Co-op CEO Judy Bruns said: “We serve the customers that no one else can serve… Costs for wireless carriers are different than for wireline.” NTCA said wireless consumers should be able to select long distance carrier for wireless calls, and FCC “should correct this inequity when it reviews equal access and the definition of universal service.” NTCA said existing revenue-based Universal Service Fund (USF) contribution methodology should be modified by eliminating wireless safe harbor percentage and expanding list of contributors to include all interstate service providers, such as cable, satellite and wireless broadband Internet access providers. They said they were considering extending USF to financing broadband services in rural areas. NTCA said it didn’t have “formal position to move in that direction.” However, gen. mgr. of Golden West Companies in S.D. said local carriers were considering that idea, providing they would receive financial support. Said NTCA: “In carrying out… broadband deployment objectives, policymakers must remain cognizant of what the rural carriers have already done and work to ensure that any legislative approach will actually result in additional deployment, will address the lack of consumer demand and will target the highest cost deployment challenges.” As for bankruptcy implications, NTCA said “it is imperative that the courts’ actions do not reward debtors for situations of their own making, while penalizing other segments of the industry, lest they face bankruptcy as well.”

NTIA plans to develop guidelines outlining how federal govt.’s Interdepartment Radio Advisory Committee (IRAC) process works, including general time frames in which coordination applications are taken up, NTIA Dir. Nancy Victory said in interview. More broadly, Victory said that after more than year at helm of NTIA, spectrum management still remains her biggest priority, with 700 MHz likely looming as next biggest challenge now that federal govt. has taken first cut at allocating additional spectrum for 3G.

FCC Wireline Bureau proposed universal service contribution factor for 4th quarter that would remain unchanged from 3rd quarter -- 0.072805 -- because unused e- rate funds would be taken into consideration as Commission had directed earlier this year (CD June 14 p3). Factor is based on ratio of projected universal service support costs to carriers’ end-user interstate and international telecom revenue. If unused e-rate funds weren’t applied to contribution base, factor would have been 0.093397, bureau said. Contribution factor is multiplied against carrier’s revenue to determine its payments. Proposed factor will go into effect if FCC doesn’t act by 14 days after bureau’s Sept. 10 announcement.

Rural telephone customers are paying more for same telecom services than customers in nonrural areas, said National Exchange Carrier Assn. (NECA) study released Mon. It said rural America was affected by govt. policy that shifted burden of telephone network cost recovery from long distance carriers to end users and govt. support mechanisms. “The FCC’s recent regulatory proposals to reduce access charges even further and the growing questions about the sustainability of the universal service fund mechanism suggest that rural customers are likely to see even more end- user charge increases,” NECA’s Demand Forecasting & Rate Development Dir. Victor Glass said: “While the drafters of the Telecommunications Act of 1996 expected that opening the local telephone network to competition would lower rates and lead to better service, these outcomes are not evident in rural areas.” Study said average cost of line per year in rural telco service areas was $337, with average of 10.5 lines per square mile, compared with 134 in nonrural areas. That’s partly because customer base of rural telephone companies is primarily residential, he said: “For example, special access revenues account for only 18.9% of total interstate revenues, in sharp contrast to its 63.3% share for nonresidential carriers. That means that rural telephone companies have much smaller customer base.” Study said rural customers were less able to absorb increases in end-user charges than were urban customers. Rural median annual household income is $40,600 per year, compared with $46,000 per year for nonrural households, research said. People aged 65 and over represent 14% of rural telcos’ population base, he said, but only 12.2% of other telcos’ population base. However, rural customers’ bills continue to rise, he said. Since 1994, rural basic service rates have risen 36% -- to $28.08 a month in 2002 from $20.69, report said. It said Federal Subscriber Line charge increases alone accounted for 1/3 of that increase, or $2.50 per month. Although rural end users have faced bigger increases in their charges than urban customers, “they are not necessarily sharing in the benefits that should accrue,” NECA said. Only 57% of customers have access to long distance discounts, report said. FCC documented that average long distance rates had dropped to 9 cents per min. in 2002 from 14 cents per min. in 1994, but many rural customers were paying 18-1/2 to 35 cents. Average share of local to total min. in rural areas is 58% compared with 79% in nonrural areas, study said. “That means that rural customers make a lot of long distance calls, but don’t have access to discounts… that is a burden,” Glass said. NECA projected rural interstate access rates would increase 50% to 3.68 cents per min. by 2007. “Rural customers have seen their bills rise more than nonrural customers,” Glass said. Report said nonrural basic service rate increased 10.25% between 1994 and 2001, to $21.84 per line per month from $19.81 to $21.84 or $2.03 per line per month.