Small carriers, wireline and wireless, opposed to reverse auctions as part of Universal Service Fund overhaul could be fighting a losing battle in an effort to reverse a move in that direction by the commission. FCC Chairman Julius Genachowski appears to have at least three votes in favor of a controversial reverse auction plan, FCC and industry officials said.

Lobbyists from rural telcos pressed their case for reform of the Universal Service Fund and the intercarrier compensation regime at the FCC last week, the groups said in an ex parte notice posted to dockets 10-90 on Friday. Representatives from OPASTCO, the Western Telecommunications Alliance, National Exchange Carrier Association, NTCA and from Fred Williamson Associates met with Zac Katz, adviser to FCC Chairman Julius Genachowski, Wireline Bureau Chief Sharon Gillett and other staff from the Wireline Bureau. They pushed the reforms in comments in the USF and intercarrier comp dockets (CD April 19 p3), which they said would meet the commission’s objectives of fiscal responsibility, accountability and modernization, “while at the same time preserving the core tenets of a rate-of-return framework that has proven strikingly effective and efficient in enabling substantial rural broadband penetration (and upgrades to existing plant) in recent years at a minimal (3 percent) annualized growth rate in support.” The rurals said their proposal would also avoid “legal and practical complications” around Title II. “Given that the Commission has previously concluded that broadband Internet access services are non-regulated and thus not subject to Title II requirements, a host of legal and practical complications would arise in attempting to identify and address non-regulated costs and revenues without any structure to define the proper accounting of them or to ensure the just and reasonable nature of them -- which, by definition, means they will need to be in some form ‘regulated,'” the lobbyists said in their ex parte notice. It’s “unclear which non-regulated services might be included” in USF reform, but the rural plan “would establish a support mechanism for broadband-capable networks that works within and is entirely consistent with the plain language of Section 254, the Title II regulation of transmission networks, and the Commission’s prior determination to classify broadband Internet access service as a non-regulated service."

The FCC is moving forward on drafting an order on a Universal Service Fund and Intercarrier Compensation revamp and is working on accelerating the process, said Carol Mattey, deputy chief of the Wireline Bureau, during a D.C. Bar panel Wednesday. Industry panelists urged immediate action on VoIP and a more targeted USF.

The FCC “should abandon” its proposal for reverse auctions and instead create three new, separate funds to overhaul the universal service system, state members of the Joint Board on Universal Service told the commission in comments posted late Monday. The state members said the three new funds should be: (1) A “provider of last resort” fund to be “a comprehensive cost-based support mechanism to provide sufficient support to carriers that accept provider-of-last resort duties, adjusted for broadband services. (2) A “mobility fund” that would provide “grants to finance the building of wireless towers in areas the FCC designates as under-served or unserved by wireless broadband.” (3) A “wireline broadband fund” that would award grants “to finance broadband wireline facilities in areas the FCC designates as under-served or unserved by wireline broadband.” The comments were posted to docket 10-90.

FARMINGTON, Pa. -- The NTIA has convened a working group to formulate the Obama administration’s position on pending Universal Service Fund changes, NTIA Administrator Larry Strickling said at an FCBA conference over the weekend: “The issue is important enough that the White House should have its own position on that.” The work group is led by John Morabito, head of the NTIA Office of Policy Analysis & Development, Strickling told us Saturday.

FCC Chairman Julius Genachowski’s staff has concluded that the nation’s broadband gap may be widening, with up to 26 million Americans lacking access to high-speed Internet, FCC officials told us. But critics are already lining up to condemn the report’s methodology and implications. The report, which began circulating earlier this month, said broadband is still not reaching Americans “reasonably” or “timely” (CD April 26 p11). Like last year’s report, the so-called section 706 report relies on subscribership data from form 477 to set the lowest end of the broadband gap range. Unlike last year’s report, Genachowski’s staff uses data from NTIA’s broadband map to determine the high end of the range -- 26 million Americans, FCC officials told us. Last year, the commission used data from models in the National Broadband Plan to determine that up to 24 million Americans were without high-speed broadband.

Using reverse auctions to speed up broadband deployment is contrary to the 1996 Telecom Act and could “blow up” the FCC’s ambitious Universal Service Fund reforms, U.S. Cellular Senior Director Grant Spellmeyer said during an FCC workshop Wednesday. Section 214 of the act gives states the power to designate eligible telecommunication carriers and USF is otherwise under Title II, Spellmeyer said. Reverse auctions fail both tests by reducing ETCs to a single carrier and opening up universal service cash to non-Title II carriers. “We think the FCC needs to stop, go to the Joint Board, and get a recommendation for broadband support,” he said. “Sections 214 and 254 are very clear. You can’t ignore all that. This is going to blow up if we skip all that stuff."

The FCC’s desire to cap the Universal Service Fund may collide with “the rubric” of technological neutrality in considering broadband projects, Washington Utilities and Transportation Commissioner Phil Jones told FCC officials during a panel. “The world you're describing is not the world we're living in,” he said Wednesday. “The rubric of ’technology-neutral’ means ‘unlimited funding.'” Capping the fund will cause an array of trade-offs: Whether to focus on high speed or fuller coverage, or whether to focus on better service metrics or companies’ management capabilities, Jones said.

Wisconsin Republicans Rep. Mark Honadel and Sen. Rich Zipperer circulated a draft bill that would update the state telecom law. The bill is expected to be introduced soon after the Tuesday deadline for co-sponsorship. Two coalitions fought over the proposed mandate on payment of intrastate access charges on VoIP.

Most public officials, consumer advocates and industry executives opposed capping the Lifeline and Link-Up programs, in comments to the FCC. But Verizon backed the cap and suggested that the FCC create a voucher program and a central administrator to watch the fund, and the Mississippi Public Service Commission said the FCC should “seriously consider” a cap, “then a state-by-state cap for the low-income fund may offer some promise.” “In fact, an indexed national cap that considers the unique circumstances of each state, especially from the perspective of poverty rates, per capita personal income, levels and unemployment, is worthy of additional review,” the Mississippi regulators said. But the cap should be scrapped “if low-income persons will be deprived of needed support,” the Mississippi commission said.