States Won’t Fade from USF System, NARUC President Says

Whatever the future holds, at least as the statute is currently written, “states aren’t going away anytime soon,” Clark said. There are some 24 states that have their own USF and if the order moves forward, there might be more states adopting the system due to incentives, Clark said. Additionally, the statute says Eligible Telecom Carrier designation comes through state commissions, he said. It’s hard to imagine how states would be squeezed out quickly barring statutory changes, he said. FCC Commissioner Michael Copps had said during Tuesday’s commission meeting that the Telecom Act of 1996 envisioned a level of federal-state cooperation that hasn’t yet been achieved in implementing the statute. Clark praised Copps’ remarks, saying the statute itself contemplates a strong federal and state partnership.

Some major telcos may be wishing to rid themselves of states in connection with the Universal Service Fund. In late January, an AT&T executive predicted that USF reforms would lead to direct negotiations between federal officials and carriers (CD Feb 1 p1). Verizon officials said that a damning staff report by Nevada regulators was in part because state officials are worried about their diminishing USF cash (CD Feb 7 p6). The Internet is essentially an interstate service, but Sec. 254 of the Telecom Act explicitly encourages states to get involved in universal service. States are the best positioned to answer questions such as carrier of last resort, quality of service and pricing, National Telecommunications Cooperative Association Policy Director Josh Seidemann told us: “I'm not sure how they divorce the states from this."

Having states go along with the FCC’s USF ICC revamp could be a challenge, Clark said. But the FCC could get support from states or a coalition of states on some USF ICC issues by giving the Federal-State USF Joint Board an opportunity to comment and draft its own proposal, Clark said. The beauty of the Joint Board is that it’s a venue for states with different perspectives to offer a compromised solution that might be acceptable to a critical mass, he said. The Joint Board has been an under-utilized resource for the last couple of years, he said. NARUC might be directly involved in the proceeding on issues with significant state unanimity, Clark said. Those tend to be issues with jurisdictional matters, he said. But when it comes down to specific policy ideas or reform mechanism, it’s likely that individual states or coalitions of states would file separately, he said. An example is a reverse auction, which has often been favored by larger or urban states, he said. “I can imagine different states weighing in on that issue.”

The FCC should be commended for expressly recognizing the critical role played by state commissions as well as the federal-state partnership Congress imbedded in Sections 254 and 706 of the agency’s enabling legislation, Clark said. The agency seeks comment on a non-pre-emptive incentive-based intrastate intercarrier compensation track similar to that suggested years ago by NARUC, and providing the state members of the USF Joint Board an opportunity and the time to provide discrete input, he said. Although it doesn’t address contribution issues, overall the FCC is taking into consideration the possibility for a comprehensive approach to reshaping the federal model, he said. The rulemaking notice takes on several initiatives that are ripe for action, he said, citing traffic stimulation and VoIP classification.