FCC Loss in Comcast Case Could Affect USF Overhaul

A court decision that the FCC lacked authority to regulate Comcast network management could fuel arguments for a legislative approach to Universal Service Fund reform, said Hill and industry officials. The ruling may not spur the Hill to action on USF this year, given an uninterested Senate and tight legislative schedule (CD April 7 p4), they said. The National Broadband Plan outlined a way for the FCC to revamp USF on its own, but House Communications Subcommittee Chairman Rick Boucher, D-Va., has voiced skepticism the agency can do a USF overhaul without Congress.

There probably will be “closer scrutiny” paid to the FCC’s statutory authority generally, after Tuesday’s ruling by the U.S. Court of Appeals for the D.C. Circuit (CD April 7 p1), Boucher said in an interview Tuesday. He doubted the FCC now has legal authority to revamp USF to fund broadband, but hopes to mark up legislation “very soon” that would accomplish the overhaul, he said. Boucher’s and the FCC’s goals with regard to USF reform are consistent, he added.

The Senate has shown no interest in revamping USF, and the Comcast decision may not change things, a Senate aide said. Even if Boucher’s bill gets through the House, and Senate leaders show interest, it will be tough to get the bill through this year because the Senate hasn’t introduced similar legislation and the upcoming elections mean a tight legislative calendar, the aide said. It’s possible the FCC can still transition USF to broadband on its own by citing powers under Section 254 of the Communications Act, said the aide. In that case, the commission wouldn’t have to reclassify broadband services under Title II to accomplish USF reform. AT&T made the same argument January in a white paper sent to the FCC (CD Feb 4 p9).

The case “puts another arrow in [the] quiver” for those who argue Congress must give the FCC authority to revamp USF, but it doesn’t necessarily increase the odds of Hill USF action this year, said President Curt Stamp of the Independent Telephone & Telecommunications Alliance. If legislators believe the court decision has created a crisis preventing USF reform, it may have more desire to act, but it’s unclear whether that’s the view, he said. The D.C. Circuit ruling’s ultimate impact is still hazy, and industry is watching what the FCC says at its April 21 meeting, said a telecom industry official. Congress could run out of time to revamp USF. Boucher still hasn’t introduced his bill, and the Senate didn’t embrace previous drafts, the industry official said.

Current political dynamics make it tough for any major telecom legislation this year, said Stifel Nicolaus analyst David Kaut. USF is a “very contentious” issue, Boucher’s bill is “very ambitious” and there’s been no USF activity in the Senate, he said. There could be broader support in Congress for a more “surgical” measure that succinctly clarified that the FCC has authority to transition the USF to broadband, he said.

A shorter bill to clarify FCC authority on USF may be possible, said the Senate aide. But it could easily get held up by legislators who don’t believe the FCC should be given any more authority than it already has, or those who want nothing less than comprehensive reform legislation, the aide said. There could be support for a quick clarification, agreed Stamp, but ITTA would rather see comprehensive reform than “tweaks around the edge."

The FCC likely will move ahead with USF overhaul efforts on its own, said Stifel Nicolaus in a note Wednesday. It’s “possible that as a strategic matter it may hold off on some actions if it feels the need to cite universal service reform authority as a justification for Title II reclassification,” the analyst firm said.