The Universal Service Administrative Corp. (USAC), which administers the $2.25 billion federal E-rate program, acknowledged at a Senate Commerce Committee hearing Tues. it had lost $4.6 million as a result of an accounting change requiring the corporation to have cash on hand to meet commitment letters. The change forced USAC to sell off high interest Treasury bills (T-bills) and other assets, paying significant penalties.
Wireless carriers acknowledged Fri. they seem to be making little progress on getting the FCC to change course on upcoming Auction 58, the major PCS auction slated for Jan. Carriers led by CTIA have been pushing the Commission to changes the rules of the auction to eliminate the set-aside for “designated entities” of more than 1/2 the 234 10-MHz licenses up for sale.
The Mo. PSC declined to certify 2 rural incumbent telcos as qualified to continue receiving federal universal service funds. The PUC notified the FCC that it was decertifying Cass County Telephone and New Florence Telephone, both run by an executive that the FBI alleged has ties to organized crime. The PUC said there were unanswered questions about whether the telcos had knowingly overpaid for data services provided by a firm the FBI alleged had Mob connections, thereby misrepresenting their costs of doing business. The FBI in July arrested Kenneth Matzdorff, alleging he was a front man for the Gambino crime family in a fraud scheme that involved deliberate large overpayments for business services from Mob-connected companies. Matzdorff still is CEO of Cass County Telephone but quit New Florence Telephone in Aug. The telcos serve about 8,500 lines total, and last year received about $3.2 million in universal service subsidies. Officials of the telcos denied any improper spending. They said a pending 3rd- party audit will show the subsidy money was spent properly. They said once the audit vindicates them, they will move for reversal of the PUC decision.
Cellular One, a subsidiary of Western Wireless, said Wed. the S.D. PUC had designated it an eligible telecommunications carrier (ETC) in the state, qualifying it for USF support.
The Internet Innovation Alliance (IIA) officially kicked off Mon., as its leaders said “promoting VoIP services” and “educating people” were top goals of the new group. Unlike other VoIP organizations, such as the VON Coalition, the IIA will focus primarily on regulatory and economic rather than social policy VoIP issues, its leaders said.
WilTel petitioned the FCC to reduce or adjust its proposed 8.9% 4th-quarter Universal Service Fund (USF) contribution factor, used by carriers to compute their USF contributions. The factor, routinely set by the Wireline Bureau, will go into effect Sept. 30 unless the Commission steps in. WilTel challenged the “legitimacy” of issuing the factor without doing something to “eliminate discrimination” in the way the contributions are recovered. WilTel took exception to the fact that AT&T hasn’t been making contributions the USF for enhanced prepaid calling cards services while competitors continued to pay. WilTel said it thought the AT&T situation was just part of the problem and “the rest of a large ‘non- contributor iceberg’ lies just below the surface.” The 8.9% factor becomes discriminatory when it’s not being recovered equally from all competitors, the company said.
The Senate Commerce Committee approved legislation Wed. that would reform the “non-rural high cost” portion of the universal service fund, which goes to RBOCs and other large ILECs serving rural areas. The bill, S-1380, which would restructure the formula under which the fund is distributed, passed 13-9. Much of the non-rural fund goes to Miss. and W. Va. but that could change under the restructuring. Bill sponsor Sen. Smith (R-Ore.) said he would try to work with Sen. Lott (R-Miss.) to look for ways to help “specific states like Mississippi.” Lott opposed the bill, saying Miss. would go from receiving $133 million yearly to just $33 million. “It’s particularly punitive to my small rural state,” Lott said. The bill would calculate support based on wire centers, as opposed to calculating a state average, which critics said favored some states and prevented others from receiving any of the $277 million fund. The bill is known by many as the “Qwest bill,” since Qwest would be a major beneficiary of the formula change. Qwest on Wed. said it “applauded” the senators for passing the bill and that it would create investment in rural telecom infrastructure. BellSouth, which receives the funding in Miss., said comprehensive USF reform was needed, not a piecemeal approach. Sen. Dorgan (D-N.D.), an ardent supporter of USF reform, said he would reluctantly vote for the measure but added that comprehensive reform was needed during the next Congress. Rep. Terry (R-Neb.) has similar legislation in the House. “The momentum created by the Senate Commerce Committee will hopefully carry over to the House so we too can see some meaningful movement on this issue. We need to ensure that this money is allocated to the rural areas this fund was designed to help,” Terry said Wed.
The Senate Commerce Committee will tackle several issues this week, including the Wireless 411 Privacy Act (S-1963), introduced by Sen. Specter (R-Pa.), which would set restrictions on wireless carriers implementing a wireless telephone directory. Tues, at 2:30 in room 253 Russell Building, the Committee plans a hearing on the bill. The session will feature: Dennis Strigl, Verizon Wireless CEO; Steve Largent, CTIA pres.; Patrick Cox, Qsent CEO; Marc Rotenberg, Electronic Privacy Information Center (EPIC) exec. dir. On Wed., the Committee will mark up S-1963. The Committee will also consider S-1380, from Sen. Smith (R-Ore.), which would redirect portions of the universal service fund’s (USF) “nonrural” fund that goes to RBOCs and large ILECs that serve rural areas. The mark up is 9:30 a.m. in room 253 Russell Bldg.
Many industry and Hill sources said an amendment to the Senate Commerce Justice State (CJS) appropriations bill that would prevent the FCC from adopting a primary line restriction on the Universal Service Fund (USF) (CD Sept 16 p1) is still a long shot. But while they acknowledged Thurs. the bill still had a long road to travel, it was certainly possible it could pass.
The Senate Appropriations Committee voted Wed. to prevent the FCC from imposing a primary-line restriction on Universal Service Fund (USF) support. With no discussion or objection, the amendment to the Senate Appropriations Commerce Justice State bill will forbid the FCC from expending any funds for a USF system in which funds could be distributed only for “primary lines.” The amendment was pushed by Senate Communications Subcommittee Chmn. Burns (R-Mont.) and supported by Sens. Dorgan (D- N.D.), Stevens (R-Alaska), Hollings (D-S.C.), Gregg (R- N.H.), Brownback (R-Kan.), and Durbin (D-Ill.), sources said. Burns said the joint board proposal would hurt Mont.’s economy, which depends on small business. “In short, if the FCC moves forward with this potentially devastating recommendation, rural America would have a harsh winter of economic isolation,” Burns said.