WASHINGTON-The government is expected to begin collecting subsidies from all eligible telecommunications providers this week for the universal service fund.
The Federal Communications Commission recently adopted an order outlining the amount of money it plans to raise during the first six months of 1998 for the USF aimed at wiring schools, libraries and rural health-care centers. The amounts mentioned in the order-$625 million for schools and libraries, and $50 million for rural health facilities during first- and second-quarter 1998-is substantially lower than what was expected last May, but those numbers could rise.
Subsidy collection begins Jan. 1, even though Rep. Thomas Bliley (R-Va.), chairman of the House Commerce Committee, wanted to delay such collections until their impact on consumers could be assessed.
“We choose not to delay the development of the new universal service funds the commission has created pursuant to requirements of the Telecommunications Act of 1996,” commented FCC Chairman Bill Kennard. “Common sense tells us that universal service is simply too important to put off until tomorrow, even if it may be difficult to do today.”
The USF contributions-which many carriers have called a tax-will be passed on to consumers, either out in the open via line items contained on bills or just through service charges not broken out on the statements. The commission’s order did not tell carriers what to do one way or the other, although Kennard did say it did “not prohibit any disclosure.”
According to Tom Wheeler, president of the Cellular Telecommunications Industry Association, wireless carriers will note charges for universal service on their bills. Indeed, Sprint Spectrum L.P. has been including the charges for some time in Kansas, where the state assesses a surcharge.
Besides protests from Bliley, three other glitches surfaced regarding the USF-one before the order was adopted and two regarding its adoption.
A Dec. 12 letter to Kennard from Senate Commerce Committee chairman John McCain (R-Ariz.) asked about a rumored agreement between long-distance carriers and FCC staffers, certain other congressmen and the Clinton administration that USF fees be listed on business bills but not on consumer bills.
McCain decried the alleged cover up, saying consumers had a right to know why their bills would be going up and carriers had an obligation to disclose such charges.
“I agree with Sen. McCain that these charges should be shown on the bills, and wireless carriers also share that belief,” CTIA’s Wheeler said. “We’ve always supported contributing to the USF, although we may have some differences with the contribution formula.”
He continued, “This issue is bigger than universal service. This issue exposes the dirty little secret between the government and other carriers that carriers could put [USF fees] into the rate base and users had no choice but to pay them. In a competitive environment, this can’t exist.”
As telecom carriers begin to compete on price, they can’t add government mandates without breaking them out on the bill, Wheeler said, “otherwise, you’re not competing on price. The kind of competition the government and this industry is providing mandates a separate line item.”
While Kennard in a Dec. 15 press conference affirmed that wireless carriers were going to break out the item on their bills, he added, “but not all carriers will be in lockstep. Carriers can recoup costs in any reasonable manner without raising rates.” Long-distance carriers, for example, have no reason to pass on USF fees because of recent reductions in access charges they received from local exchange carriers that make up for the contribution.
Kennard and fellow commissioner Susan Ness both reiterated that USF contribution equations were debated in public by the industry, and that nothing was done behind closed doors with any entity. However, some in Congress do not believe that is exactly true.
A Dec. 19 letter to Kennard from McCain and Bliley again brought up talk that the FCC and the Clinton administration had engaged in talks with “major long-distance carriers to agree not to put line-item charges on residential phone bills until at least July … The fact that the commission and the administration have apparently engaged in substantive, nonpublic dealings with selected carriers on long-distance rates raises unavoidable questions about whether the commission’s Dec. 16 actions comply with the minimum requirements of due process under the Administrative Procedures Act.”
The congressmen asked Kennard to supply lists of all meetings and phone calls on or before Nov. 1 dealing with this issue plus a summary; they also want unredacted copies of any written materials that may have been circulated. In addition, Bliley and McCain want a written analysis supporting the commission’s closed-door meetings, of its authority to regulate long-distance carriers’ billing practices, why such carriers should be able to craft their bills as they see fit and a side-by-side comparison between the first USF figures in May and the ones adopted earlier this month. Response is expected by Jan. 12.
In apparent agreement with the congressmen, Commissioner Harold Furchtgott-Roth, who dissented on the order, said no consumer was allowed to comment on lowered universal service fees, only a “small, select group of businesses.” He cited a Dec. 15 New York Times article that implied the FCC had changed its mind on original fees proposed in May “after the carriers said the fee could lead to higher rates and after AT&T and MCI threatened to specify the charge on the bills they send to customers … Apparently, the agency worried that if millions of Americans began seeing such fees on their bills, popular support for deregulating the telecommunications industry could begin to erode.”
Furchtgott-Roth said he would not support any plan to build USF funds into a rate base or masking them on a billing statement. “I was not a party to these negotiations. I suspect that hundreds of millions of American consumers were not a party, either,” he wrote in a separate statement accompanying the USF order. “I am reluctant to support any new fees or taxes on consumers; I will never support any new fees or taxes negotiated in secret, without public notice or comment.” He also agreed with congressional attempts to halt the Jan. 1 implementation of fee collection until an awaited report on universal service is released sometime next spring by the office of Sen. Ted Stevens (R-Alaska.)
“That study will provide the most appropriate proceeding in which to review the commission’s approach to universal service and to ensure that that approach is consistent with congressional intent,” the commissioner wrote. “I see no need to begin implementing these programs on Jan. 1, 1998, in the fact of such direct congressional concerns. Indeed, in response to recent questions from Chairman Bliley, Chairman Kennard agreed that this date is not statutorily required, but rather `the earliest feasible date.’ “
Agreeing in part with Furchtgott-Roth was Commissioner Michael Powell who, while voting for the USF item, did admit that his fellow panelist “raises a number of sobering and extremely valid questions about our entire universal service approach. In particular, I am troubled that we are marching ahead with mechanisms and procedures that are premised on prior commission decisions that are still under reconsideration. I sincerely hope that we take the opportunities presented by future reconsideration orders and, as Commissioner Furchtgott-Roth recommends, the Stevens report, which is due to the Congress in April of next year, to examine fully our current and future universal service efforts.”
