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.

One part of the effort to revamp the USF and intercarrier compensation system will examine and learn from the actions that states have taken to reduce intrastate access rates, said Wireline Bureau Chief Sharon Gillett on the FCC’s blog. By taking actions to revamp the rates, emphasizes further the FCC’s goal of modernizing the intercarrier compensation system for broadband, reducing incentives for regulatory “gamesmanship” and paving the way to lower long distance and wireless rates for consumers, she said. Gillett noted that Tennessee recently passed a law (CD Mar 21 p7) that will gradually reduce intrastate rates to interstate levels, and Washington state recently required CenturyLink to reduce its intrastate access rates to Qwest’s levels as a condition of the companies’ merger approval. Tennessee and Washington joined more than a dozen states, including Georgia, Iowa, Kansas, Michigan, Nebraska and Texas, that are “leaders on ICC reform,” she said. She urged other states to take similar action, saying revamping USF and ICC requires cooperation between the FCC and the states.

The FCC should give Alaska a separate “transition path” for Universal Service Fund reform, General Communication said in comments posted to dockets 10-90, 09-51, 07-135, 05-337, 01-92, 96-45 and 03-109. “Alaska’s telecommunications networks are like none other in the country, and face challenges of distance, climate and supporting infrastructure unlike anywhere else in the United States,” General Communication said. Despite the company’s “substantial rural wireless deployments in 2009 and 2010, much of rural Alaska is still waiting to receive the 2G mobile voice services that the rest of the country has enjoyed for over a decade,” General Communication said. The National Broadband Plan recommended that the commission focus on broadband speed of 4 Mbps down and 1 Mbps up, but “those objectives will never be achieved in Alaska without hundreds of millions of dollars in capital investment,” General Communication said. Only “a fraction of Alaska has access to broadband with maximum advertised speeds of 3-6 Mbps for downloads and .786-1.5 Mbps for uploads,” the company said. “At a time when all indications show that achieving the Commission’s broadband objectives in Alaska will require several hundred million dollars in support just for capital investments, let alone operating costs, the interim proposals for both ILEC and CETC support would slash support for Alaskan telecommunications and broadband deployment,” General Communication said. If the FCC adopts all of the proposals for USF reform in its rulemaking notice, Alaska would lose about 75 percent of its universal service support by 2016, General Communication said. “Meanwhile, because of the way that the proposed interim Connect America Fund and Mobility Fund would be structured, virtually no funds from those new mechanisms can be expected to support Alaska telecommunications and broadband deployment services,” General Communication said. “Rural Alaska will never win a nationwide reverse auction pegged at supporting the lowest dollar per user deployments because Rural Alaska is both high cost to serve especially to connect over the middle mile and has extremely small population centers.” The better course is to preserve “existing support” for all eligible telecommunications carriers and high-cost programs on Tribal Lands “during the interim, and then move directly to a long term (not first phase) reformed Connect America Fund ('CAF'), as long as it can be tailored to Alaska’s unique challenges,” General Communication said.