The Republican-led Federal Communications Commission, already under siege from the Democratic-controlled Congress on a slew of telecom issues, could be hearing lots more from lawmakers-from both political parties-on a federal-state panel’s controversial recommendation that would limit universal service support for wireless carriers in rural areas.
The Federal-State Joint Board, a creation of the 1996 telecom act, said it wants the FCC to enact a temporary cap on federal subsidies available to competitive eligible telecommunications carriers that currently draw on the high-cost fund in the universal service fund program to bring telecom service to rural citizens.
Rep. Edward Markey (D-Mass.), chairman of the House telecom and Internet subcommittee, set the tone for what the FCC is apt hear more of from Capitol Hill as federal regulators consider the joint board’s latest recommendation.
“After literally years of inquiry and deliberation, yesterday’s joint board decision is a major disappointment and a setback for true reform,” Markey stated. “The joint board appears to want to battle an oncoming tsunami with bows and arrows. The joint board largely punts difficult decisions, yet again, to a later time. Its recommended ‘interim, emergency cap’ is anti-competitive, denies rural consumers the choices they deserve, and, if history is any guide, is unlikely to be interim.”
Senate lawmakers previously made similar points in written correspondences to the board, led by FCC member Deborah Taylor Tate and Oregon Public Utility Commission member Ray Baum, and have backed technology neutrality in USF reform legislation. Tate is the strongest ally of FCC Chairman Kevin Martin, who largely blames wireless CETCs for the skyrocketing high-cost USF fund.
Reverse auction comments
The joint board 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 board also asked for public comment on various issues, including a reverse auction approach for high-cost USF support in rural areas. The FCC’s 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 CETC.
Cellular industry groups blasted the board’s recommendation.
“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.”
Small landline telephone companies applauded the board’s recommendation. So did the ranking member of the House Commerce Committee, with a caveat.
“I am glad to see that the joint board is advancing the discussion on needed Universal Service Fund reform. This is a necessary step in the process. The Universal Service program is broken, and needs wholesale reform. As this discussion continues, my preference is that we take a more comprehensive approach that addresses wireline carriers as well, rather than one that just caps funds used primarily by wireless carriers,” said Rep. Joe Barton (R-Texas).
The high-cost rural component program accounts for about $4 billion of the total $7.2 billion USF, but incumbent rural wireline carriers benefit in dollar terms far more than mobile-phone operators.
In one FCC filing, a group of small wireless carriers pointed to a 2006 Federal-State Joint Board Monitoring Report showing incumbent local exchange carriers receiving $22 billion in high-cost support compared to nearly $2 billion for CETCs from 1999 through 2006. The mobile-phone industry draws less than the $2 billion it contributes annually to the USF.
Wireless Across America, a coalition of small cellular operators, urged the FCC “to reject this anti-competitive proposal and implement competitively neutral universal service funding approaches that will continue to implement the vision of the 1996 telecommunications act by fostering the development of competitive rural telecommunications services that are comparable to those provided in urban America. Rural consumers deserve the same choice of telecommunications services as their urban neighbors.”
A trade group representing competitive telecom companies said the joint board’s recommendation is illegal and unfair.
“Federal law directs the joint board and the commission to ensure that rural and high-cost consumers enjoy the same access to and benefits from telecommunications and information services that consumers in urban areas enjoy. By arbitrarily restricting needed high-cost support only for competitive carriers, this recommendation, if adopted, would favor entrenched incumbents and deny consumers in rural areas the competitive choices and access to mobile services that consumers in urban areas take for granted,” said Earl Comstock, president of Comptel. “This cap punishes consumers by limiting the ability of competitive carriers to grow in states they are already serving, and in some states where incumbents get millions in USF support would prevent competitors from getting any USF support at all. The commission should reject this recommendation and work expeditiously to enact comprehensive USF reform that ensures incumbents and competitors are treated equally in their access to USF support.”
Michael Copps, one of two Democrats on the Republican-led FCC, said the joint board is unnecessarily delaying the hard decisions on USF reform and asserted the proposed cap on high-cost support for CETCs 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.”
Analysts at Stifel, Nicolaus & Co. Inc. predicted the FCC will adopt the proposed cap on high-cost support for CETCs, but added it is less clear how the panel and federal regulators will address long-term USF reforms. Major CETC recipients included U.S. Cellular Corp., Alaska Communications, AT&T Mobility, Sprint Nextel Corp. and Alltel Corp., with smaller carriers likely to feel more of a pinch if the FCC enacts the USF interim high-cost cap.
