Martin drops USF, intercarrier compensation from Nov. 4 FCC vote

Federal Communications Commission Chairman Kevin Martin has scratched a planned Nov. 4 vote on reforming the universal service fund and intercarrier compensation regimes. The move is a temporary reprieve for small- and mid-size mobile-phone operators that oppose a plan to phase out hundreds of millions of dollars in federal subsidies for rural wireless deployment, and stands as a turnabout that, after tomorrow’s presidential election, could significantly alter the political dynamics surrounding the two controversial issues.
“I am disappointed that we will miss the opportunity for comprehensive reform,” said Martin. “Instead my colleagues have requested that we once again seek public comment on several proposals. As a result such a notice would make little progress and ask for comment again on the most basic and broad questions about reforming the two programs.”
The FCC chief added: “I would like to be encouraged by my colleagues’ commitment that they will truly be ready to complete this much needed reform on Dec. 18. The nature of the questions they would like to include makes me doubt they will have found their answers with an additional seven weeks. I believe the far more likely outcome is that, in December, the other commissioners will merely want another Further Notice [of Proposed Rulemaking] and another round of comment on the most difficult questions.”
“Three weeks ago, Chairman Martin first shared with the commission his proposals to fundamentally reform the intercarrier compensation and universal service systems,” stated Republican members Deborah Taylor Tate and Robert McDowell and Democratic Commissioners Michael Copps and Jonathan Adelstein. “Four commissioners provided the chairman bi-partisan, constructive and substantive suggestions, and stated that notice and comment should be sought on the proposals, with an understanding that we would all be prepared to vote on Dec. 18. We also have asked the chairman to narrowly address the ISP-bound traffic remand and the joint board’s recommendation. We therefore are disappointed that the chairman has withdrawn the fundamental reform item from tomorrow’s agenda,”
Martin has been under heavy pressure from industry groups and lawmakers to delay the vote on the USF/ICC item.
“We approached this proceeding with the common goal of modernizing our universal service and intercarrier compensation policies, and commend the desire to tackle some of the most important issues facing this commission,” stated the four commissioners. “It is equally important to ensure that any reform proposal receive the full benefit of public notice and comment – especially in light of the difficult economic circumstances currently facing our nation. We remain committed to fulfilling our obligation to tackle these difficult issues, and have set forth a reasonable path for completing comprehensive reform. We remain hopeful that the consensus process we have pursued regarding this issue will ultimately lead to a thoughtful, well-reasoned item that will inure to the benefit all Americans.”
The parent companies of AT&T Mobility and Verizon Wireless and to a lesser extent, Sprint Nextel Corp., pushed for USF/intercarrier compensation reforms along the lines sought by Martin. Now, the FCC chairman’s plan could be in jeopardy.
“Many observers on Capitol Hill and in the industry note that after Tuesday’s U.S. presidential election, reaching a consensus may be more difficult as industry stakeholders will be under less pressure to compromise and cut a deal,” said Jessica Zufolo, an analyst at Medley Global Advisors L.L.C.
Zufolo noted the FCC must act by Nov. 5 on a D.C. Circuit Court of Appeals mandate, requiring the agency to provide more clarity on its compensation rules governing ISP-bound traffic. Another deadline comes Nov. 20 when the FCC must respond to the federal-state joint board’s recommendation on USF reform.
Analysts at Stifel, Nicolaus & Co. Inc. said they believe Martin has drafted an order on USF distribution reform that could, among other things, impose a new USF cap and utilize reverse auctions to underwrite expansion of rural telecom facilities. “We’re skeptical he will be able to secure a majority for broad use of reverse auctions, but a new cap is not out of the question and it remains to be seen what else he may be proposing as part of that draft,” analysts stated.
“The National Association of Regulatory Utility Commissioners is pleased that the FCC has deleted the intercarrier compensation/universal service reform proposal from its Nov. 4 agenda,” stated Oregon regulator Ray Baum, chairman of NARUC’s Telecommunications Committee. “It is our hope that Chairman Martin will agree with the other four FCC commissioners, an overwhelming number of lawmakers, state regulators, industry and consumer groups and open these proposals for public comment. We look forward to working with the FCC and others in our effort to ensure that the intercarrier compensation and universal service programs are properly reformed this year.”