Mobile-phone carriers blasted a new Federal Communications Commission proposal to cap wireless universal service support in rural areas.
The FCC plan, based on a recommendation by the Federal-Joint Board on Universal Service, is a stop-gap attempt to limit a growing high-cost component of the universal service fund-one accounting for about $4 billion of the $7 billion total USF-while policy-makers pursue broader reforms to the entire program.
“The joint board’s recommendation to cap funding to wireless carriers evidences a lack of institutional memory and a disregard for good policy,” stated the Alliance of Rural CMRS Carriers. “As board member Billy Jack Gregg correctly pointed out in his recent testimony to the Senate, the FCC’s current policy failure flows from its decision some eight years ago to allow wireline carriers to not lose support, even as they lose customers. Policy-makers should be increasing support to wireless voice networks to ensure public safety, accelerate economic development in rural areas, and provide consumers the ability to choose high-quality wireless service.” Gregg is the consumer advocate for the West Virginia Public Service Commission.
Wireless carriers classified as competitive eligible telecommunications carriers benefit from the high-cost fund, but not to the extent that incumbent rural telephone companies do. Wireless carriers argue they bring competition to rural areas. But FCC Chairman Kevin Martin replied that providing high-cost support for multiple cellular operators in the same market runs astray of the program’s primary objective and is financially unsustainable.
“Before I became chairman, I dissented from this commission policy of using universal service support as a means of creating government-managed competition for phone service in high-cost areas . I also warned that this policy could make it difficult for any one carrier to achieve the economies of scale necessary to serve all of the customers in a rural area, leading to inefficient and/or stranded investment and a ballooning universal service fund,” said Martin in written responses to questions from House telecom subcommittee Chairman Edward Markey (D-Mass.). “I remain hesitant to subsidize multiple competitors to serve areas in which costs are prohibitively expensive for even one carrier.”
Higher-cost payments to wireless
A major flaw in the system that needs repair, according to officials, is that wireless ETCs receive high-cost USF support based on heftier landline carrier costs of bringing telephone service to rural customers.
“Since 1998, ILEC’s [incumbent local exchange carriers] have received roughly $24 billion in USF support while wireless carriers have received about $2 billion. Instead of arbitrarily limiting the choices available to rural consumers-who like every other American consumer is interested in high-quality mobile telecommunications services-these statistics suggest we should be pursuing more substantive and wholesale reforms to the broken USF system,” stated cellphone association CTIA.
The joint board wants the emergency interim cap to apply until one year from the date that it makes its recommendation on comprehensive high-cost universal service reform. Some worry a temporary cap could last at least two years, maybe much longer. The FCC is also looking into revising the formula for contributions to the USF, with the wireless industry and other telecom sectors supporting Martin’s idea of a numbers-based approach rather than the current revenues-based system.
“We appreciate chairman Martin’s remarks . in support of moving to a numbers-based USF contribution methodology as soon as the fall,” stated a coalition including CTIA and a broad cross section of telecom sectors, following a speech by the FCC chief. “We look forward to working with the chairman and his staff to reform the outdated revenues-based collection system, and to implement a numbers-based collection system that would be better for consumers, the telecommunications industry and the government.”
In contrast, the distribution of USF rural subsidies-particularly the proposed cap on wireless ETC support-is far more combustible in USF reform efforts.
No impact on ILECs
“The joint board’s proposal would cut funding to wireless and other competitive providers of universal service by 50% or more, while having no impact at all on funding to ILECs,” Richard Massey, general counsel of Alltel Corp., told the Senate Commerce Committee in a recent filing. “This unfair and anti-competitive recommendation effectively would hinder universal service by making it harder for rural consumers to access the type of services that a majority of consumers want-affordable, high-quality mobile universal service.” Alltel is a recipient of USF high-cost support in 27 states.
Maine Gov. John Baldacci (D) has asked Sen. Olympia Snowe (R-Maine), a member of the Senate panel, to help combat the planned cap on the universal service high-cost fund.
“Given Maine’s significant need for infrastructure development, I am deeply troubled by the notion of capping rural CETC funding just when our two wireless ETCs are aggressively building new rural network facilities,” sated Baldacci in a May 8 letter to Snowe. “I certainly understand the need for proper stewardship of the universal service mechanism. However, even if FCC Chairman Martin’s estimate-that funds to CETCs will grow by $300 million in 2007-comes to pass, the projected growth would be less than 5% of the total $7 billion fund-hardly an emergency situation.”
