WASHINGTON—Cutting wireless out of the universal-service system seems to be gaining traction with the introduction of legislation in the House of Representatives that would make it much more difficult for mobile-phone carriers to qualify for universal-service support. Further, the chairman of the Federal Communications Commission said the universal-service fund should not be used to create artificial competition.
Reps. Lee Terry (R-Neb.) and Rick Boucher (D-Va.) finally introduced their Universal Service Reform Act of 2006 after releasing a draft of the bill last year. The draft included provisions that hurt wireless, and the revamped version of the legislation does not improve wireless’ situation.
Terry, Boucher and FCC Chairman Kevin Martin are all concerned that competitive eligible telecommunications carriers, which are mostly wireless, are hurting the universal-service system.
The universal-service fund should not be used to create artificial competition, Martin told a Bank of America conference Wednesday evening “You do not want to create artificial competition in an area where it costs too much to have a network,” said Martin. “It is a very different policy decision to say we are going to subsidize the same number of competitors in Alaska as you have in Manhattan. That leads not to providing service but to competing for the subsidy.”
Responding to a question regarding the ability of wireless carriers to receive universal-service subsidies, Martin said, “If we had a limitless amount of money, maybe we could say that was a good thing to subsidize multiple competitors.”
Since the universal-service fund is shrinking, Martin said he prefers a reverse auction to determine which carrier would receive the subsidy. To qualify for the subsidy, a carrier would have to commit to being the carrier of last resort in an area.
The reverse auction would determine “how little subsidy do you need,” said Martin, noting the reverse auction should occur periodically.
“Reverse auctions are an interesting idea that are worth exploring. But the details are essential, especially given the chairman’s many public statements expressing reservation about wireless’ role in universal service,” said a wireless industry source who declined to be named.
The Terry-Boucher bill does not call for a reverse auction but rather contains vestiges of the current universal-service system.
The universal-service system was set up in the 1930s to bring telecommunications services to high-cost areas by using long-distance revenues. Complications arose when the Bell monopoly was broken up in the 1980s.
Universal-service support is distributed to rural wireline companies and other carriers, including wireless, who serve customers in rural-wireline territories.
Rural wireline carriers have long complained that the increasing number of wireless carriers that receive universal-service support is putting undue pressure on the fund. Martin seemed to agree, noting that “this combination of duplicative networks in rural areas and the ability to keep your old service and get wireless service” is quickly becoming unaffordable.
Carriers are able to receive support for all telecommunications services because Congress continues to prohibit the FCC from putting in place a primary-line restriction. The Terry-Boucher bill would continue this exclusion. If the FCC were to implement a primary-line restriction, only one carrier could receive support for one household. Under the current system, carriers receive support based on how many lines they serve. This system has allowed wireless carriers to receive support for serving rural customers even if those customers continue to use landline service in combination with wireless service. The Telecommunications Act of 1996 allowed universal-service support to become portable so carriers receive the support for the customers they serve.
The bill would expand the base of contributors to the universal-service fund by requiring any provider that primarily offers voice services to pay into the fund, regardless of whether the traffic is local or long-distance. Any carrier taking from the fund would be required to offer broadband services within five years.
