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FURCHTGOTT-ROTH STANDS ALONE IN DEFENSE OF WIRELESS CARRIERS

WASHINGTON-Four of the five members of the Federal Communications Commission have chosen to ignore wireless carriers in the ongoing debate over universal service funding. The one exception is FCC Commissioner Harold Furchtgott-Roth, who again last week stated emphatically that any reductions in universal-service fees afforded to wireline phone companies would not be granted to wireless carriers.

Furchtgott-Roth repeatedly has said that since wireless carriers do not pay local phone companies to connect long-distance calls-fees known as access charges-wireless carriers should not be required to pay as much into the universal-service fund as wireline carriers. “To be sure, there will be some offsetting reductions in access charges for some consumers, but not for all. And there will be no offsetting reduction in access charges whatsoever for wireless customers, who will simply have to pay higher rates,” Furchtgott-Roth said at a Senate hearing.

The FCC is struggling over how to fund connections to the Information Superhighway for schools, libraries and rural health-care facilities, low-cost phone service for rural America, and telephone subsidies for low-income customers-programs collectively known as the universal service fund-and how these costs are being passed on to consumers.

The three largest long-distance companies, AT&T Corp., MCI Communications Inc. and Sprint Corp., all have announced recent increases in consumer long-distance rates to pay for universal-service-fund contributions. The FCC has disagreed with these increases, claiming that access charges have been reduced so long-distance companies don’t need to raise rates to pay for universal-service contributions. The long-distance companies simply should shift the money that used to be paid for access to pay for universal service, the FCC argued.

However, that strategy doesn’t work for wireless carriers. Since they don’t pay access charges, they would not benefit from any such reductions.

The FCC’s plan is simplified this way: If the FCC reduces access charges by $1, but all carriers-including wireless-are assessed $2 for universal service, the net amount that wireline carriers must charge customers is $1 while the net amount wireless carriers must charge customers is $2. Wireless customers will pay more in the end than wireline consumers, said Kevin Martin, a legal adviser to Furchtgott-Roth.

The official FCC response says wireless customers should not experience any increase. Wireless prices have gone down because of the competitive policies the FCC has promoted, so wireless consumers can absorb any increases necessary to fund universal service as their total bill will be lower.

It is not clear what reductions and offsets the FCC will propose for the universal-service fund. At press time, the FCC had given itself until midnight Friday to rule on the amount of universal-service contributions. It is doubtful this ruling will include an explanation of why wireless carriers are not experiencing universal service reductions.

In addition to changes in contributions, FCC Chairman William Kennard indicated at the hearing held by the Senate communications subcommittee that more surgery would occur to the universal service fund-particularly the portion used for Internet connections for schools and libraries.

Kennard attempted to assuage concerns about the so-called schools and libraries fund by suggesting a variety of changes to the program to make better use of the money that has been and will be collected, including ensuring that neediest schools would receive first priority for funding.

Sen. Conrad Burns (R-Mont.), chairman of the communications subcommittee, again called for using half of the 3 percent excise tax on telephone calls to pay for universal service. All commissioners said they were intrigued by the idea, but Kennard expressed skepticism as to whether the realities of congressional scheduling allowed enough time for the idea to pass.

Although most of the focus of the hearing was on the whats and hows of universal service, the purpose of the hearing was to explore improvements to the FCC in the guise of reauthorization. The FCC technically has been a non-authorized federal agency since 1992, Burns said.

Notwithstanding this, FCC reauthorization will not occur this year, said Sen. John McCain (R-Ariz.), chairman of the Commerce Committee.

For his part, McCain was not kind to the FCC’s Wireless Telecommunications Bureau. McCain strongly criticized that 16 employees work directly for Chief Daniel Phythyon. “This large front-office cadre has managed to produce a grand total of 15 items during the first six months of Chairman Kennard’s tenure-less than one item per front-office employee,” McCain said in his opening statement.

McCain further indicated he would use FCC reauthorization legislation, to be introduced early in 1999, to “amend the dysfunctional parts of the 1996 Telecom Act, which is not working the way its supporters intended.” McCain was one of only five Senators to vote against the telecom act.

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