An accounting change that resulted in loss of money in the Universal Service Fund (USF) (CD Nov 1 p1) could bankrupt some rural telephone companies, NTCA said in a Nov. 3 letter urging key members of Congress to take legislative action to solve the problem. “The entire portfolio of federal programs supported by the… USF, including its premiere high-cost program, is facing a politically perilous situation as a result of a recent accounting modification mandated by the… FCC,” NTCA CEO Michael Brunner wrote. Subjecting the high-cost and related low-income programs to the Anti-Deficiency Act (ADA) would “either skyrocket the contribution factor to 25% or more, or… rural telephone companies could be bankrupted should support payments be withheld in order to avoid such an escalation,” the letter said. The letter was sent to House and Senate leadership as well as the chmn. and ranking minority member of Commerce and Appropriations committees in both houses. NTCA followed up with a letter Fri. to FCC Chmn. Powell, urging the agency’s support for Hill efforts. NTCA told Powell it was in discussions with members of Congress about a solution “but your leadership is critical.” NTCA said in a news release that it has been working “with a broad coalition of private as well as public interests as this situation unfolds in an effort to prevent any harm to the high-cost program.” Required changes in the accounting practices of the Universal Service Administrative Co. (USAC) have resulted in a loss of money and disrupted USAC’s procedures for funding schools, libraries and possibly rural telephone companies. Recipients of universal service funding are particularly concerned about an ADA requirement that USAC can’t make “commitments” to provide funding unless the funds are in hand, which appears to conflict with the way some USF funds are provided. Recipients say the changes could result in higher contribution costs by carriers, which would be passed onto consumers, or serious disruptions to universal service programs. Spearheaded by outside members of USAC’s board, organizations such as NTCA are seeking legislation to exempt USAC from the ADA. Brunner’s letter said Sens. Snowe (R-Me.) and Rockefeller (D-W.Va.) “are engaged in discussions with the FCC chairman and others to develop a legislative solution to this dilemma.” Meanwhile, the USAC has issued its projected “demand” figures for first quarter 2005, which the FCC will use to determine a contribution percentage “factor” in Dec. Based on the USAC filing, a number of parties are estimating the factor could raise to around 12.74% from the current 8.9% due to the accounting changes. Legg Mason said in a report Fri. that it thinks “Congress will be very interested in a permanent legislative fix, possibly during this month’s lame-duck session.” The goal is a rider to the appropriations bill, but it’s possible Congress will settle for a continuing resolution and not pass the appropriations bill this year, the analysts said.
CTIA warned the FCC that the hikes of 12% or higher reportedly being examined at the FCC for the federal USF contribution factor will lead to a 40% increase in the USF charge on consumer bills. CTIA Pres. Steve Largent said the latest development should lead to a rethinking of the entire USF program. “Consumers already are saddled by a growing list of government mandates and in this case a 40% increase in what wireless consumers are already paying into the fund is ridiculous,” he said. “It just does not make sense to require consumers to carry that kind of a burden because of an unnecessary requirement that does nothing to improve program integrity.” Largent, a former Republican House member from Okla., urged Congress to tackle needed changes to the program during its upcoming lame duck session. “No consumer will benefit from collection of these additional funds,” Largent said. The conventional wisdom has been that Congress is more likely to reform USF if the contribution hits double digits.
ORLANDO - The plan recently submitted to the FCC by the Intercarrier Compensation Forum (ICF) was criticized by some at the Comptel/ASCENT conference here for not addressing VoIP. “The plan should address all the types of traffic,” said KMC Telecom Vp & Senior Counsel- Regulatory Affairs Marva Johnson: “I believe we need to move towards a SIP-based interconnection and the plan should account for it… Any plan that doesn’t incorporate VoIP traffic won’t be sustainable in the future… Not to incorporate that is a severe flaw.”
The Universal Service Administrative Co.’s (USAC’s) outside board members are trying to get a legislative fix to solve an accounting problem (CD Oct 6 p1) that caused the $6.5 billion universal service program to lose money and jeopardized not only to the E-rate program but also high-cost rural telephony support. Although USAC can’t lobby Congress, its board has been meeting with state regulators, telecom industry associations, education groups and others to seek help in gaining legislation during the lame-duck session of Congress beginning Nov. 15. “The USAC board is reaching out to constituents, talking to people about a solution, trying to do as much as we can,” said USAC Chmn. Frank Gumper, a Verizon consultant: “We've got to do something to get the situation under control, to get the program back to normal.”
TON Services agreed to pay $400,000 to the U.S. Treasury, in a consent decree with the FCC Enforcement Bureau that resulted from an investigation into the company’s lack of compliance with Universal Service Fund contributions requirements. “We cannot and will not tolerate refusals to comply with our contribution rules,” FCC Chmn. Powell said Thurs., saying fair contributions “ensure that the universal service fund remains on a sound footing [and] telecommunications services are available to all Americans.” The bureau said TON operates payphones at travel plazas and provides prepaid calling card services. After the bureau contacted TON in March, the company said its current management team assumed control of the company in late 2003 and didn’t know of potential universal service problems until Jan. 2004. The company said it began correcting the compliance problems before being contacted by the FCC. The bureau said the company had brought itself into compliance by Oct. 1. The bureau said TON claimed it’s owed credits for past overpayment to the USF and is talking to the FCC Wireline Bureau and the Universal Service Administrative Co. about that.
LAS VEGAS -- Whether VoIP’s success is due to “regulatory arbitrage” or “superior technology” remains a key question, according to state PUC commissioners speaking Tues. at the USTA convention here. Commissioners said improper regulation could increase regulatory arbitrage. Meanwhile, other speakers predicted state retail rate regulation would largely fade out by decade’s end.
The Federal-State Joint Board on universal service released its most recent monitoring report, which reflects information filed with the FCC through May 2004. The report said the universal service fund (USF) distributed 61.1% for high-cost support, 25.1% for schools and libraries, 13.4% for low-income support and 0.4% for rural health care support. Total industry revenue for telecom services provided to end users in 2003 rose to $234 billion from $232 billion in 2002. Low-income support increased to $716 million in 2003, up from $676 million. High-cost support increased to $3.3 billion from $2.9 billion in 2002.
Chmn. Powell responded Thurs. to Senate questions about whether the FCC’s recent work on E-rate was politically motivated. “That is ridiculous and unfounded,” Powell told reporters. “I've been here 7 years. This program has been run as effectively and efficiently by us as by anyone else. I don’t think it’s politically motivated to make sure govt. money, $2.25 billion of taxpayers’ money, complies strictly with the govt. accounting and auditing standards.” Powell added he also didn’t view as political a decision to keep the USF contribution rate low in light of funding shortfalls that led to an Aug. 3 suspension of the program. “The Commission worries about all consumers,” he said. “The contribution factor gets paid by somebody, It gets paid by individual bill payers.” Powell said he hopes Congress will look at changing the law if it has concerns about how FCC has handled the program. “If we all care about the program, what we ought to be worried about is how to fix it,” he said. “Let’s talk about legislation that would either exempt or modify the [USF] program so it didn’t have to comply with the Antideficiency Act.” Powell said he was ready to appear before the Senate on the issue if called: “I work for them and I'll participate as they choose.” HB
FCC Chmn. Powell said Wed. the Commission acted properly in ordering the Universal Service Administrative Corp. (USAC) to change how it accounts for money in the federal E-rate program fund, the subject of a Senate Commerce Committee hearing yesterday. The issue has gotten considerable national attention in recent days, including coverage in the N.Y. Times and across the country. But the FCC’s 2 Democrats sharply criticized Powell over the way the Commission handled the issue.
Responding to a WilTel complaint, AT&T told the FCC in a letter Mon. that it isn’t improper for AT&T to exclude universal service contributions from its enhanced prepaid card revenues. WilTel had asked the FCC to deny the Wireline Bureau’s proposed 8.9% universal service fund (USF) contribution factor because it doesn’t include AT&T enhanced prepaid card revenues. The request became moot Sept. 30 because the time period for the FCC to halt it expired, but the FCC in a different proceeding has been considering possible action against AT&T’s handling of its prepaid card revenues. AT&T argued in the letter that USF contributions aren’t required because the card is an information service and “WilTel’s suggestion that AT&T is not living up to its universal service obligations is absurd” because “AT&T is the single largest contributor to the USF.” AT&T criticized WilTel and BellSouth assertions “that AT&T is enjoying an unfair, discriminatory competitive advantage” by not paying universal service contributions. “Other providers are free to qualify their prepaid card services as information services, outside of the duty to contribute to the USF,” AT&T said. If the FCC adopts a numbers-based approach to USF contributions, “the regulatory classification of a service as an ‘information service’ or ’telecommunications service’ will no longer be determinative, because providers of both sets of services will be required to contribute to the USF based on their end-users’ assigned telephone numbers.” The company also noted that the “predominant users” of the enhanced prepaid card are military, low-income, minority, immigrants and retirees who depend on the cost-effective nature of the card. Requiring USF contributions “would shift the USF burden from more affluent consumers to individuals who are least able to afford it.”