Emergency USF cap draws fire

The cellphone industry blasted a federal-state panel’s recommendation to enact an emergency cap on universal service fund support for carriers in rural areas.
The proposed temporary fix for the ballooning high-cost fund-which provides about $4 billion in subsidies to wireline and wireless carriers in rural locales-would hit wireless carriers the hardest because most eligible telecommunications carriers receiving support are wireless operators.
“Almost three years after being assigned the task of developing recommendations to reform the high-cost universal service system, the Joint Board has missed the mark,” said Steve Largent, president of cellphone association CTIA. “The Joint Board’s bias toward legacy wireline networks will undoubtedly disadvantage rural consumers, the majority of which now view wireless as their primary mode of telecommunication. In neglecting to propose a comprehensive set of technology-neutral, market-oriented reforms to the high-cost universal service system, the Joint Board has effectively told rural consumers that they don’t deserve high-quality wireless services.”
The Federal-State Joint Board, created by the 1996 telecom act, said it plans to make recommendations for comprehensive high-cost universal service reform within six months, and would like FCC to act on follow-up recommendations within one year from the date of its next action. As such, the Joint Board also asked for public comment on various issues, including a reverse auction approach for high-cost USF support in rural areas. FCC Chairman Kevin Martin strongly backs the idea of awarding high-cost support to the entity bidding the lowest to provide telecom service in rural areas, while wireless carriers argue USF funding should be available to more than one carrier.
Michael Copps, one of two Democrats on the Republican-led FCC, said the Joint Board is unnecessarily delaying hard decisions on USF reform, and that the proposed cap on high-cost support for eligible carriers may have made a bad satiation worse.
“I believe today’s recommendation misses the mark-it puts too many issues off to another day. It’s risky business,” Copps stated.
He added: “The Joint Board has two major referrals before it, one dating to 2002 and the other to 2004. These are complicated referrals, to be sure, but it is nevertheless entirely possible to come forward with recommendations on the outstanding issues with which we are all familiar. Instead the Joint Board proposes an interim, emergency cap that solves no enduring problem and that will be interpreted by many as movement enough to justify putting the larger universal service reform imperative on the back-burner. I fear today’s action diminishes rather than enhances the prospects for near or even mid-term reform.”
Analysts at Stifel, Nicolaus & Co. Inc. predicted the FCC would adopt the Joint-Board’s proposed cap on high-cost support later this year, but added it is less clear how the panel and federal regulators will address long-term USF reforms.
“A CETC (competitive eligible telecommunications carrier) cap could be problematic for some wireless carriers tapping USF for support, particularly smaller carriers such as U.S. Cellular [Corp.] and Alaska Communications (which is also an incumbent), and we note that wireless carriers could challenge an FCC order in court,” the analysts stated.