"The odds favor” the FCC adopting the USTelecom-brokered agreement on the Universal Service Fund and intercarrier compensation regime reforms, MF Global analyst Paul Gallant said Thursday. The so-called framework could be filed as early as Friday (CD July 28 p8). It “would be a neutral-to-positive” for publicly-owned, mid-sized rural carriers such as Frontier, CenturyLink and Windstream, Gallant said. “We also believe the plan would be a boost for AT&T and Verizon by reducing their overall payments into the federal and state subsidy mechanisms.” Despite some opposition, he expects the commission to adopt the USTelecom-brokered deal more or less as-is because FCC Chairman Julius Genachowski has made USF and intercarrier comp reforms “a centerpiece of his National Broadband Plan” and the framework “would redirect federal subsidies from voice to broadband buildout, which is what the Broadband Plan called for.” Also, he said the proposal “has the support of a strong coalition” and Gallant “would not be surprised if it gained additional support” in the next few weeks, and “key legislators have indicated that the FCC is better suited than Congress to reform USF/ICC because of the level of detail required for reform. Congress’s key asks are that rural and urban interests are both clearly recognized, and that the overall USF … not grow larger -- and ideally shrink over time. We think the FCC’s final rules this Fall are likely to satisfy those criteria."
Federal Universal Service Fund
The FCC's Universal Service Fund (USF) was created by the Telecommunications Act of 1996 to fund programs designed to provide universal telecommunications access to all U.S. citizens. All telecommunications providers are required to contribute a percentage of their end-user revenues to the Fund, which the FCC allocates for four core programs: 1. Connect America Fund, which subsidizes telecom providers for the increased costs of offering services to customers in rural and remote areas 2. Lifeline, which directly subsidizes low-income households to help pay for the cost of phone and internet service 3. Rural Health Care, which subsidizes health care providers to offer broadband telehealth services that can connect rural patients and providers with specialists located farther away 4. E-Rate, which subsidizes rural and low-income schools and libraries for internet and telecommunications costs The Universal Service Administrative Company (USAC) administers the USF on behalf of the FCC, but requires Congressional approval for its actions. Many states also operate their own universal service funds, which operate independently from the federal program.
The FCC wouldn’t distribute Universal Service Fund cash for broadband in areas where any ISP already sells Internet service, under a USTelecom-brokered industry agreement that could be made public as early Friday (CD July 22 p3), industry and FCC officials told us. Talks are still going on, they said Monday. Under the agreement, which USTelecom has been calling a “framework,” VoIP wouldn’t be classified either as telecom or information service, and VoIP carriers would be required to pay interstate access rates for all non-local calls, the officials said. Comcast and other major cable operators continue to evaluate the USTelecom proposal, and it’s possible they'll join it, industry officials said.
Invitations to serve on the FCC’s diversity committee will be made shortly, as work on the Universal Service Fund “soon” will culminate in a comprehensive order, Chief of Staff Eddie Lazarus told minority and women communications entrepreneurs Friday. A day earlier, Commissioner Robert McDowell told the Minority Media and Telecom Council conference (CD July 22 p7) he worried about delays in changing USF to also fund broadband and in rejuvenating the Committee on Diversity for Communications in the Digital Age. Chairman Julius Genachowski’s staff told the Federal State USF Joint Board last week that the order on USF and intercarrier compensation (ICC) will be ready for the October meeting, an FCC official told us.
LOS ANGELES -- The FCC needs to recommit to the principles of Universal Service and revamp the system in a manner that won’t weaken the system that has helped connect rural America for decades, former Sen. Byron Dorgan, D-N.D., said during NARUC’s summer meeting Tuesday. Meanwhile, AT&T CEO Randall Stephenson emphasized wireless is essential for universal broadband. The AT&T/T-Mobile merger, which is getting a closer look from the California Attorney General, is a private party solution to achieve universal broadband, Stephenson said.
LOS ANGELES -- Panelists at NARUC’s summer meeting urged the FCC to address the missing pieces in the Universal Service Fund and intercarrier compensation revamp. Those are contribution, speed and roles for small and rural phone companies, speakers said Sunday. Meanwhile, FCC Chairman Julius Genachowski was expected to meet with the NARUC Telecom Committee and the Federal/State Joint Board at NARUC’s summer meeting late Monday.
Lawmakers shouldn’t tap into the Universal Service Fund, said NARUC President Tony Clark and Telecom Committee Chair John Burke. House Republicans are thinking about using USF to help pay down the budget deficit (CD July 14, p1). Congress is considering tapping the fund to help pay down federal debt. To divert the funds from their intended use would be counterproductive and may undermine the country’s broadband goals, they said. USF receives no federal monies and shouldn’t even be under consideration in the budget debate, they said. USF is funded by fees consumers pay through their phone company to ensure affordable access across America, they said.
Congress will finish off Universal Service Fund reform, Rep. Lee Terry, R-Neb., said at a press conference Thursday kicking off rural telecom associations’ marketing push on rural broadband. Terry said he’s “extremely optimistic” there will be a deal by the end of August that’s supported by industry, the FCC and the House Commerce Committee. Also at the event, Sen. Mark Begich, D-Alaska, predicted that the Senate will get “very aggressive” on the issue.
The FCC must not remove state jurisdiction over intrastate communications and preserve the joint governmental structure in its Universal Service Fund and Intercarrier Compensation proceeding, state officials said during a seminar held by the National Regulatory Research Institute Wednesday. Other top concerns for state regulators include cost and contribution methods, they said.
A handful of rural rate-of-return telco executives took aim at the USTelecom-led efforts to create cost models for Universal Service Fund and intercarrier compensation regime reforms, an ex parte notice released Monday showed. USTelecom had brought in analyst CostQuest to create cost models as it continues to lead industry-wide talks on wholesale reform. CostQuest executives have been sitting in on ex parte meetings since at least May to discuss some of their findings (CD May 24 p14).
Top congressional staffers are lending a hand in the ongoing talks on an industry-endorsed Universal Service Fund reform proposal, telco and Capitol Hill officials said in interviews. Ray Baum, senior policy adviser on the House Communications Subcommittee and longtime friend of Rep. Greg Walden, R-Ore.; Nick Degani, legal counsel to the subcommittee; and Brad Schweer, legislative director to Rep. Lee Terry, R-Neb.; have all taken an active part in the industry talks in recent weeks, telco officials and Baum said. Since the November elections, Congress had steered clear of USF, focusing on net neutrality, spectrum, FCC reform and AT&T’s plan to buy T-Mobile. Walden earlier this month said he was “encouraged” by the FCC’s USF efforts, and urged industry to come up with a reform package soon (CD June 8 p5).