USF reform continues slow progress

While Federal Communications Commission Chairman Kevin Martin talked up wireless technology and its potential to reach high-cost rural citizens at the cellular industry’s big bash in Orlando, key lawmakers, mobile-phone carriers and others are ratcheting up efforts to convince a federal-state panel not to cap wireless universal service fund support in upcoming reform recommendations.
Martin, who has repeatedly blamed federal subsidies for rural wireless service for the mushrooming universal service high-cost fund, supports capping USF support in rural areas through technology-neutral “reverse auctions.” Under such an approach, the entity bidding least-based on agreed upon service and funding criteria-would win USF high-cost support.
“Year over year CETC universal service payments continue to rise rapidly each year. This is in part because CETCs receive universal support based on the incumbent LEC’s [local exchange carrier] embedded costs or the per line support amount that the incumbent LEC receives,” said Martin in prepared remarks for a Federal Joint-Board meeting on universal service in late February. Martin’s dislike for the CETC regime dates back to 2001, the year he joined the agency under a different chairman and dissented from a ruling creating the current USF high-cost rules.
The USF high-cost fund, while ballooning, benefits incumbent LECs far more than CETCs. CETCs are synonymous with wireless carriers. The high-cost fund now stands at about $4 billion. Overall, the universal service fund was about $7 billion in 2005, with subsidies designed to ensure that consumers in rural areas, low-income consumers, schools, libraries, and rural healthcare providers have access to affordable and high-quality telecommunications and information services.
As the debate on USF reform intensifies, the FCC continues to sit on a slew of wireless CETC applications, some dating back to 2003 and 2004. The FCC only this year acted on a wireless CETC application filed by Smith Bagley Inc. in 2002.
In an FCC filing, a group of small wireless carriers pointed to a 2006 Federal-State Joint Board Monitoring Report that showed incumbent LECs received $22 billion in high-cost support compared to nearly $2 billion for CETCs from 1999 through 2006.
The mobile-phone industry, which draws less than the $2 billion it contributes annually to the USF, does not want to be singled out by the imposition of a wireless-only cap. The Joint-Board, led by Federal Communications Commission member Deborah Taylor Tate and Oregon Public Utility Commission member Ray Baum, is expected to issue USF reform recommendations in the next month or so.
Senate lawmakers are now urging the Joint Board to consider alternatives other than proposals that could drastically reduce universal service fund support for wireless carriers in rural areas.
“Instead of limiting rural consumers’ options, the Joint Board should focus its efforts on even-handed interim and long-term reform measures,” stated Sen. Jay Rockefeller (D-W.Va.) and four other members of the Senate Commerce Committee in a letter to the Joint Board’s co-chairs. “It seems worthwhile to us that the board should seriously consider competitively neutral proposals, ensure accountability for how funds are used, and promote buildout of advanced services in rural regions through effective targeting of funds to high cost areas.”
The lawmakers also seem to suggest they specifically do not want a wireless-only cap for high-cost USF support. “We also believe a cap, especially one imposed on certain carriers, would not provide incentives to all stakeholders to engage in thoughtful negotiations on how to best reform the USF,” Senate Commerce Committee members stated. “Although the cap is reported only to be a temporary cap, we are concerned that it would become a de facto permanent cap. Unless all recipients have an incentive to find solutions to controlling the growth of the USF, we do not believe that the Joint Board or the FCC would ever be able to adopt measures to reform and modernized the administration of the USF.”
Alltel Corp. agreed, warning Joint-Board co-chairs last week that a wireless-specific cap on USF high-cost support “effectively would retard universal service by making it harder for rural consumers to access the type of services a majority of consumers want-affordable, high-quality mobile universal service.”
CTIA also rejects the notion of a wireless-only USF cap.