Bell companies and competitive carriers urged the FCC to deny an AT&T request for stay of the prepaid calling card order pending an appeal filed in U.S. Appeals Court, D.C. The stay would delay AT&T payment of past-due contributions to the universal service fund (USF)and bar phone companies from suing AT&T for unpaid access charges. AT&T has offered to post a letter of credit to secure more than $150 million in USF payments due this month if the stay is granted; opponents said that won’t stop immediate harm to the USF from AT&T’s nonpayment. The FCC’s order (CD Feb 24 p1) told AT&T to pay universal service contributions and access charges retroactively, though carriers would have to sue to get the access payments. AT&T withheld regulatory payments based on revenue from its prepaid calling card service, arguing that it is an exempt interstate information service.
NTCA’s Foundation for Rural Service (FRS) on Mon. unveiled an “educational paper” supporting the Universal Service Fund (USF). FRS presented the paper Mon. during a luncheon on Capitol Hill. Speakers emphasized USF’s importance and how changes to USF have bolstered the program’s scope and size. The paper, “One Nation Indivisible: The Case for Universal Service and Rural Connection in the Broadband Age,” explained USF to the audience of mostly young Hill staffers. The paper, and speakers, asked if the USF fund and the Telecom Act’s goals for competition were compatible. “Is true compatibility possible between universal service and competition in the rural areas served by community based telecom providers?” the paper asked. “Industry experience since the passage of the 1996 Telecommunications Act suggests that success in achieving these divergent policy objectives is illusory, at best. It remains essential that consideration be given to the economics of rural markets, where it is ‘costly’ for one network to serve but ‘doubly costly’ for two.” Speakers said changes in access charge regulations have caused a rise in the USF. The Interstate Common Line Support (ICLS) mechanism, which lets long-distance providers use USF to cover interstate common carrier line access charges, now accounts for nearly 40% of USF funding. Douglas Meredith, dir.- economics & policy for John Staurulakis, Inc., said the policy change has helped fuel USF growth, leading some on Capitol Hill to suggest slashing the program. House Commerce Committee Chmn. Barton (R-Tex.) recently questioned USF’s relevance in light of high telephone connection rates in the U.S.
Congress returns tomorrow (Tues.) after a 2-week recess, but communication issues seem destined to wait at least another week to be addressed. Despite talk of hearings by several committees, none are set for this week. Universal Service Fund, telecom mergers, and IP- enabled video are all topics sources said would likely be subjects of Hill hearings in coming weeks. Industry and Senate sources said the Senate Commerce Committee seemed ready to begin holding hearings on telecom issues. And new FCC Chmn. Martin could make his official Hill debut soon.
The Neb. PSC said VoIP providers are subject to state universal service fund assessments on the intrastate portion of their services. The PSC said the jurisdictional nature of VoIP calls can be found using their ultimate termination point, even though VoIP providers claimed it’s impossible to know where a VoIP call goes. The PSC (Case NUSF-40/PI-86) said if a VoIP provider can’t set a jurisdictional allocation based on a reasonable sampling of actual call data, the PSC will base the assessment on the FCC’s default safe-harbor allocation of 71.5% intrastate and 28.5% interstate. The PSC said this approach won’t put VoIP providers at an unfair competitive disadvantage but will result in “equitable contributions” toward the state USF. The PSC said the FCC hasn’t explicitly preempted states from requiring VoIP providers to pay into state universal service funds. The PSC disregarded VoIP provider claims that no portion of a VoIP call can be deemed jurisdictionally intrastate, and that VoIP as an information service is totally beyond state jurisdiction. The order will take effect April 1.
AT&T CEO David Dorman urged new FCC Chmn. Martin to act quickly on issues hanging over the telecom sector’s business side, including intercarrier compensation reform and the USF’s future. But Dorman, who is expected to be in the number 2 slot as president of the new company after a merger with SBC, admitted he welcomed a world in which decisions based on regulatory concerns play a far smaller role. Asked what Congress should do on a Telecom Act rewrite, he replied: “My quick answer is ‘repeal it.'”
AT&T said in its annual report filed at the SEC it has set aside $553 million to cover costs related to the FCC’s Feb. calling card ruling. In that decision, the Commission found AT&T acted “unlawfully” by failing to pay millions of dollars in universal service contributions and other fees. The figure disclosed didn’t surprise those close to the issue. AT&T had said in a previous filing it had saved $500 million as a result of its treatment of the cards before the unfavorable FCC decision. Earlier, in a filing to the SEC, the company cited $160 million in savings tied to USF and $340 million tied to access charges. Meanwhile, AT&T likely faces more scrutiny over calling cards. Rep. Pallone (D-N.J.), a senior member of the House Commerce Committee, said this week the Dept. of Defense should investigate the exclusive contract under which AT&T sells cards to U.S. troops. “AT&T says an overwhelming majority of our soldiers are using its cheaper military cards, but I'd like your office to investigate how prevalent the problem is of soldiers using other cards that do not give them the best deal,” Pallone wrote DoD Inspector Gen. Joseph Schmitz - HB
The FCC defended its management of the E-rate program as consistent with its historical organizational structure but said it could make changes to the administrative structure in light of the Govt. Accountability Office’s (GAO) critical review. On Wed., the GAO presented the House Commerce Oversight & Investigations Subcommittee its report on the FCC’s management of E-rate, which funds Internet and information technology equipment for schools and libraries. The GAO concluded there were structural flaws in the FCC’s management of E-rate, but the FCC said its use of a private organization to manage the program was similar to its establishment of the National Exchange Carrier Assn., which manages the access charge assessments. “Congress was well aware of that practice when it enacted the Telecommunications Act of 1996,” the FCC said in its written response to the GAO report. The FCC said it believes its current management structure of E-rate -- part of the universal service fund -- was consistent with congressional intent. The FCC also disagreed with GAO’s assessment that the FCC never conducted a comprehensive study of federal policies that would apply to E-rate. The FCC cited several separate reviews of policies relating towards USF and E-rate. The FCC acknowledged the GAO’s conclusion that performance measurements for E-rate weren’t comprehensive. It said the FCC has assigned additional staff to review the performance measurements. The FCC also said it has brought on more staff to catch up on back appeals, another flaw cited in GAO’s review. During the hearing, House Commerce Committee Chmn. Barton (R-Tex.) said E-rate fraud, waste and abuse, which has been investigated for nearly 2 years by the Oversight & Investigation Committee, was out of control and Congress must consider a legislative fix. House Commerce Committee ranking Democrat Dingell (Mich.) also agreed, saying he looked forward to joining with Committee leadership to “enact the reforms that the FCC either cannot, or will not, implement.”
Chances of a Telecom Act rewrite this year are slim, and court decisions will make any action confusing for Congress, panelists said at Catholic U. symposium on the Telecom Act’s future Thurs.
Wed.’s House Telecom Subcommittee hearing on VoIP focused mostly on how the new telecom service fits with the Universal Service Fund (USF) and intercarrier compensation. House Commerce Committee Vice Chmn. Pickering (R-Miss.) used the hearing to say he would reintroduce VoIP legislation. The bill will resemble legislation he introduced last year to preempt state regulation of VoIP, an issue apparently resolved by the FCC’s ruling in the Vonage petition. But Pickering said it was also “critical” to address intercarrier compensation in VoIP legislation. His bill would set a deadline for the FCC to finish reviewing intercarrier compensation regulations. Pickering suggested a deadline, and all witness at the hearing agreed. But Mark Shlanta, CEO of S.D. Network Communications, said the review period should be 12-18 months instead of the 180 days Pickering proposed. Pickering deemed a compromise of 9 months acceptable. House Commerce Committee Chmn. Barton (R-Tex.) asked the witnesses if they would support reducing or eliminating USF. “Reform it, don’t repeal it,” Carl Grivner, CEO of XO Communications, said of USF. Grivner said it should apply equally to all carriers, including cable VoIP providers. Barton asked if anyone on the panel would vote to repeal USF. When none replied, Barton said: “Now that we've determined that you're for USF, are you willing to pay into it?” Thomas Rutledge, COO of Cablevision Systems and representing NCTA, said cable is willing to support USF. However, he said an updated definition of USF is needed to clarify exactly what services USF funds could underwrite. House Telecom Subcommittee Chmn. Upton (R-Mich.) asked the witnesses if USF should be financed with a flat fee for each phone line. Most said no. Paul Erickson, SunRocket chmn., said assessing USF as a percentage of revenue would be the easiest. CenturyTel Pres. and COO Karen Puckett and Grivner said they would support a revenue percentage formula. Barton said he thought VoIP was a poor acronym for Internet phone service and suggested his own: BITS, for Broadband Internet telephone service. He said it was “food for thought” and he would consider other acronyms.
Senate Commerce Committee Chmn. Stevens (R-Alaska) laid out new communications-related ideas Wed. at a breakfast forum held by The Hill newspaper. He suggested changing sunshine rules for the FCC and the system for auctioning spectrum. Stevens clarified positions on indecency regulation and said he remained open to ideas for guarding children from raunchy TV. He left open how the proposed telecom mergers might affect universal service fund distribution.