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Questions loom whether FCC will address USF vote before new administration takes over

Federal Communications Commission Chairman Kevin Martin last week scratched a planned vote to reform the universal service fund and intercarrier compensation regimes, providing a temporary reprieve for small- and mid-sized wireless providers that oppose a plan to phase out hundreds of millions of dollars in federal subsidies for rural wireless deployment.
“I am disappointed that we will miss the opportunity for comprehensive reform,” said Martin. “Instead my colleagues have requested that we once again seek public comment on several proposals. As a result such a notice would make little progress and ask for comment again on the most basic and broad questions about reforming the two programs.”
The FCC chief added that he hoped the commission would be able to review the proposal at its Dec. 18 meeting. That meeting could be one of the last for Martin, likely to step down early next year when the Obama administration assumes power. As such, Martin has a small window to push out priority telecom measures.
Martin’s FCC colleagues insist USF and ICC reforms can still be enacted before year’s end.
“Three weeks ago, Chairman Martin first shared with the commission his proposals to fundamentally reform the intercarrier compensation and universal service systems,” stated Republican members Deborah Taylor Tate and Robert McDowell and Democratic Commissioners Michael Copps and Jonathan Adelstein. “Four commissioners provided the chairman bi-partisan, constructive and substantive suggestions, and stated that notice and comment should be sought on the proposals, with an understanding that we would all be prepared to vote on Dec. 18. We also have asked the chairman to narrowly address the ISP-bound traffic remand and the joint board’s recommendation.” The commissioners said they were disappointed Martin pulled the entire issue from the Nov. 4 agenda.
Martin had been under heavy pressure from industry groups and lawmakers to delay the vote on the USF/ICC item. The FCC chairman wanted to move forward anyway, but lack of support from other commissioners, state regulators and industry players ultimately forced his hand.
The parent companies of AT&T Mobility and Verizon Wireless and to a lesser extent, Sprint Nextel Corp., lobbied for USF/intercarrier compensation reforms along the lines sought by Martin. Cellular industry association CTIA acquiesced to a phase-out of rural wireless USF money – which has grown to more than $1 billion – but urged the FCC to find a replacement mechanism to fund wireless buildout in sparsely populated areas typically underserved by major carriers because they are uneconomical from a business standpoint.
Now, the FCC chairman’s USF/ ICC plan could be in jeopardy.
“Many observers on Capitol Hill and in the industry note that after Tuesday’s U.S. presidential election, reaching a consensus may be more difficult as industry stakeholders will be under less pressure to compromise and cut a deal,” said Jessica Zufolo, an analyst at Medley Global Advisors L.L.C.
Zufolo noted the FCC had to act by Nov. 5 on a D.C. Circuit Court of Appeals mandate, requiring the agency to provide more clarity on its compensation rules governing ISP-bound traffic. Another deadline comes Nov. 20 when the FCC must respond to the federal-state joint board’s recommendation on USF reform.
Analysts at Stifel, Nicolaus & Co. Inc. said they believe Martin has drafted an order on USF distribution reform that could, among other things, impose a new USF cap and utilize reverse auctions to underwrite expansion of rural telecom facilities.

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