Prospects are good for passage of a telecom bill the President can sign this Congress, House Telecom Subcommittee Chmn. Upton (R-Mich.) told a Tues. National Journal breakfast. “Their bill is not all that far away from ours,” Upton said, referring to a Senate telecom bill introduced Mon. (CD May 2 p1). That bill, especially its franchise provision, offers a “hook” to get something into conference where the 2 can be reconciled, Upton said.
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.
Senate Commerce Committee Chmn. Stevens (R-Alaska) Mon. introduced a telecom bill reflecting several members’ input but lacking strong Democratic support. The 10-title bill hits Universal Service Fund (USF) reform, municipal broadband, net neutrality, white spaces and broadcast flag, and would close the terrestrial loophole for cable. Bell companies applauded the Stevens bill.
Consumers in 12 states would be hardest hit by a proposal before the FCC to move to a numbers-based system for contributing to the Universal Service Fund, the Keep USF Fair Coalition said Thurs. The coalition said consumer bills would go up the most in Cal., Fla., Ill., Md., Mass., Mich., Minn., N.Y., O., Pa., Tex. and Va. In all of those states except Tex. and Minn. “consumers already pay more in federal USF taxes than their states get back for schools, hospitals and rural connectivity and that disparity would grow even wider” under the plan supported by FCC Chmn. Martin, the group said. Tex. and Minn. would move from being USF “winners,” taking in more USF funding than paying out, to being USF “losers,” the coalition said.
The FCC shouldn’t apply new universal service definitions to rural telcos’ operations as a result of a proceeding involving the Bells and other “non-rural” telcos, rural telcos said. The issue came up in response to an FCC request for comments on how to respond to a remand by the 10th U.S. Appeals Court, Denver, in Qwest v. FCC. The court had questioned definitions the FCC planned to use to decide if the larger firms qualified for high-cost universal service support in some areas. The debate centers on how the FCC defines Telecom Act requirements that universal service support be “sufficient” and “reasonably comparable.”
The FCC is using a “hoax” argument that the Universal Service Fund (USF) contribution process is broken to justify fee hikes, a citizen group charged Fri. The USF contribution formula “requires at most minor adjustments that can be accomplished without hefty increases in federal phone fees,” the Keep USF Fair Coalition said. The group opposes FCC Chmn. Martin’s proposal to move from a long distance revenue- based system to one based on how many telephone numbers a carrier serves, claiming it would penalize low-volume long distance callers. At a news event set for today (Mon.), the group will discuss “the phony USF funding crisis.” A Tues. Senate hearing will address USF contribution methodology. Progress & Freedom Foundation Pres. Ray Gifford said the coalition’s view “is contrary to established fact.” The long distance industry, which is the basis for the current contributions system, “is in decline and it makes no sense as a funding vehicle for universal service in the age of VoIP technology.” A PFF working group has endorsed per-line fees.
Universal service subsidies totaled nearly $5.7 billion in 2004, the Federal-State Joint Board said in an annual report issued Thurs. About 61.5% of that went to rural telcos with high costs, 24.8% to schools and libraries, 13.4% for subsidies to low-income consumers and 0.3% to support communications services used by rural health care facilities. Other statistics in the report: (1) Telecom industry revenues were about $228 billion in 2004, down from $231 billion in 2003. (2) Local wireline providers saw $86 billion in revenue, reflecting little change from 2003, while wireless providers’ revenue rose to $96 billion from about $85 billion the year before. Revenue from long distance calling dropped to about $51 billion from $59 billion in 2003. The Joint Board report said interstate toll use declined from 444 billion min. in 2003 to 422 billion min. in 2004. Carriers contribute to the Universal Service Fund (USF) based on a percentage of their interstate long distance revenue -- a method the FCC has proposed changing.
A bill introduced by Sen. DeMint (R-S.C.) that would give the FCC authority to define what constitutes fair competition for consumers is based largely on ideas from the Progress & Freedom Foundation’s project on telecom reform. The bill, which has no co-sponsors, includes a substantial section on universal service fund (USF) reform -- the first major Senate telecom bill to address the matter. The provisions are based on research by experts PFF convened from universities, law firms and research groups (CD Dec 9 p3). DeMint’s bill would require the FCC to adopt within 6 months after enactment a new contribution mechanism based on phone numbers; place a $3.6 billion cap on distribution, in the form of performance-based block grants to states.
An FCC Office of Inspector Gen. (OIG) effort to audit more Universal Service Fund (USF) contracts remains stymied by an auditor shortage, OIG said in a report to Congress for the 6 months ending Sept. 30. OIG has long wanted more auditors, especially for E-Rate projects. “Unfortunately, we have made no additional progress in either obtaining additional staff or completing the 3-way contract with USAC (the Universal Service Administrative Co.)” meant to get auditors from an accounting firm, the OIG said. A staff member was to transfer from the Commission’s Office of Managing Dir., but “personnel actions were frozen shortly after Chairman Martin assumed his position and no action has been taken to complete this transfer.” OIG said the 3-way contract for contractors seemed to have FCC approval but in mid-Aug. the FCC Gen. Counsel’s Office raised concerns about the vendor selection process. The OIG said: “We have been working with USAC since the summer of 2004 to establish a three- way contract under which the OIG and USAC can obtain audit resources to conduct USF audits. In addition to providing access to resources to conduct audits, the three-way agreement was intended to provide access to resources necessary to provide support to criminal investigations of E-Rate and USF fraud. As a result of delays in establishing the three-way agreement, the FCC OIG has struggled to provide adequate investigative support to federal law enforcement.”
Universal Service Fund (USF) reform should be a pillar of telecom reform, FCC Comr. nominee Copps told Senate Commerce Committee Chmn. Stevens (R-Alaska) at his Tues. confirmation hearing. The FCC needs to hear from Congress what “universal service” means, Copps said. He also said the contribution methodology needs repair. Responding to Stevens’ query on Copps’s top priority in updating the ‘96 Telecom Act, he said: “USF is so essential to the future of this country… I think we've got to fix that system.”
A plan to reform the Universal Service Fund (USF) with more state control and a cap on growth got Sen. Sununu’s (R-N.H.) conditional backing at a Wed. forum sponsored by the Progress & Freedom Foundation (PFF), which also proposed the reform package. As it stands, the USF program “significantly distorts the marketplace, undermines innovation and limits services to customers,” Sununu said. PFF’s plan correctly aims to limit growth and increase efficiency, he said: “We've got too many programs that are on auto-pilot.”