WASHINGTON-Four Senate telecom lawmakers plan to introduce universal service legislation this week aimed at preventing mandated Internet links for schools, libraries and rural health-care facilities from draining telephone service subsidies for poor and high-cost rural subscribers.
The bipartisan draft, authored by Sens. Ted Stevens (R-Alaska), John McCain (R-Ariz.), Conrad Burns (R-Mont.) and Ernest Hollings (D-S.C.), does not appear to directly address wireless industry concerns about universal service.
However, the measure would give wireless carriers a legislative vehicle to address these concerns. So far, in the escalating debate, wireless industry criticism of universal service has not hit home with federal regulators and lawmakers.
McCain, speaking at a U.S. Telephone Association gathering last Thursday, said the legislation will “require the Federal Communications Commission to make good on its promise to pay for these new programs out of currently planned access-charge reductions and without increasing consumers’ bills, to pare down the multimillion-dollar overhead currently projected to administer the new subsidy programs, to distribute these subsidies to eligible recipients based on need and, hopefully, to allow nonfederal authorities more latitude in determining how these subsidy funds should be distributed in each state.”
Lauren “Pete” Belvin, majority counsel to the Senate Commerce Committee, confirmed the legislation would be introduced prior to the FCC’s universal-service report to Congress April 10. Part of the bill will require the commission to show, in dollars and cents, how universal service will be funded by access-charge cuts. If it cannot, Belvin said, changes will have to be made.
The FCC originally wanted to spend $2.25 billion to connect schools, libraries and rural health-care facilities to the Internet. But the agency scaled back that amount last December to correspond with anticipated weaker demand at the outset of the program.
In addition, last month the General Accounting Office found that two entities created by the FCC to administer monies earmarked for libraries, schools and rural areas-The Schools and Libraries Corp. and the Rural Health Care Corp.-were illegal, and this spurred even more intense scrutiny of the commission’s universal-service agenda.
“The wisdom of creating these enormous bureaucracies was always questionable,” McCain said. “Whatever money would be spent in administering these corporations could otherwise go toward funding the technological advancements.”
He continued, “I don’t even want to get into the fact that the FCC is still holding the bag on the current high-cost subsidy. Let’s let it go for today by saying that, without some basic adjustments in the way the FCC seems to be proceeding, this is yet another litigation accident waiting to happen. I would only caution again, as I have before, that at some point competition will require policy makers to target existing subsidies more precisely than we now do, regardless of the cost methodology we use to compute them. For now, policy makers can run from this issue, but they can’t hide forever.”
According to Mitch Rose, chief of staff to Sen. Stevens, his boss agrees with McCain regarding an impending “train wreck,” in that universal-service collection rates could double during the third and fourth quarters of this year.
Since the passage of the 1996 telecom act, Stevens and Burns repeatedly have expressed reservations about the implementation of universal service mandate by the FCC.
Stevens also believes that much of the FCC’s projected costs of universal service can be attributed to trying to wire all schools and libraries by 2000-an election year-and that this should not be part of the debate because that timetable was not part of the 1996 telecom-reform act.
Connecting schools, libraries and hospitals to the Internet is a pet project of Vice President Gore, a leading Democratic candidate for the White House in 2000.
“There could be a bipartisan report to limit inside wiring of these places,” Rose said. “We are concerned that universal service is becoming a sacred cow. There is no such thing as a free lunch, and this program has been sized wrong from the beginning.”
“We are generally interested in anything to squeeze down the size of the bubble of universal service funds,” said Allan Ciamporcero, chief of staff for government relations at the Personal Communications Industry Association.
“We’re looking for the most efficient universal service support system.”
PCIA has been vocal about the financial burden of universal service on paging carriers, which must contribute to the fund without a chance of drawing on it, and on new personal communications services licensees that have spent hundreds of millions of dollars buying licenses and building advanced networks.
Similarly, the Cellular Telecommunications Industry Association has ratcheted up its criticism of federal, state and local levies imposed on mobile phone service providers.
As a result, Bell Atlantic Mobile announced in its February billing that cellular customers will be charged an additional 62 cents beginning this month. Other carriers are expected to take similar actions.
CTIA has asked the FCC for clarification on interstate-intrastate revenue separation, resale issues, roaming revenue reporting and treatment of bundled offerings and fraud-related uncollectables.
“Absent quick resolution of these issue,” CTIA told the FCC recently, “the commission runs the risk of violating the statutory mandate to assess all telecommunications carriers on an `equitable and nondiscriminatory’ basis.”
In remarks prepared for delivery at the FCC’s en banc hearing on universal service last Friday, Haynes Griffin, chairman of Vanguard Cellular Service, reiterated the industry’s opinion that commercial wireless services are subject only to federal, and not state, universal-service requirements. And instead of caving into pleas by some states and their related telcos serving rural areas that more universal-service responsibility should be shifted to the federal government, Griffin said the commission should stick to current levels rather than creating “new subsidies at the federal level for what are now intrastate costs.”
Vanguard serves a “significant” rural population, Griffin said, and it hopes to draw more from existing universal-service funds to continue serving rural customers. Interstate jurisdictions contribute 25 percent to universal-service cost-recovery funds, and the remaining 75 percent comes from intrastate jurisdictions. Telcos have been able to recover the costs of serving rural and high-cost customers via the interstate/intrastate formula currently in place, and no changes are needed.
“Today, all jurisdictionally intrastate costs are recovered through existing intrastate charges, and rates generally are reasonable,” he said. “In fact, rates often are lower in rural areas than in urban ones. If the total costs recovered through interstate charges remain the same, there is no reason for average intrastate rates to increase anywhere in the country. In practice, any increase in the interstate portion of universal-service funding caused by shifting costs out of the intrastate jurisdiction and into the interstate jurisdiction would be a new subsidy in addition to those that already exist.”
Shifting more costs to interstate jurisdictions “might help state regulators avoid difficult political choices,” Griffin concluded, but such action would do nothing toward changing the costs that must be recovered.
