State Preemption, Contribution, Cost, Among Top USF/ICC Concerns, State Officials Say

The Pennsylvania state-specific USF has maintained affordable local rates for the end-user consumers of rural incumbent local exchange carriers, and the state is in the process of examining further intrastate access revamp, said Joseph Witmer, assistant counsel with the Pennsylvania Public Utility Commission. The efforts reflect compliance with state law mandates regarding USF, intrastate access rate revamp and broadband deployment, which would be at risk if the FCC preempts states from pursuing intrastate policies, he said.

Meanwhile, it appears that speakers weren’t surprised that the relevant FCC revamp orders won’t be ready in August (CD July 13, p4). “It tells me that they are continuing to listen” and try to figure out the best way to get it done, said Commissioner Anne Boyle of the Nebraska Public Service Commission. “There’s no way to make this an easy process,” she said. It’s obvious that the FCC has done significant amount of outreach to different parties, she said. The FCC is trying to address many matters that have lasted for years, she said.

Regarding ICC, there’s the early adopter case, Witmer said. Early adopters would lose if new USF policy underwrites rates for late adopters, he said. Additionally, rate equality may not solve all broadband support issues, he said. According to Witmer, other ICC issues include: Who sets the reciprocal compensation rate, the intrastate access rate and the interstate rate? When do the “contribution” and “recipient-contributor” issues get addressed?

Given limited USF resources, ICC remains essential to the rural carriers’ investment in broadband networks, said Ken Pfister, vice president of strategic policy at Great Plains Communications, a rural operator in Nebraska that receives state and federal USF. For rate-of-return companies, per-minute ICC accounts for some $1 billion in annual revenue, he said. Discontinuing switched access as part of the formula is premature, he said, urging the FCC not to preempt states’ authority to establish reciprocal compensation rates. The vast majority of voice traffic still originates and terminates on the public network, especially in rural areas, he said. Adoption of a low or zero rate for VoIP traffic would create a “flash cut” end to the switched ICC system since providers would unilaterally declare their traffic to be VoIP, he warned. Carrier-specific ICC rates shouldn’t be eliminated in favor of a standardized rate, he said. The market would never set a rate for valuable networks resources far below cost, he said.

The FCC’s potential USF changes raise key questions for state regulators such as whether state high-cost funds need to be diverted to ensuring that wireline quality of service remains adequate as carriers begin to convert their networks to broadband, Sherry Lichtenberg, principal for telecom at NRRI said. There’s also the potential impact of capping the high cost fund at $3,000 per line and short-term impact on current operations of designating USF funds as broadband only, she said. Additionally, as the broadband plan forces the convergence of voice and data networks, should states designate a new class of service called “lifeline broadband” to ensure that all consumers remain able to make and receive voice as well as data calls? States and the FCC need to ensure low-income consumers have access to the equipment necessary to use broadband services including VoIP, she said. Another key issue is how to carry out the reverse auctions that will potentially govern the distribution of USF funds, she said.