Industry Pans Payphone Companies’ Request for Emergency USF Cash
Payphone operators’ request for emergency cash and long-term Universal Service Fund support was panned by Sprint-Nextel, Verizon, USTelecom and TracFone Wireless. The American Public Communications Council filed a petition last month asking the FCC for about $57 million in emergency Lifeline money and for a proceeding on whether payphones should receive universal service support permanently (CD Dec 6 p6). The petition drew support from the Florida Public Telecommunications Association, which said that the collapse of the payphone industry “has been greatly exacerbated in Florida and other states … due to the introduction of ‘free’ governmentally supported cell phone service offered by TracFone and more recently Virgin Mobile.”
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The rest of the commenters in docket 03-109 urged the FCC to reject the payphone operators’ petition. TracFone said payphones aren’t “in the scope” of the USF. “Even a cursory review of Sec. 214(e)(1) leads to no other conclusion than that payphone owners are not within the scope of providers which may be designated to receive USF support,” TracFone said. “Moreover, payphone owners do nothing other than install and maintain payphones at public and semi-public locations and collect money deposited in the phones.”
Sprint said USF was designed for “low-income consumers,” not companies. The fund’s support for pay phones “would violate the statutory mandate that eligibility be based on consumer demand,” the carrier said. Section 254(c)(1)(b) of the Telecom Act requires the commission “to define services eligible for federal universal service support based (among other factors) upon a finding that the services ‘have, through the operation of market choices by customers, been subscribed to by a substantial majority of residential customers,” Sprint said.
USTelecom said “changes to the low-income programs are necessary, appropriate and overdue,” but “there is no compelling need to take up the questions raised by APCC.” The FCC should carry out a “comprehensive” overhaul of Lifeline before it worries about the payphone industry, the association said. The payphone operators “seem to confuse the concepts of high-cost and low-income universal funding,” USTelecom said. “On the one hand, the petitions seemingly request funds for payphones that collect less revenue than their costs, which is a concept more akin to high-cost funding than Lifeline. But APCC does not establish that these unprofitable payphones exist in any significant number. Indeed, given payphones are not regulated, and there is no ‘payphone of last resort’ requirement on payphone providers, payphone operators presumably only choose to continue operating those payphones that yield positive net revenues, thereby obviating the need for high-cost type support."
Verizon sees any effort to save payphones as “a waste of scarce universal service dollars,” the telco said. “Nothing about the commission’s universal service or payphone policy obligations … compels the commission to prop up a declining industry segment against market forces and advanced technologies.” The USF contribution factor “hit another all time high of 15.5 percent this quarter,” Verizon said. “This trend is unsustainable."
The industry condemnation was “puzzling,” APCC President Randy Nichols told us. The companies will receive nearly $1 billion in USF subsidies but balk at “investing at most $50 million to preserving payphone service,” he said. “It is particularly ironic to see a company like TracFone, which alone is receiving over $300 million, protesting a purported statutory limit on support for payphones when their own USF Lifeline money is entirely dependent on FCC forbearance and waivers of statutory and regulatory limits directly applicable to them under the Communications Act and the FCC’s rules.”