The FCC is creating a Universal Service Fund Strike Force in the Enforcement Bureau, charged with combating waste, fraud and abuse in agency funding programs, said Chairman Tom Wheeler in a news release (http://fcc.us/1qACHZl) Monday. The strike force will be led by Loyaan Egal, who joins the FCC after being a senior assistant U.S. attorney in the Fraud and Public Corruption Section of the U.S. Attorney’s Office for the District of Columbia. The strike force will expand commission efforts, including those of the FCC Office of Inspector General, “to protect the integrity of the Universal Service Fund and ensure that the American people’s money is wisely spent,” Wheeler said. The Strike Force will investigate violations of the Communications Act, commission rules and other laws involving USF programs and contributions, said the FCC.
DALLAS -- Parties within state utility commissions and elsewhere opposed to the 10th U.S. Circuit Court of Appeals’ decision upholding the FCC 2011 USF/intercarrier compensation order (CD May 27 p1 ) should continue exploring options for appealing that decision even though available options have a low probability of succeeding, industry panelists said at the NARUC meeting. Those options include requesting an en banc review by the entire 10th Circuit or an appeal to the Supreme Court, said NARUC Counsel Brad Ramsay.
Comments on proposed USF overhauls are due Aug. 8, replies Sept. 8, in FCC dockets including 14-58, said the agency in a Federal Register notice Wednesday (http://1.usa.gov/1oJT46i). The NPRM seeks to adapt its universal service reforms to ensure those living in high-cost areas have access to services that are reasonably comparable to services offered in urban areas (CD April 24 p2).
Congressional Republicans began raising concerns about the FCC’s Friday E-rate vote, focusing primarily on the financing of any E-rate overhaul. “Since Chairman [Tom] Wheeler first announced his $5 billion Wi-Fi stimulus proposal, I have been concerned that he cannot realistically expect to pay for it without forcing Americans to pay more for communications services or diverting E-Rate funds that support necessary connectivity in our nation’s schools, particularly in rural areas,” said Senate Commerce Committee ranking member John Thune, R-S.D., in a statement Wednesday night. He also suggested that if Wheeler lacks bipartisan backing on the commission, Wheeler should postpone the vote. “Moving forward in a partisan manner, relying on untested budget assumptions, and shifting E-Rate’s priority from connectivity to Wi-Fi will only erode the Chairman’s and FCC’s stature, and potentially jeopardize support for E-Rate,” Thune said. House Commerce Committee Chairman Fred Upton, R-Mich., and Communications Subcommittee Chairman Greg Walden, R-Ore., sent a joint letter (http://1.usa.gov/U5xsq1) to Wheeler Thursday questioning the math that Wheeler has said will be used to pay for the E-rate expansion. Upton and Walden support the described approach but worry about “discrepancies” and the plan’s sustainability as well as “press reports that you have promised to increase the E-rate budget in the ‘near term,'” they said. There are also procedural “red flags” on bipartisan deliberation, they added. Sen. Kelly Ayotte, R-N.H., sent Wheeler a letter Wednesday raising her concerns about broader USF equity among the states. Real E-rate overhaul “means simplifying the process by reducing the paperwork needed to apply for funding” and “distributing aid to schools on a more equitable per-student basis (rather than the complex discount formula that the program now uses),” Ayotte said. “Moreover, this means giving schools the flexibility to spend E-Rate funds on technologies that directly benefit students, instead of a complicated system of technology priorities dictated by Washington.” Do not increase the size of the E-rate budget without these changes, she cautioned.
USTelecom opposed an American Cable Association FCC application for review of a Wireline Bureau April decision on the Connect America Fund cost model order that calculated costs of serving census blocks in price-cap telco areas. “USTelecom stands by its cost of capital calculation which resulted in a zone of reasonableness above 8.48% and below 9.52%, resulting in a point estimate of 9.00%” and other figures, said that association in an opposition filing to ACA’s request posted Monday in docket 10-90 (http://bit.ly/U1g5GM). “ACA presents no new information to contradict it. Yet ACA rejects the Bureau’s considered conclusion which adopted a cost of capital 50 basis points below the recommendation of the ABC Coalition.” The association said an FCC model used data from the coalition, a USF reform group of telcos that has included USTelecom members (http://bit.ly/1pXdWuo). ACA’s June 20 application for review said the bureau’s model, “for the key input of the cost of money ... adopted a cost significantly in excess of forward-looking market rates” and would mean price-cap LECs get more support than required (http://bit.ly/1vWPFSK). ACA plans to respond to USTelecom’s opposition, in reply comments, said ACA Senior Vice President-Government Affairs Ross Lieberman. He declined further comment.
FCC Chairman Tom Wheeler has sidestepped likely partisan Capitol Hill battles surrounding E-rate for now due to the nature of his overhaul, apparently focusing on Wi-Fi and not immediately touching the fund’s contribution rate and size, lobbyists and observers told us. They predict political rancor will come in later phases of the E-rate revamp when those parts will be inevitably addressed. The prime Hill critics now are Democratic architects of the original 1996 Telecom Act E-rate provisions, who question the proposal in more granular ways and urge the agency to listen as E-rate beneficiaries express fears, sending a critical letter Tuesday. The FCC will vote on Wheeler’s item Friday, and it’s been controversial among FCC Republicans. (See separate report in this issue.)
FCC Commissioner Ajit Pai said in a statement that negotiations between his office and Chairman Tom Wheeler over E-rate broke down Tuesday, when Wheeler’s staff “rejected almost every suggestion that I made.” Wheeler’s E-rate modernization proposal could still be approved when the commission is scheduled to take it up Friday, Pai’s Chief of Staff Matthew Berry told us. But he expressed disappointment it would likely be along a party-line vote with the support of the commission’s two Democrats.
Eight libraries, including those in Hartford, Memphis, New York and Seattle, protested FCC Chairman Tom Wheeler’s proposed E-rate changes, which FCC officials said would fund libraries based on their square footage, in filings posted in docket 13-184 Wednesday and Thursday. CenturyLink protested another element of the plan to eliminate E-rate funding for voice services, arguing funding of the services is required by the Telecom Act. Under Wheeler’s draft, libraries would receive $1-per-square foot, said Reed Hundt, who represents the Urban Libraries Council, though FCC Managing Director Jon Wilkins said during a media call Tuesday (CD July 2 p2) the figure is still being negotiated. Seattle public libraries total 633,000 square feet, and the cost of delivering Wi-Fi over five years is $4 to $5 per square foot, said Seattle Public Library Director-Information Technology Jim Loter in a letter (http://bit.ly/1vBUh09). Using square footage “is unfair to urban libraries, and to our patrons who are disproportionately low-income, unemployed or underemployed. ... Wi-Fi is essential to our urban patrons,” the filing said. “If square footage is used as the basis to allocate E-rate funding for Wi-Fi, we fear urban libraries will not be adequately funded,” the New York Public Library said in a letter (http://bit.ly/1zaJdMc). While supportive of E-rate modernization, “it would be a mistake to discontinue support for voice services -- which actually are required by statute,” CenturyLink officials told aides to commissioners Ajit Pai and Michael O'Rielly on June 30, said an ex parte filing (http://bit.ly/1xmZEmG). Any reduction in voice support should be phased in over time and must apply equally to all types of voice services, including all technologies and bundled services, the telco said. Universal service support extends to the services of “telecommunications carriers” that “are supported by Federal universal service support mechanisms, the company said. “Standalone voice is among them, and in the USF/[Intercarrier Compensation] ICC Transformation Order, the Commission explained that voice, not broadband, is the USF-supported service, and it expressly required eligible telecommunications carriers to offer standalone voice service.” Wheeler’s plan calls for funding Wi-Fi connections within schools partly through eliminating funding for some services including voice, FCC officials said during the media call on the plan.
Plaintiffs who unsuccessfully contested the FCC 2011 USF/intercarrier compensation order (http://1.usa.gov/1r18uaa) (CD May 27 p1) before the 10th U.S. Circuit Court of Appeals were hurt by the sheer number of interests in the case, said attorneys involved in the case. Plaintiffs also were hindered by the court’s questionable decisions and the case’s complexity, they said Tuesday night at an FCBA continuing legal education seminar.
Mescalero Apache Telecom officials expressed concerns that the $250 per line monthly USF cap could stifle the development of basic and advanced services on the Mescalero Apache Reservation, during a June 25 meeting with officials from the telco, tribe and the Office of Native Affairs and Policy, said an ex parte filing (http://bit.ly/1wRC69k) in docket 10-90. The parties also discussed the IP transition and the possibility of appropriating $50 million of unused Connect America Funds for the Tribal Broadband Fund, said the filing posted Thursday. A draft FCC order would start tests of CAF Phase II funds for broadband experiments. (See separate report above in this issue.)