Carriers aim to push back on USF reform

Wireless providers continue to push back against proposed reforms to the stressed universal service program for rural America, arguing that they are being penalized at a time when consumers increasingly demand the kind of mobility and broadband capabilities that wireless technology provides.
The FCC is seeking to impose a cap on universal service subsidies for competitive eligible telecom carriers – mostly wireless – that serve rural areas; to utilize a reverse auction approach to award high-cost USF support to telecom carriers that can provide service at the lowest cost; and to abolish a policy whereby wireless carriers serving rural areas receive government support based on costs of rural landline telephone companies.
The USF has grown to about $7.4 billion, with the ballooning high-cost component accounting for more than half of that total. While mobile-phone carriers have benefited to the tune of hundreds of millions of dollars in government subsidies, rural landline telephone companies collectively account for most of the high-cost USF subsidies.
None of the high-cost USF proposals has attracted anything close to wholesale support from national, regional and rural wireless carriers.
The FCC, acting on recommendations of the Federal-State Joint Board on universal service, is nearing a soft deadline of May 1 on whether to cap the high-cost fund. FCC Chairman Kevin Martin last week said he still needs a third vote to approve the measure. Fellow Republican Commissioner Robert McDowell is believed to be the vote Martin lacks for an item that’s been pending for months.
“I think this is also a very significant issue from a deregulatory perspective for people concerned about growth in universal service funds and growth in government,” said Martin at a press briefing. “These are carriers that are not filing any of their costs with the commission today, and I think it’s important that we try to contain and control those costs – particularly for money that’s going out to carriers that we don’t know what they’re using that money for. That has been the single largest area of growth for the universal fund since I arrived at the commission.”
While the wireless industry agrees the high-cost universal service fund – originally designed to subsidize monopoly wireline voice networks – needs reform, it argues the FCC is going about it in a way that discriminates against cellular carriers that offer consumers increased choices of wireless and broadband offerings through their competitive presence in rural areas. Major recipients of the high-cost fund include Alltel Corp., U.S. Cellular Corp., AT&T Mobility, Rural Cellular Corp. and Dobson Communications Corp. (acquired last year by AT&T).
“In the current environment, the congressional mandate of competitive neutrality has become more crucial than ever,” stated cellular association CTIA in response to the FCC’s reverse auction and identical support proposals. “The commission should be wary of proposals that would violate that important principal. Wireless carriers should not, for example, be segregated into a separate fund that is rigged to provide less support than that provided to incumbent local exchange carriers. Locking in almost three times as much high-cost funding for ILECs than is available to mobile wireless and other competitive eligible telecommunications carriers cannot be consistent with the competitive and technology-neutrality requirements of the [telecom] act.”
Various lawmakers agree with the wireless industry position, and have urged the FCC against revising high-cost universal service fund rules in a way that effectively punishes a particular segment of the telecom industry: wireless.
The Rural Cellular Association and the Alliance of Rural CMRS Carriers are particularly critical of FCC efforts to overhaul the high-cost universal service fund. “The commission’s proposals display an obeisance to an existing system that is seriously flawed, that continues to reward inefficient investments and operations by entrenched incumbent carriers, and that fails to ensure that consumers in rural and other high-cost areas have an opportunity to share the advances in telecommunications technologies that have benefited consumers in urban and suburban communications across the nation,” the groups stated.
Adding to controversy is a dispute over whether the FCC should exempt General Communications Inc., an Alaska-based telecom firm, from any cap imposed on universal support for competitive eligible telecom carriers seeking to serve rural locales.