Federal Universal Service Fund

The FCC should set a goal for everyone in the U.S. to have broadband access by early 2014, major phone companies said late Monday as comments for the commission’s national plan continued arriving. There was wide agreement that overhauling the Universal Service Fund must be a high priority.

An FCC report on rural broadband prescribes government intervention to spur availability and demand. The report, released publicly on Wednesday, was required by Congress in the 2008 Farm Bill and did not require sign off by all commissioners. Instead, writing in the first-person, acting Chairman Michael Copps highlighted common problems affecting rural broadband, including technological challenges, lack of data and high network costs. Copps also urged a revamp of the Universal Service Fund, new rules on network openness and an audit of all spectrum that the FCC has licensed, with an eye on where it is being used effectively or could see more use on a secondary basis.

The 8th U.S. Appeals Court should rehear en banc Nebraska’s appeal of a lower court decision barring the state from making traditional VoIP providers pay into its universal service fund, Nebraska officials said Thursday. A panel of the St. Louis-based court found May 1 that a U.S. District Court in Nebraska properly upheld an injunction Vonage obtained prohibiting Nebraska’s utility commission from assessing the VoIP company (CD May 4, p5). The en banc request challenges what the state called the panel’s “overbroad reading” of the FCC Vonage preemption order that the appeals court cited in rebuffing Nebraska. Contrary to what the 8th Circuit said, Vonage would not have succeeded with a claim to preemption that it deployed to obtain the injunction, the state argued. “Further, the Decision is based on a misapplication of the impossibility exception employed by the FCC to preempt such entry regulations,” Nebraska officials said in petitioning to have the ruling vacated and an en banc rehearing set. “Indeed, the United States and FCC submitted an amicus brief in this case in support of the NPSC, asserting that the Vonage Preemption Order ‘did not address, let alone preempt, the state-level universal service obligations of interconnected VoIP providers…’, and that the impossibility exception did not preclude the NPSC from placing this requirement on Vonage, as the NPSC’s NUSF Order ‘does not present a conflict with the FCC’s rules or policies.” The Nebraska utility commission’s order that Vonage pay into the state fund “does not conflict with any federal regulatory policy or impair the FCC’s authority to regulate the interstate aspect of interconnected VoIP service,” the state said. “In fact, its action is entirely consistent with the FCC’s imposition of USF contribution requirements on Vonage and other interconnected VoIP providers. The ‘impossibility exception’ relied on in the Decision thus does not apply.” In seeking an en banc rehearing, the state faces “an upstream swim,” said Brad Ramsay, general counsel for the National Association of Regulatory Utility Commissioners. “What’s in Nebraska’s favor is that there’s no question but that the court got it wrong. From a policy, legal and commonsense perspective, the May 1 ruling makes no sense. The question is, will the other judges be willing to act or will they defer to their brother jurists? If the judges really look at this case, they should reverse and rehear.” The May 1 ruling stands to imperil state universal service funds and the federal USF, Ramsay said. “Everything is migrating to VoIP -- not necessarily nomadic, but VoIP nonetheless,” he said. “There are 23 states with universal service funds. If those funds aren’t there, the rates in those states will go up significantly, and there will be a greater burden on the federal fund. This is really bad.” NARUC, which filed an amicus brief on Nebraska’s behalf in the earlier appeal, may weigh in on the en banc request as well, Ramsay said.

An FCC notice of inquiry about universal service high- cost support for non-rural carriers spurred old arguments for a USF overhaul, in comments at the commission last week. But the notice, which asks how the FCC should respond to a 2005 remand by the 10th U.S. Circuit Court of Appeals (CD April 9 p4), may address too narrow an issue to result in comprehensive reform, industry officials said. In 2005, the court called unlawful the FCC’s current non-rural rules, which address carriers like Qwest that serve high-cost areas with too many lines to be considered “rural” by the statutory definition.

Acting on a suggestion by Qwest, Wyoming’s Public Service Commission plans to amend rules on state universal-service funds, the commission said Tuesday. The rewrite of section 500, in chapter 5 of the commission’s procedural rules and special regulations, would create a way for eligible telecommunications carriers to seek state permission to divert federal Universal Service Fund support to specific building projects or equipment upgrades, the commission said. The same change would permit the state to subsidize authorized projects or upgrades by increasing the state USF assessment. Any diversions would need commission approval. Qwest said the change will encourage efforts to improve service, including its own proposed spending to assess service quality in the Lander-Riverton Wind River Indian Reservation area, the commission said. The proposed change would address a situation apparently particular to Wyoming, said Qwest President for Wyoming Mike Ceballos. In other states federal USF funds cover high-cost construction, but Wyoming requires ETCs like Qwest to use such funds as credits on customer bills, he said. Qwest has as many rural customers as independent phone companies in the state do, but independents can use federal USF funds to cover their costs, he noted. “I believe we are unique in Wyoming in applying federal USF money to bill credits,” Ceballos said. “The rule change would allow the Commission to hear proposals to allocate some of that federal money to construction and upgrades.” At the reservation, on which Qwest is the predominant carrier, the company plans to study how best to invest in high-cost areas. Only Alaska is less dense in population than Wyoming, Ceballos noted. His state averages four customers per square mile compared with Alaska’s 3.7, and some Wyoming locales, like the town of Lusk, have one customer per square mile, he said. The commission plans a public hearing on the proposed amendments (Docket Number 90000-102-XO-08) at 9 a.m. May 27 at its headquarters, 2515 Warren Ave., Suite 300, Cheyenne, Wyo. May 18 is the deadline for written comments -- http://psc.state.wy.us under “Hot Topics.”

Small phone companies went to Capitol Hill Tuesday to make the case for legislation including broadband in the universal-service program. Another priority is having this year’s must-pass satellite measure change retransmission- consent rules to give small phone companies easier access to video programming. But lawmakers warned that communications issues face stiff competition for attention in a Congress focused on the economy, health care, energy and a Supreme Court nominee.

Rate-of-return carriers should only need to seek recovery of universal service audit costs from the federal government, said state members of the Joint Board on Jurisdictional Separations. In reply comments Tuesday, they backed a petition by the National Telecommunications Cooperative Association (CD April 22 p4) that would assign all federal Universal Service Fund costs to interstate jurisdiction. “The audit costs involved are incurred to assist in the review of the function of the federal USF program and as such should appropriately be assigned to the interstate jurisdiction,” the state members said: “A significant, if not primary, purpose for the audits is to ensure the reasonableness of federal USF surcharges and to detect waste, fraud, and abuse of federal funding.” They rejected comments by Verizon saying costs should remain divided between intrastate and interstate jurisdictions. States may benefit from federal USF subsidies, but “it does not necessarily follow that States benefit from the federal audits,” they said. The “main beneficiaries” are the FCC, interstate ratepayers and the Universal Service Administrative Co., they said. States “have no control over whether federal audits are conducted, the scope of the audits, the audit costs, the selection of the auditor, or the federal universal service disbursement mechanisms that are being audited.”

Vonage and other traditional VoIP providers don’t have to pay into the Nebraska Universal Service Fund, the 8th U.S. Circuit Court of Appeals said Friday. The St. Louis-based court was upholding a district court decision that Nebraska officials had appealed. As the lower court had, the appeals court accepted Vonage’s claim to be an information service rather than a telecom service (CD Sept 15 p8).

States asked the FCC to promptly adopt a three-year Lifeline and Link-Up pilot program for broadband. In a letter Friday to the FCC commissioners, the National Association of Regulatory Utility Commissioners said the new Universal Service Fund program should be open to all broadband providers. Participating carriers shouldn’t automatically be designated eligible for other USF programs, but the FCC should require any provider receiving USF from another program to participate and contribute to the pilot program, NARUC said. The Federal-State Joint Board on Universal Service should study how the program is carried out and decide whether to expand the pilot into a national program. States should handle the eligibility and verification for low-income participants, it said.

The FCC should allow rate-of-return carriers to allocate federal audit expenses completely to interstate jurisdiction, said small carriers supporting a petition by the National Telecommunications Cooperative Association. The change would make recovery of audit expenses more certain, and save small companies time and money, they said. However, Verizon condemned the petition as having “no basis,” and urged the FCC to do away with jurisdictional separations altogether.