Verizon Got High-Cost USF Without Proper State Authorization, Rivals Claim
Verizon Wireless used Alltel’s license to obtain high-cost Universal Service Fund support without getting permission from state regulators, U.S. Cellular, Allied Wireless, Commnet Wireless, and Viaero Wireless said in an ex parte filing published Tuesday. The wireless companies said “the core issue is whether Verizon Wireless was ever properly designated by state authorities” and that using Alltel’s high-cost support caused “ongoing harm … by driving up statewide support levels, causing steep reductions under the cap.” The high-cost issue involves tens of millions, if not hundreds of millions of dollars, in USF support, one industry official said.
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Verizon bought Alltel for $28.1 billion in January 2009 (CD Jan 12/09 p9). One of the conditions of the merger was that Verizon forego high-cost USF support within five years. In several states, Alltel had been designated an eligible telecommunications carrier for high-cost support. U.S. Cellular and its allies said Verizon used Alltel’s ETC designation to gain funding for non-legacy Alltel lines. The padded billing has gone on for at least 18 months since the merger, U.S. Cellular claimed in Tuesday’s filing. The notice was filed under dockets No. 96-45 and 05-337. Verizon is separately filing for ETC status in several states, which U.S. Cellular claimed was evidence that the company knew it wasn’t eligible to use Alltel funds.
A Verizon official dismissed Tuesday’s filing as “gamesmanship” and an effort by the rival wireless companies to get a bigger share of high-cost support. In an e-mail statement, a company spokesman said Verizon is taking high-cost funds “appropriately in areas where Verizon Wireless or its wholly-owned subsidiaries have ETC designations.”
The issue “bears close scrutiny,” Rural Cellular Association President Steve Berry said through a spokesman. “Given the statements from the Nevada Public Utilities Commission, it appears Verizon may be accessing USF funds in a way that is inconsistent with their previous public statements regarding USF,” he said. “I can only hope that this is not a circuitous route to reduce USF funding available to other carriers."
Under the Corr Wireless decision, the FCC is considering what to do when an ETC gives up its high-cost subsidy (CD Sept 7 p1). But one of the proposals the commission has considered is to lower a state’s USF cap so the money can be rolled into broadband subsidy. The uncertainty -- along with Verizon’s alleged bill-padding -- has some officials worried. “This is particularly concerning given the limited flexibility that federal statutes permit states to exercise for relinquishment applications,” Nevada Public Utilities Commission financial analyst Jeffrey Galloway said in testimony Dec. 13 about Verizon’s ETC application. “States are required to permit an ETC to relinquish its designation if another ETC serves the designated area. If the FCC adopts its proposed changes, which it has not yet done so, and if this commission grants [Verizon] any authority in this state, [Verizon] could file to relinquish its designation at any time and automatically lower the … state cap.” Galloway urged Nevada regulators to reject Verizon’s ETC petition.
Regulators are weighing Verizon’s ETC status in several former Alltel states. U.S. Cellular asked the FCC “to take no action that could interfere with ongoing state eligibility proceedings,” its ex parte filing said. Between 2006-08, Alltel and Verizon were given nearly $1.9 billion in high-cost support, a pre-merger Congressional review found (CD July 29/08 p6).