rederick M. Joyce, Esq.
It is a time-worn political axiom that no candidate ever lost a vote by speaking in favor of Mom, apple pie, and the American flag. In 1996, politicians discovered something equally safe to advocate: Universal telephone service. For evidence of the ascendancy of universal service into the nation’s political lexicon, you need look no further than the Telecommunications Act of 1996; new universal service provisions commanded close to five single-spaced pages worth of that act’s text.
It is easy to imagine why. For a statute that has generated so much litigation and debate, the universal service provisions have received relatively little attention to date. After all, no politician would publicly oppose the notion of making telephone service available to everyone, any more than they would decry, well, motherhood. That said, there is an equally obvious difference between a national policy that is pro-mom, and one that is pro-universal service. The former doesn’t cost taxpayers one dime; the latter may well cost them a bundle.
For land mobile and other wireless operators guessing that universal service costs will not affect them, guess again. The process of defining the scope of universal service is well underway and the preliminary findings don’t look good at all for the commercial mobile wireless industry.
The Telecom Act
The Telecom Act set a daunting schedule for the Federal Communications Commission to implement the statute’s universal service requirements. Congress gave the FCC less than one month to organize a “Federal-State Joint Board” on universal service. That joint board was required to make its universal service recommendations to the FCC within nine months after passage of the act. The FCC has no more than 15 months from the original date of the act (Feb. 8, 1996) to “implement” the joint board’s recommendations. That means that by this spring, the wireless industry could be facing substantial additional regulatory expenses.
The Telecom Act requires the FCC to define the services that will be supported by federal universal service funds, and set a “specific timetable for implementation” of universal service payments. The statute also broadly defines who will be required to pay into this universal service fund: “All providers of telecommunications services should make an equitable and nondiscriminatory contribution to the preservation and advancement of universal service.” That definition is certainly broad enough to include commercial mobile radio services. And, if you believe that these “contributions” will be voluntary, don’t bother reading the rest of this article.
The joint board
The joint board was promptly organized to include a score of FCC and state utility commission officials. In early November, the joint board released its “recommended decision,” as required by the Telecom Act. That decision was more than 400 pages long, not including appendices and dissenting opinions from some of the board members.
The joint board recommended that the FCC require all interstate telecommunications providers, including CMRS carriers (paging, specialized mobile radio, cellular, personal communications services), to contribute to federal universal service funds. The board also recommended that the Telecom Act be interpreted so that states are not precluded from requiring telecommunications providers to also contribute to state universal support mechanisms. Left open for comment are issues surrounding the role of complementary state and federal universal service mechanisms, and whether the states have the ability to assess the interstate revenues of providers of intrastate telecommunications services to fund state universal programs. The board recommended that federal universal service support contributions be based on a carrier’s gross interstate and intrastate telecommunications revenues net payments to other carriers.
The joint board determined that only carriers that offer all the services supported by the federal universal service support mechanism throughout their service areas will be eligible for universal service support. These “supportable” services were defined to include: voice grade access to the public switched network, with the ability to place and receive calls; touch-tone or dual-tone multifrequency signaling or its equivalent; single-party service; access to emergency services; access to operator services; access to interexchange services; and directory assistance.
Since most CMRS providers cannot technically provide these services, if these recommendations are adopted by the FCC, many wireless operators will be forced to pay into the universal service fund without ever qualifying to receive universal fund payments to promote their CMRS services. There is no evidence in the joint board’s decision that the members of this body even considered that inequitable possibility.
Comments
The FCC invited interested parties to file comments on the joint board’s recommendations and on the FCC’s legal authority to implement those recommendations. The comment deadline was little more than a month after the release of the board’s magnum opus, allowing scant time for analysis of that lengthy decision. Such a brief comment period was presumably dictated by the statutory deadlines, not agency caprice.
Although the FCC’s staff is still assembling the dozens of comments that were filed in this proceeding, one trend is evident: CMRS operators were conspicuous by their absence from this debate. Only a few CMRS operators and their major wireless trade associations filed comments in response to the joint board’s decision.
Those that did file comments shared these common concerns: (1) land mobile wireless services have been excluded from eligibility for universal service payments; that is, CMRS operators will be required to pay into the fund, but, they will not be eligible to receive any payments from it; (2) the joint board has suggested that states may impose universal service fees on CMRS operators, even though such fees could constitute unlawful rate and entry regulations; and, (3) the land mobile industry is already marked by fierce price competition; therefore, these carriers should not be subject to the same payment obligations that monopoly carriers will face. One paging carrier stated that the universal service fee would be unconstitutional if imposed on CMRS operators, under the legal doctrine that there must be some corresponding benefit provided to those who are required to pay a tax.
The final word
It is certainly not the wireless industry’s fault that our nation does not have “universal service” today. Monopoly-pricing telephone companies, with guaranteed rates of return, had nearly 100 years to accomplish that goal. It strains at least this unsophisticated observer’s credulity to believe that the phone companies could not by now have delivered at least basic telephone service to virtually every person in the United States, if they tried. That they chose instead to pursue only the most cost-effective customers seems patently obvious.
Now, Congress has belatedly entered the telecom arena, to mandate what the phone companies should have accomplished on their own. Unfortunately, the most competitive sector of the communications industry-the mobile radio industry-has been dragged into the fray, to cure a problem it did not cause, with no likelihood of reward for its efforts.
The wireless industry is not without recourse, but time is short, and aggressive action is required. The joint board has acknowledged that the FCC has authority under the Telecom Act to exempt a carrier or class of carriers from contributing to the universal service fund, “if the carrier’s telecommunications activities are limited to such an extent that the level of such carrier’s contribution to universal service would be de minimis.” The land mobile industry ought to be loudly demanding such an exemption from universal service payment obligations, at least until their services
are eligible to receive federal support payments.
The goal of universal service is surely a noble one; but, someone will have to pay to achieve it. Indifference or inaction on the part of the wireless industry in this universal service debate could come at a very high price.
Frederick Joyce is a partner with the law firm of Joyce & Jacobs, Attorneys at Law, L.L.P. in Washington, D.C., where he specializes in communications, corporate and litigation matters. He can be reached at (202) 457-0100, or on the Internet via email at [email protected]
