Federal court decision last week on ILEC access charges has ramifications for other proceedings such as FCC’s attempts to overhaul access charge and universal service regimes for rural telcos, industry observers said Mon. Fifth U.S. Appeals Court, New Orleans, ruled May 3 that ILECs couldn’t recover their Universal Service Fund (USF) contributions through access charges levied on long distance companies. Court, which remanded FCC regulations for 2nd time on this issue, said such action constituted implicit subsidy, which is barred by Telecom Act. At issue are contributions that all carriers must make to USF. Long distance companies, for example, recover those contributions directly from their customers. FCC in 1997 ordered ILECs to recover their costs from long distance companies as part of access charges. Fifth Circuit remanded that rule in 1999 because of implicit subsidy problem. Commission rewrote rule and said ILECs no longer were required to recover costs from access charges but were permitted to do so if they wished. FCC said it interpreted court’s decision to mean it couldn’t require contributions through access charges but instead had to give ILECs choice of how they recovered contributions. In latest ruling, court said FCC interpretation was wrong. It said ILECs couldn’t recover universal service contributions from access charges, period: “The distinction the agency draws between ‘require’ and ‘permit’ is one without a difference.” Court said its original ruling “turned on the recovery method per se, not whether the Commission permitted or mandated it.” AT&T Vp Joel Lubin said he was cheered by strong language court used in defining access charge recovery as implicit subsidy. Lubin said court’s ruling could affect decision FCC is expected to make Thurs. on rural universal service. At very least, proposals under study by FCC, such as one proposed by Multi-Assn. Group, should be revised to eliminate implicit USF subsidies in access charges, he said. AT&T and several other carriers proposed such action to FCC last month, Lubin said, so court’s ruling was pleasant coincidence. Appeals Court ruling doesn’t have as much effect on large price-cap-regulated ILECs because FCC directed them last year to stop recovering USF contributions through access charges. Action was taken as part of Commission’s adoption of CALLS proposal. Lubin said court’s strong statements barring implicit subsidies in access charges applied to other industry practices as well. Among them, he said, is practice of pooling carrier common line (CCL) charges for rural carriers. Because National Exchange Carrier Assn. (NECA) pools those charges, by nature they are not cost-based, he said. Pooling access charges discourages competition, he said. Competitors such as Western Wireless can’t share in that subsidy because it’s “buried in the pool,” he said. Judge Emilio Garza wrote decision. Also on panel were Judges Eugene Davis and Donald Pogue. Pogue concurred because he disagreed with 1999 decision, saying it might have gone too far

Federal appeals court upheld district court decision striking down Wis. state e-rate program as violating constitutional separation of church and state. Three-judge panel of 7th U.S. Appeals Court, Chicago, said Wis. program for supplementing federal e-rate program was unlawful because it gave money directly to religious schools without any restrictions to ensure they didn’t use funds for religious support. Court in case brought by Freedom from Religion Foundation (Case 99-2850) said both programs taxed telecom service providers. But federal program, court said, compensated carriers from federal universal service fund for e- rate discounts to schools, so schools never actually received federal funds. Court also faulted state program for lacking any rules to ensure that state e-rate subsidies given to parochial and other religiously affiliated schools weren’t used to benefit campus religious facilities such as chapels or religious classrooms.

Interagency task force led by Justice Dept. April 15 will publish final revised standards on federal appraisal of public lands, action that telecom and energy interests said could increase cost of using rights-of-way (ROW). They said such action also would violate restrictions last year set in 2001 Interior and Related Agencies Appropriations bill. Edison Electric Institute (EEI) spokesman said task force, known as Interagency Land Acquisition Conference, was attempting to slip under Congressional radar by publishing revised govt. land appraisal desk guide, rather than formal regulations, enabling federal appraisers to assess inflated costs on companies seeking to deploy fiber and other utility infrastructure on public land.

FCC declined to specify what Internet security measures schools and libraries must use in order to continue to receive E- rate funding for Internet facilities through Universal Service Fund (USF). In decision released Thurs., Commission said local communities should select appropriate security measures, schools and libraries didn’t have to certify the effectiveness of measures and they wouldn’t be liable if measures failed.

AT&T said it was “encouraged” that FCC shortened lag time between carrier’s accrual of revenues and assessment of its Universal Service Fund (USF) contribution (CD March 15 p5). However, that won’t solve problem entirely, carrier said. AT&T said it looked forward to participating in FCC’s upcoming proceeding to consider ways to simplify entire USF cost recovery process and eliminate lag entirely.

FCC denied petition by Operator Communications (Oncor) for forbearance of rule requiring that contributions to federal universal service fund be based on carrier revenue from prior year. Oncor contended that basing contributions on prior-year revenue harmed carriers with declining revenue. It asked FCC to forbear from assessing revenues for years 1998-2000 and then reassess contribution based on actual revenue for those years. Commission said requested action would give unfair advantage to carriers with declining revenue. FCC Comr. Furchtgott-Roth issued statement agreeing with FCC’s denial but emphasizing that problem raised by Oncor was serious: “Because carriers contribute to the universal service fund based on the prior year’s revenues, those carriers whose revenues have declined find themselves paying a higher percentage of their current revenues… than do carriers with stable or increasing revenues.” He said end-user surcharges could be “promising solution.”