AT&T and USTelecom are trying to revive dormant efforts to create an industry-wide proposal on Universal Service Fund and intercarrier compensation regime reforms ahead of the FCC’s rigid schedule, multiple industry officials told us. Similar efforts have foundered in the past -- including a concerted attempt in 2006-07 -- but this time, “I think there is a possibility for a very broad industry coalition on this,” said USTelecom Vice President Jon Banks. “The FCC knows we're trying to do this,” he added. “Everybody -- ILECs, CLECs, cable wireless, rurals -- is trying to put together a path for the FCC to follow.”

AT&T will have a “steep climb” if it wants to take over T-Mobile, FCC Commissioner Michael Copps said. “You will remember in the Comcast merger that I said at the outset that it would have been a very steep climb for me. I ended up voting against it,” he said in a videotaped interview for C-SPAN’s The Communicators. “This is maybe even a steeper climb from the standpoint of a lot of power, a lot of influence given to one company in a world where two companies are going to control, like, 80 percent of the spectrum.” Copps worries about “what residue of competition will be left if the merger is approved,” what impact it will have on U.S. jobs and whether the bulk of the proceeds will flow into Europe’s telecom market, he said. T-Mobile’s parent is based in Germany.

Netflix continues to gobble up bandwidth, but the company’s explosive growth still hasn’t threatened cable, said a study released Tuesday by analyst Bruce Leichtman. Nearly 30 percent of survey respondents watched online video at least once per week through Netflix. Three percent of non-Netflix subscribers reported that they were watching streaming video, Leichtman said. While Netflix is growing exponentially, over-the-top streaming is growing only incrementally: 12 percent of the adults surveyed told Leichtman that they watched TV shows online once a week, up a percentage point from last year and up from 10 percent in 2009. “People watching TV online has barely moved,” Leichtman told us. “The reality is, in this over the-top emerging video world, there’s only two winners: Netflix and YouTube. Everyone else is losing out."

Rep. Doris Matsui, D-Calif., will soon reintroduce her Universal Service Fund revamp bill, she said at a conference Tuesday of the Schools, Health & Libraries Broadband Coalition. The bill will return “in the coming weeks,” the Communications Subcommittee member said. The bill would update the Lifeline and Link-Up programs to subsidize broadband for low-income people. Rep. Lee Terry, R-Neb., has said he also plans to reintroduce his comprehensive USF legislation from last year. Matsui expects Congress to spend a “considerable amount of time” on the proposed AT&T/T-Mobile merger, and she expects Walden will have hearings, she said. Congress has a “duty” to “thoroughly examine” what impact the merger will have on the marketplace, Matsui said. Spectrum and USF reform may be on the way, too, though the subcommittee has focused on net neutrality, she said. Matsui reiterated that she “strongly” supports the FCC’s net neutrality order.

A recent audit that criticized the FCC for not following federal guidelines on tracking public spending (CD March 28 p11) “may come up” when Chairman Julius Genachowski testifies before a House appropriations subcommittee, said a spokesman for Rep. Jo Ann Emerson, R-Mo. The chairman of the subcommittee on Financial Services and General Government “is aware of the situation,” her spokesman said. Managers at both the FCC and the Universal Service Administrative Co. were recently ordered to “update and reinforce” rules for entering expenses into the federal accounting system, after outside auditors labeled the commission’s accounting system “a significant deficiency."

The Rural Cellular Association and the Universal Service for America Coalition appealed the FCC’s Corr Wireless II order, claiming the commission jumped the gun when it determined that surrendered high-cost Universal Service Fund should lower a state’s cap for high-cost support. “USF is a critical issue for RCA members,” association President Steve Berry said in a news release. “It can mean the very survival of many smaller competitive carriers wishing to serve consumers in rural America.” RCA said the Corr order created an illegal “slush-fund.” The Universal Service Coalition, formed in 2008, includes Cellular One and Corr Wireless -- the competitive eligible telecommunications carriers who have been fighting to preserve their high-cost support since at least last year. Cellular One and other CETCs have accused Verizon, for instance, of padding its universal service bills by unlawfully including Alltel lines into its annual line count. Earlier this month, 13 CETCs -- including Cellular One and Corr -- accused the commission of violating the companies’ Fifth Amendment rights against illegal takings by reducing the interim cap (CD March 14 p2). The FCC is in the midst of a USF and intercarrier compensation overhaul. Rural operators have been the most vocal in their complaints about the proposed rewrite, saying that the FCC’s plans will leave them at the mercy of the telco giants. An FCC spokesman said the “reforms the Commission is proposing are long overdue and it is critical that we take action soon to streamline the system and cut wasteful spending. As part of that process, it will be essential for the Commission to appropriately redirect a percentage of the USF funding to broadband services to help modernize the program and better meet consumer demands into the future.” The appeal was filed in the D.C. Circuit, RCA spokeswoman Lucy Tutwiler said. “It’s a suit to ensure the FCC uses the funds that have already been collected for the purposes of which they were collected,” she said.

The Rural Utilities Service (RUS) is trying to drum up interest in its revived rural broadband loan program, but impending Universal Service Fund and intercarrier compensation overhauls are making some rural telcos leery about getting in line, some rural lobbyists said. The RUS expects to have up to $800 million available this year to offer to rural broadband projects. But “this program may be a vestige of an antiquated technology and an antiquated concept,” said Rural Cellular Association President Steve Berry. “It may well be the money can be used for better things.”

Two similar Texas bills would define VoIP and prohibit state regulation for IP-enabled services and VoIP. SB-980 also seeks to exempt telecom companies from reporting requirements. It and SB-985 are sponsored by Republican Sen. John Carona.

State PUCs will have a major say in the eligible telecom carrier (ETC) question in AT&T’s plan to buy T-Mobile (CD March 22 p1), said Brian O'Hara, NARUC legislative director. ETC issues might not derail the deal, but could make it slightly less profitable for the combined company if there’s reduced or eliminated USF support, he said. Based on further discussions with many states, it appears that states are trying to determine their role as well, he said. Most state regulators require carriers to submit transfer of asset applications that must be approved, but “that is a far cry from full blown merger review,” he said.

EchoStar’s purchase of Hughes could lead to a policy shift by the second company on the Universal Service revamp because the acquiree has voiced different positions on the issue from the acquirer, FCC filings show. Hughes, which has previously said satellite broadband should be left out of the USF and Connect America fund, could change its position if EchoStar takes over. A united satellite broadband front would “be a big positive for the industry and provide a very strong response to the FCC” General Counsel Lisa Scalpone of WildBlue said in an interview.