FCC Comr. Adelstein used a Wall Street term before a finance audience Tues., saying he’s “bullish on satellite.” Keynoting at the ISCe Satellite Investment Symposium in N.Y., Adelstein said he has been “particularly struck” by the changes in all segments of the industry the past 18 months. The commissioner highlighted several recent shifts, from M&A activity in the FSS sector, to growth and challenges facing DBS, satellite radio and next-gen mobile satellite networks promising Ancillary Terrestrial Component (ATC) capabilities.

NASUCA adopted resolutions on Lifeline and inmate payphone services, at the state consumer advocate group’s annual meeting, held along with NARUC’s annual convention in Miami Beach. Meanwhile, NASUCA panelists addressed a Conn. decision declaring AT&T’s IP-based video service not to be cable TV, as well as telecom privacy and the Missoula Plan. NASUCA’s Lifeline resolution was close to one adopted by NARUC. It backed the same Lifeline Working Group recommendations and made similar recommendations on Lifeline promotion and outreach through public-private partnerships, state commissions, other gov agencies, and business. NASUCA’s payphone resolution said inmate interaction with family, friends and professionals is an important part of rehabilitation hurt by unreasonably high rates at inmate payphones. The resolution urged policymakers to ensure fair rates, encourage use of prepaid debit accounts as an alternative to collect calls, and cut or eliminate commissions that inmate payphone providers pay state or local corrections authorities for their contracts. On NASUCA panels, Bill Vallee, attorney with the Conn. Office of Consumer Counsel, said the Conn. Dept. of Public Utility Control (DPUC) misclassified AT&T’s video delivery system because it looked only at the interactive on-demand capability, ignoring AT&T’s plans to offer scheduled cable programming like ESPN and CNN. William Durand, exec. vp of the New England Cable & Telecom Assn., said the DPUC erroneously based its ruling on the video delivery technology, rather than the service. Vallee and Durand said the DPUC decision created an unfair, illegal regulatory imbalance. NASUCA had invited AT&T and Verizon to speak, but they didn’t send representatives. Of various federal suits seeking to stop state regulator inquiries into allegations that telecom companies violated customer privacy rights by unlawful cooperation with federal intelligence-gathering operations, Shayana Kadidal of the Center for Constitutional Rights said states are right to resist “intelligence gathering operations in the guise of law enforcement.” He said broad telephone surveillance actually harms national security because “it diffuses efforts by putting attention on those who pose little or no threat.” He also said it made no sense for the govt. to invoke the state secrets privilege after the National Security Agency’s phone surveillance program became common knowledge. On the Missoula Plan, Doug Kinkoph, XO Communications regulatory vp, said the plan “is overly broad and based on a suspect political and legal foundation.” The plan aims to keep carriers whole by shifting access revenue reductions onto consumers and the federal universal service fund, he said: “It'll present consumers with a $7 billion bill.” It also will impair state jurisdiction over interconnection and prematurely deregulate transit traffic, he said. But Joel Shiffman of the Me. PUC staff called the plan “a reasonable but not perfect transition to the broadband world,” because it will eliminate arbitrary distinctions among jurisdictions and traffic types. Work is needed in some areas, like with “early adopter” states that moved to reform intercarrier compensation, he said. -- HK

Speakers at a NARUC panel on use of reverse auctions as a universal service reform tool said their effectiveness will depend heavily on how the auctions are designed. FCC Chmn. Kevin Martin in March supported the concept as a way to contain universal service fund growth. His idea would make the winning bidder the provider of last resort. For reverse auctions to have a chance to work, speakers said, the auction process must recognize the large cost differences that can exist between locations within the same high-cost area. Brian Stahr, Embarq regulatory economist, said costs can vary by over 400% across a market area, such as between a town or other population concentration and the outlying areas. He said the industry has depended on low-cost downtown lines implicitly subsidizing high-cost outlying areas, but competition is causing that subsidy source to disappear. He said explicit subsidies through the USF aren’t working either, because support is based on a statewide average. Support needs to be more “granular,” he said, such as by census block: “Competitive bids must truly reflect costs of the truly high-cost areas.” Dennis Weller, Verizon chief economist, supported the idea of targeting support to the areas where it’s really needed: “The current system isn’t rational nor sustainable.” He said auctions in areas with multiple ETCs could establish rate models for setting support levels in areas not auctions. He said universal service is “essentially a government procurement process, and bidding is how government procures most everything.” Scott Reiter, NTCA industry affairs dir., disputed the wisdom of reverse auctions, calling them “a big blind leap into the unknown.” He said adoption of auctions won’t address how the universal service fund came to be unbalanced in the first place: “Auctions may be worth a look, but they aren’t the fundamental reform that’s needed.”

Wireless companies that operate in rural areas have formed the Wireless Across America coalition to work for continued Universal Service Fund support for wireless companies. The group plans to “tell Congress to safeguard USF funding for rural wireless service [to assure] the security and economic prosperity of countless rural communities.” The members are the Rural Cellular Corp., Alltel, Dobson, SunComm, Corr Wireless, Rural Cellular Assn. and Bluegrass Cellular.

The Kan. Corporation Commission (KCC) ordered rural incumbent telcos to set their intrastate access charges at their respective interstate levels after concluding the revenue impact would be negligible. State law allows rural telcos to make up access revenue shortfalls from the state universal service fund, up to a specified cap. The KCC said setting intrastate access rates at parity with interstate would mean a mere $40,000 in additional demands on the state USF because only 4 of the 20 rural telcos affected by this decision will see a net reduction in access revenue.

A Fla. state lawmaker whose Miami-Dade district includes a substantial proportion of low-income households urged the PSC to adopt a pending proposal for automatic Lifeline enrollment. Lifeline participation among eligible Fla. households is “profoundly disappointing,” State Rep. Juan Zapata (R), member of the House Business Regulation Committee, said. The state loses $30 million annually in payments to the federal universal service fund “because the Lifeline and LinkUp programs have essentially been permitted to fail,” he said. Automatic enrollment would cut that deficit and provide “deserving and eligible Floridians [with] the services for which more fortunate Floridians have paid,” he said. The proposal by the Office of Public Counsel and AARP would require local exchange providers to work with the PSC and Dept. of Children & Families, automatically enrolling all Fla. households that qualify for public assistance. In a related action, the PSC granted Attorney Gen. Charles Crist’s (R) request to become a formal party to the Lifeline enrollment case. Crist said he supports automatic Lifeline enrollment.

More than a third of the country’s state regulators want the FCC to alter or kill the Missoula Plan for intercarrier compensation reform, according to comments filed late Wed. Most concerned voices speak for one of 2 types of states: (1) “Early adopters” that already implemented access charge reforms, resulting in higher consumer costs -- and don’t want to do so again. (2) “Payer” states where carriers put more into the universal service fund than they get back. They tend to be urban states with fewer rural LECs and see more payouts as unfair.

Debate over net neutrality keeps Congress from addressing 2 issues with more impact on expanding broadband access, ex-FCC Chmn. William Kennard said Sat. in a N.Y. Times op-ed. Instead of focusing on net neutrality, Kennard said, Congress should: (1) Reform the Universal Service Fund (USF) by finding “a new source of revenue” to better support expanded broadband access. The USF should start supporting broadband access, but “the fund in its current form is not an effective way” to do so, he said: “We must find a new source of revenue that does not exclusively tax users of the phone network.” One possibility is a reverse auction, an idea raised by FCC Chmn. Martin, he said. (2) Pass a national franchising law to speed services to consumers. Cable and phone providers are hurrying to offer bundled services but “the legacy of historic regulation puts the telephone companies at a serious disadvantage in quickly deploying video services,” Kennard wrote: “Congress punted on both of these issues this year in large part because of the polarizing net neutrality debate. Now the combatants are set to throw millions more dollars into [the net neutrality debate] when Congress revisits new telecommunications legislation. Policymakers should rise above the net neutrality debate and focus on what America truly requires from the Internet: getting affordable broadband access to those who need it.”

Reverse auctions might rein in burgeoning universal service costs, but there are pitfalls, panelists warned Thurs. in a program sponsored by the D.C. Bar. It’s an “interesting idea” but shouldn’t be the sole solution, said Eric Einhorn, AT&T exec. dir.-federal regulatory. Done right, it could be a “market-oriented” way to downsize the Universal Service Fund (USF) but “the devil is always in the details,” said CTIA Asst. Vp Paul Garnett. It would have to be implemented in a technologically- and competitively- neutral manner, he said.

The FCC’s query about using reverse auctions (CD Oct 12 p6) for universal service support ended up drawing more than 50 comments, with a variety of views. NECA warned that “reverse auctions would effectively end rate of return regulation for rural ILECs, a result not contemplated” by the Federal-State Joint Board, where the proposal originated. Alltel said reverse auctions could be used to set the level of support, similar to “a forward-looking cost methodology,” but any carrier able to provide that price should be allowed to offer service. In other words, “auctions should not be used to select one or a limited number of eligible telecommunications carriers.” Verizon, joined by Verizon Wireless, said reverse auctions could be the solution to the over-extended Universal Service Fund (USF): “With the right design, a simple system of reverse auctions for high cost support could provide consumers, carriers and regulators with substantial benefits.” State regulators appeared to have mixed feelings about the reverse auction concept. The Ia. Utilities Board said it likes that auctions would reduce the number of USF-supported carriers but it’s concerned about the viability of incumbent rural carriers: “On the one hand, rural exchanges may represent the type of service territory where it makes the most economic sense to support only one network and an auction may incent carriers to seek operational efficiencies… On the other hand, existing incumbent networks have been constructed… in reliance upon continued receipt of universal service support. If that support were to suddenly be redirected to another network based on competitive bids, the existing universal service ‘investment’ in the incumbent network would be lost.”