UNIVERSAL SERVICE REFORMS GET AIRING AT USTA CONVENTION

His legal asst., Daniel Gonzalez, appearing later on universal service panel, said Martin had “pretty strong views” on contribution proposals and had indicated concern about “liability of the connection-based proposal” were it challenged in court. Gonzalez said Martin also had reservations about “any system that assesses Internet providers” as connection-based system would do.

Several proposals have been put forward to replace current contribution system that’s based on revenue source that’s slowly lessening. Mainstay for contributions now is wireline long distance industry and some of those companies, such as AT&T, have seen their revenue dwindle as result of wireless substitution and other factors. Connection plan would base contributions on number of connections provider made to interstate networks, rather than current system of taking percentage of total interstate revenue. Proposal would result in contributions from cable modem service providers and ISPs for first time and probably would increase wireless contribution. Verizon Public Policy Consultant Frank Gumper said even if FCC were to adopt connection-based proposal, there wasn’t time to implement it by April deadline for action. To make up shortfall in contributions, FCC recently applied unused funds from e-rate program to current programs but said those extra funds would run out after first quarter 2003, when new contribution program would have to be in place. Gumper said transition system would have to be used because of lack of time. Other problem, said Wiley, Rein & Fielding attorney Gregory Vogt: “Most consumers are going to view a revenue-based system [like what’s used now] as fairer than a connection-based one.”

Panelists said contribution problem was just one of several hot-button issues involving universal service that were pending at FCC, including one that Martin also commented on in his appearance earlier in day. He said he wondered about appropriateness of wireless competitors’ gaining universal service support when they didn’t meet all requirements for such funding. He said current “portability” rules allowed wireless companies to gain support from Universal Service Fund even though they didn’t provide customers with choice of long distance companies, process known as equal access. He said equal access was required before carriers could get funding but, in this case, portability rule allowed wireless competitor to gain some of universal service funds originally allocated to wireline carrier that did meet qualifications. “Probably the biggest issue is the portability of universal service funds,” TDS Federal Affairs Dir. Bob DeBroux said: “We're still trying to get the FCC rules to work.” Maybe, based on Martin’s comments, “the FCC is starting to understand,” DeBroux said.

Other pending universal service issues with serious ramifications, panelists said: (1) What is FCC response to 10th U.S. Appeals Court, Denver, decision that questioned agency’s rationale for several parts of its Oct. 1999 universal service order? FCC asked for recommendation from Federal-State Joint Board, which is expected to respond soon. Court questioned, for example, Commission’s benchmark for eligibility for universal service support, which provides support if costs are more than 135% of national average costs. (2) What happens to universal service funding if FCC adopts bill-&-keep system for all intercarrier compensation as has been proposed? Vogt said “regulators need to consider if this puts pressure on universal service.” -- Edie Herman

USTA Notebook…

Incoming USTA Chmn. Margaret Greene Wed. predicted dire consequences for telecom industry unless “uneconomic regulation” is lifted. In speech on last day of USTA convention in Boca Raton, Greene said: “For years, this industry has warned of the end result of uneconomic regulation. Today those chickens are coming home to roost. No longer can we dismiss the pain as isolated to companies that grew too fast or managed their businesses poorly. All of us are feeling the heat of the telecom train wreck.” Greene, pres., BellSouth regulatory & external affairs, said blame lay with collision of technological advances and “an outdated U.S. telecom policy.” She said “it’s heartbreaking to see… If you think universal service will continue as it’s always been delivered. If you think you can succeed solely as a wireline provider amid the straitjacket of regulations imposed on your business. If you believe the world will stay with you when broadband is everywhere and you can’t invest in it… then the last few days probably have been a waste of your time. But if you're concerned about the future… then USTA is our most potent weapon of economic self-defense.” Greene said her priorities were: (1) Reform of unbundled network element platform (UNE-P) regime: “UNE-P creates a parasitic relationship.” (2) Building “industrywide consensus on universal service,” making sure “the fund is used for its original intent -- to help mitigate the extraordinary costs of serving remote areas -- rather than simply as a gravy train for other platforms that don’t face higher costs.” (3) “Reintroducing ourselves to the public” because there are too many erroneous stereotypes about telcos.