House GOP Considering Using USF To Close Deficit

All but $1 billion of the money would come from spectrum auctions, but the universal service subsidy is likely to be the most controversial, said a Hill staffer and several industry officials. USTelecom and rural telcos have already made inquiries on the Hill, the staffer said. Cantor’s office didn’t respond to requests for comment, and the White House didn’t either.

The Republicans believe they can save up to $1 billion by capping universal service collections and distributions at fiscal 2011 levels and then attacking “waste, fraud and abuse,” according to the GOP’s budget report. “A complete overhaul of funding in this policy area is warranted,” Rep Paul Ryan, R-Wis., wrote in his budget report. “It might include freezing USF collections so they cannot rise any further; eliminating duplication by consolidating all competing broadband funding programs into a modernized USF; and requiring a minimum $1-billion reduction in annual spending through the elimination of waste, fraud and abuse.”

The proposal comes as rural telcos blitz the Hill and the FCC trying to ward off what they see as a disastrous set of reform proposals (CD July 5 p6). News of the Republican proposal drew condemnation from NTCA CEO Shirley Bloomfield. “We recognize that Congress is in emergency mode and looking at things at a macro level, but they should not wreck programs that shouldn’t even be part of the equation, such as USF,” she said. “Suggestions that USF can be used to pay down the debt means that Congress doesn’t understand how USF works. If Congress used USF to reduce debt, it would impact USDA’s $4.5 billion loan portfolio -- rural telecom companies would not be able to pay back their loans -- it would have no real budget impact and in the end would cost the government money with the loan defaults."

Rural carriers have promised to start a public relations campaign designed to “save rural broadband” (http://saveruralbroadband.org). Rep. Lee Terry, R-Neb., and Sen. Mark Begich, D-Alaska, have promised to join rural associations’ leaders Thursday as they begin their formal PR campaign. Terry has been an enthusiastic supporter of the FCC’s reform efforts. He’s placing a lot of his hopes for reform on the USTelecom-led talks, but he will make clear that rural companies shouldn’t lose support, an aide said. USTelecom has said it has reached a reform “framework” agreement among AT&T, Verizon, CenturyLink, Windstream and Frontier (CD July 6 p6). The individual companies will file the proposed compromise package in early August telecom officials said. They said it won’t be filed under USTelecom letterhead, even though the association led the talks.

Meanwhile, officials at Public Knowledge urged the FCC to create what it called a “self-provisioning” model for universal service reform, according to an ex parte notice in docket 10-90 released Wednesday (http://xrl.us/bkzxfe). Under the group’s plan, fund recipients would be required to “make interconnection points and backhaul capacity available to neighboring, unserved communities,” Public Knowledge said. One deficiency “of the FCC’s current Connect America Fund proposals is its drawback from the concept of true universality of access,” the group said. “But coupled with a modest one-time grant for equipment expenditures, a self-provisioning approach could ensure that some communities that might be left behind can get connected.”