DENVER-Federal and state telecommunications officials prodded almost every aspect of the universal-service program at a hearing here last week, focusing mainly on the major effects from wireless, in an attempt to determine whether the fund needs to be changed-and if so, how.
“The time for this proceeding is ripe,” said Nan Thompson with the regulatory commission of Alaska.
“There’s a ton of issues here,” said Kathleen Abernathy, a commissioner with the Federal Communications Commission. “A lot of questions have centered on wireless.”
The FCC is examining the universal service fund because there is a concern that it could go bankrupt as long-distance revenues plummet. Indeed, wireless is affecting both sides of the fund, which was outlined in the 1996 Telecommunications Act. The fund ensures rural Americans receive the same telecommunications services as those in urban areas by essentially subsidizing the buildout of rural networks through taxes on the long-distance bills of urban callers.
On the taxation end, one reason long-distance revenues are shrinking is that buckets of minutes where consumers pay one price for local and long-distance-offered almost exclusively by wireless carriers-have become increasingly popular. On the other end, wireless carriers have begun seeking competitive eligible telecommunications carrier (ETC) status in order to dip into the universal-service fund.
Representatives from a wide variety of interests testified before the federal-state joint board, with many insisting that USF rules need to be changed to address the differences between wireline and wireless service. Some wireline proponents argued that wireless carriers should not have access to USF money, while others maintained that new mechanisms must be set up to account for the differences of wireless carriers.
Today, states can bestow ETC status on carriers looking to compete with the wireline incumbents that serve rural areas. Such competing ETC carriers earn USF money depending on how many lines of service they sell. Incumbents are subsidized the same way.
Wireless proponents largely argued that the universal-service fund should remain essentially untouched, and that wireless carriers be allowed to foster competition in rural markets and provide the same services now available in urban markets.
“For every dollar wireless carriers receive from the universal service fund, the incumbent wireline telephone companies have increased their take by more than 15 times,” said Steve Barry, senior vice president for government relations for the Cellular Telecommunications & Internet Association. “Wireline carriers still take 96 percent of the support flowing from the high-cost fund. The high-cost fund was never intended to be an exclusive subsidy for rural wireline carriers.”
The high-cost fund portion of the universal-service program accounts for the majority of carrier subsidies.
Debate on the USF program spanned the gamut, from whether competitive carriers should be subsidized to whether they should be subsidized at a lower rate than the incumbent to whether all ETCs should be held accountable for their service. A particularly spirited exchange centered on the benefits of wireless in rural areas, with Western Wireless President Mikal Thomsen defending the technology against wireline proponent Mike Strand of the Montana Universal Service Taskforce.
“We currently provide significantly better coverage … than wireline providers,” Thomsen said.
“That’s one of the most ludicrous statements I’ve ever heard,” Strand responded, drawing audience chuckles over Verizon Wireless’ advertisements. “Of course you can `hear me now’ on a wireline network.”
Abernathy and other members of the board questioned whether carriers that score access to USF subsidies should be held to a standard of service, and how that standard should be applied. Board members also questioned whether the current USF per-line funding method should be replaced with one based on overall network costs. Many panelists expressed concern over the current funding methods due to the lower costs wireless carriers enjoy compared to wireline telephone providers in adding new customers.
“They get an unreasonable amount of public money,” said Gene Johnson with the Organization for the Promotion and Advancement of Small Telecommunications Companies.
Don Wood, speaking for the Rural Cellular Association, said wireless carriers use subsidies from the USF program to invest in rural network buildouts, thus supporting additional customers.
“I’m having a hard time figuring out why that’s bad public policy,” he said. “We have to look at what we want to fund long term.”
Some of the board members’ questions served to highlight potential modifications to the universal-service fund.
Abernathy again floated a proposal that could require states to conduct a cost-benefit analysis of various rural areas and rural carriers in an attempt to determine whether competition would improve telecommunications services.
Board member Billy Jack Gregg, with the West Virginian consumer advocate division, floated another potential modification he called “presumptive benchmarks.”
Under the tiered approach, rural markets around the country would be separated into groups based on the cost of service per line, and the number of subsidized carriers in each area would be limited depending on such costs. For example, in areas where lines cost $30 or more only one carrier would be subsidized, but in areas that cost $20 to $30 per line two carriers would be subsidized.
The joint federal-state board will offer its proposals to the FCC, which will then make a ruling on whether the USF program will be modified, and if so, how.
