Industry sources said the Wed. summit on the Universal Service Fund could lead Senate Communications Subcommittee Chmn. Burns (R-Mont.) to introduce USF legislation shortly. Burns and Sen. Dorgan (D-N.D.) will host the summit of “stakeholders” in the USF debate. The meeting is scheduled to examine contribution methods, with Mont. PSC Chmn. Bob Rowe as moderator. It also will include analysis of what contribution methods are most feasible to adopt and which are the most troublesome. Sources said depending on the tone of the summit, Burns could file USF legislation this week. A source said he was likely to want USF legislation in the public record before a potential USF hearing later this month. One industry source said a USF bill was likely to be limited in scope and would deal with contribution methods. A source said Burns might push for including intrastate calls in addition to interstate calls as a contribution source. Another source said Sen. Stevens (R-Alaska) would push for including facility-based broadband, such as cable modem, as a USF contributors. The meeting isn’t open to the public, but is scheduled for this morning in Rm. 192, Dirksen Bldg.

The Iowa Utilities Board (IUB) opened a proceeding to consider rules for wireless universal service carriers involving service area and service quality. The new docket (Case RMU-03013) applies to any wireless carrier that is or wants to be an eligible telecom carrier (ETC) for federal universal service funding. The IUB proposed a rule that would define a wireless carrier’s universal service area as the area licensed by the FCC, regardless of landline exchange boundaries. The IUB also proposed applying its basic service quality rules to wireless services supported by universal service funds. Hearings are to begin Dec. 10.

AT&T told the FCC that BellSouth’s proposals to exempt ILECs’ broadband service from cost allocation rules and mandatory universal fund (USF) contributions were “frivolous” and should be “summarily rejected.” In a July 31 ex parte letter, AT&T told the Commission that cost allocation rules were “vital accounting safeguards and eliminating them or creating an arbitrary exemption for broadband services would only enhance the Bells’ already significant opportunities to harm consumers and competition through discrimination and cross-subsidization.” AT&T also argued that BellSouth basically was seeking deregulated status for broadband service except for cost allocation rules where it “paradoxically claims that such services should, for those purposes only, still be considered ‘regulated.'” AT&T said it didn’t support the idea of deregulating broadband services, but “if broadband services are to be deregulated, then the only nonarbitrary conclusion would be that broadband services must also be deemed ‘nonregulated’ under the Commission’s cost allocation rules.” AT&T said that under FCC rules, classifying a service as nonregulated triggered the cost allocation rules, which require ILECs to separate the costs of nonregulated services from regulated services. “Making this distinction between regulated and nonregulated services is the critical first step in the Commission’s accounting safeguards,” AT&T said. It also disagreed with BellSouth’s proposal to remove wireline DSL revenues from the USF contribution base to gain parity with cable broadband providers, which don’t contribute. Said AT&T: “BellSouth is simply mistaken in contending that it cannot be required to contribute to universal service based upon the interstate revenues from its wholesale transport offerings unless cable broadband providers also contribute to universal service.”

The Senate Commerce Committee approved a permanent Internet tax moratorium Thurs., although a few senators expressed concern that the definition of Internet access needed to be more precise. The Committee passed on voice vote a substitute bill (S-150) that was supported by Sens. Allen (R-Va.), Wyden (D-Ore.), Stevens (R-Alaska), Sununu (R- N.H.), Brownback (R-Kan.) and Dorgan (D-N.D.). But Dorgan also emphasized that language in the bill needed to be tweaked so it couldn’t be interpreted to apply to telecom services as well as Internet access. And the bill included provisions supported by rural telecoms that would protect the universal service fund (USF.)

“Regulators must resist the urge to regulate [voice- over-Internet-protocol -- VoIP] unless and until there are compelling reasons to do so,” Richard Whitt, WorldCom dir.- federal law & public policy, said at an FCBA lunch Wed. in Washington. He said telecom service regulatory policies, in particular the current intercarrier compensation regime, were “bloated, untenable and inequitable and harm the public interest in numerous ways… The worst thing to do is to extend this bloated mess to nascent, innovative IP-based technologies such as VoIP.”

Several telecom companies and associations wrote to House and Senate Commerce Committee members urging a comprehensive approach to universal service fund (USF) reform. The letter specifically targeted USF legislation that would alter distribution of a narrow slice of USF distributions. The letter said the bills (HR-1582 by Rep. Terry (R-Neb.) and S-1380 by Sen. Smith (R-Ore.)) were “too divisive and narrow in their scope.” The legislation would change the distribution equation for a $234 million fund that goes to RBOCs and midsized carriers that serve rural and poor areas. Under the current distribution, Miss. gets more than half of the funds and only 7 other states receive any. The bill is supported by Qwest, which would receive increased funding under the proposed distribution method, and opposed by BellSouth, which probably would lose funding. The letter was signed by USTA, BellSouth and several smaller telecom firms.

The most important part of the FCC decision issued Mon. on what services are eligible for universal service support (CD July 15 p1) is what the Commission chose not to do, observers said, as did the Commissioners themselves in separate statements issued as part of the order. The FCC voted to defer action on whether “equal access” should be on the list of eligible services. Placing it on the list would have required competitors, such as those that provide wireless service in rural areas, to offer equal access service before they could be eligible for universal service, a move they opposed but rural ILECs supported.

The FCC adopted the recommendation of the Federal-State Joint Board on Universal Service to retain the existing list of services supported by federal universal service funds. In an order issued late Mon., the agency made no decision on whether equal access should be added to the list of services. The Joint Board also was unable to reach agreement on the issue, which is very important to rural ILECs. “We agree with the Joint Board that, with the possible exception of equal access,” no new service satisfies the statutory criteria… or should be added to the list of core services,” the FCC said.

The universal service bill (S-1380) by Sen. Smith (R- Ore.) picked up an influential co-sponsor Thurs. evening when Senate Commerce Committee Chmn. McCain (R-Ariz.) signed on. His support increases the bill’s co-sponsors to 11, with Committee members Allen (R-Va.) and Fitzgerald (R-Ill.) also supporting the measure that would change the formula used to distribute universal service funding (USF). It would distribute a $254 million portion of USF funding to RBOCs in more states, including many in Qwest territory (CD July 10 p6), and is similar to HR-1582 by Rep. Terry (R-Neb.). Qwest serves Ariz.

Sen. Smith (R-Ore.) introduced a universal service fund (USF) reform bill similar to one by Rep. Terry (R-Neb.) (HR- 1582). Sources said that Smith’s USF bill, while similar, wasn’t identical to Terry’s, which is designed to spread more evenly USF funding for RBOCs and midsized carriers that serve rural areas (CD April 4 p1). The formula used to distribute the $254 million spreads money to just 7 states, critics said, with more than half going to Miss. A spokesman for Terry said the formula took statewide averages, so states with both urban and rural areas often couldn’t receive USF funding for rural areas. The bill is pushed by Qwest and opposed by both USTA and BellSouth. “Senator Smith’s bill does not address the overarching challenges threatening universal telephone service,” USTA Pres. Walter McCormick said: “This approach picks winners and losers and pits state against state. What is needed is a unifying approach.” BellSouth said the bill didn’t address the crucial question of USF reform: “Where does the money come from? It is the funding side of the universal service equation that is in peril; the distribution side should not be addressed separately.”