[RTC List] FCC to release USF reform proposals

[Sean McLaughlin]

FCC to release USF reform proposals
Associated Press
http://www.businessweek.com/ap/financialnews/D8UBSFLO0.htm

The Federal Communications Commission is set to release several 
proposals aimed at reforming a government-subsidized fund to offset 
costs of deploying telecommunications services in rural and under-served 
parts of the country.

The agency will release three items suggesting a radical overhaul of the 
Universal Service Fund -- possibly as soon as later this week -- 
according to several FCC officials who spoke on condition of anonymity 
because the plan had yet to be made public.

The first will ask for industry feedback on a proposal long championed 
by Kevin Martin, the Commission's Republican chairman, known as reverse 
auctions.

It would designate one company to receive financial assistance from the 
fund in any given geographic area. Companies would compete against each 
other to become the designated company; those that ask for the lowest 
amount of assistance would be successful.

Currently there are few limits as to the number of companies that can 
receive subsidies in markets across the country.

Martin has advocated the reverse-auctions proposal as the best way to 
rein in the size of the fund, which is widely perceived as bloated and 
out of control.

A second proposed change would address an issue known as identical 
support. Currently, the amount that qualifying wireless companies 
receive from the fund is based on the rates paid to wired-line telephone 
companies in the same area.

But, the costs that wired-line companies face are far greater than those 
by wireless companies, and there have long been calls to address this 
discrepancy.

All five FCC commissioners have expressed support for this change in 
various public statements.

The final notice to be released by the FCC will formally put out for 
comment several of the recommendations made last year by the board of 
federal and state regulators that oversees the fund.

Martin, as well as Michael Copps and Deborah Tate, two other FCC 
commissioners, sit on that board.

The board's flagship recommendation was to specifically earmark a 
portion of the fund to help pay for the costs of deploying broadband 
Internet networks across the country.

The fund doesn't allow for money to be spent for this purpose, even 
though it is generally thought that many companies do in fact use it 
toward these costs.

Despite having voted for the board's proposed reforms, Martin has since 
expressed doubt about explicitly allowing the fund to be used to support 
broadband deployment.

His primary focus is on reducing the size of the $7 billion a year fund 
and he has publicly questioned where the money would come from to pay 
for broadband subsidies.

There are at least two other proposals for reform on circulation at the 
commission, neither of which has the requisite majority support to be 
released yet.

One calls for a temporary cap on the moneys received by wireless 
companies from the fund until more substantive reform is introduced.

The FCC struck deals with two of the largest wireless companies last 
year that imposed a cap on the money they received from the fund in 
exchange for winning agency approval for transactions in which they were 
involved.

One of them involved the $27.5 billion deal to take Alltel Corp. private 
by a unit of Goldman Sachs Inc. and TPG Capital Partners. Alltel is the 
largest recipient of subsidies from the Universal Service Fund.

Through the first nine months of 2007, Alltel received $224 million in 
subsidies from the fund, according to the Universal Service 
Administration Co., the not-for-profit group that manages the fund's 
finances.

The second was AT&T Inc.'s $2.8 billion acquisition of rural 
wireless-carrier Dobson Communications.

According to documents publicly filed with the agency, several senior 
executives from AT&T last week met with Robert McDowell, the third 
Republican member of the FCC. At that meeting, according to the 
documents, AT&T pressed the commissioner to support an industry-wide cap 
on wireless companies.

Every American who has any kind of telephone service pays a small 
proportion of every bill into the Universal Service Fund. For people who 
have multiple telephones, this can mean they are paying several dollars 
a month into the fund.

Any attempt to radically overhaul the fund would require the support of 
lawmakers on Capitol Hill. Several senators who sit on that chamber's 
commerce panel represent rural states that benefit strongly from the 
fund, and could prevent any in-depth reform from occurring.


-- 
Sean McLaughlin
Executive Director
Access Humboldt
P.O. Box 157, Eureka, CA 95502
tel: 707-476-1798
dir: 707-476-2873
fax: 707-476-1702
cel: 707-616-2381
e: sean at accesshumboldt.net
web:  accesshumboldt.net

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