The FCC should remove buildout requirements from the local franchise process as well as other provisions small and midsized telecom companies deem barriers to offering video services to customers, USTelecom said. In an ex parte filing Fri., USTelecom said the agency also should: (1) Prohibit “excessively long franchise application review and approval processes.” (2) Bar franchise fees and “in-kind payments that are not specifically authorized in the Communications Act and exceed the statutory maximum of 5%.” The comments went into MB Doc. 05-311, a proceeding in which the FCC is considering if there are barriers to competition in the franchise process that would violate Sec. 621 of the Communications Act. The statute “plainly limits” buildout requirements, even for incumbent cable operators, USTelecom said: “The timetable must be reasonable in light of market conditions, and a cable operator cannot be made to provide service where it is not economically feasible. With respect to competitive entrants, therefore, the best approach is to allow market competition to decide build-out schedules as this will establish reasonable build-out schedules more certainly and accurately than any regulator could do.” The FCC has “unquestionable authority” to adopt rules dealing with Sec. 621 franchising requirements, “despite the protestations of cable operators,” USTelecom said: “The Commission’s rulemaking authority is not affected by the fact that local franchise authorities have the primary role in applying, but not interpreting, the section.”

A collection system for the Universal Service Fund (USF) based on telephone numbers gained the support of a new telecom alliance called the USF by the Numbers Coalition. The coalition - made up of groups such as NCTA, CTIA and USTelecom and its members AT&T and BellSouth -- held a news conference call Tues. to “set the story straight” on misconceptions about the plan, it said.

The Senate Finance Committee Wed. approved a repeal of the communications excise tax. The markup of Sen. Santorum’s (R-Pa.) proposal (S. 1321) endorses eliminating a 3% tax on local telephone services. The proposal directs phone companies to cease tax collection on long distance services billed after July 31st. The bill has gained serious momentum since the IRS indicated last month that the tax doesn’t apply to flat-rate long distance calls. Service providers like BellSouth, AT&T and USTelecom praised the decision, predicting repeal of the tax this year.

The FCC Wed. placed universal service obligations on VoIP providers, setting a “safe harbor” of 64.9% of interstate revenue for their payments -- a figure based on the percentage of interstate revenue wireline toll providers report. The FCC also raised the wireless safe harbor from 28.5% to 37.1%. As wireless carriers already can, VoIP operators will be able to submit traffic study data to show they should pay less than the safe harbor percentages. FCC officials declined to comment on whether they will impose new rules on how such studies should be done.

House Commerce Committee Chmn. Barton (R-Tex.) took another swipe at the Universal Service Fund (USF), regaling onlookers at a hearing Wed. with examples of questionable use of USF support by seemingly flush rural telecom companies in Tex. A company in Big Bend, Tex., with 6,000 customers got $9.6 million in USF money, posted a 12.8% return on equity and paid $3 million in dividends to shareholders, he said: “It also runs a hunting ranch to entertain rural phone lobbyists.” A Tex. panhandle company got $2.6 million in federal USF money and “paid back more in dividends than it charged customers,” Barton said: A small telecom operating outside Houston gets “huge subsidies” to serve wealthy customers.

With the FCC apparently poised to impose Universal Service Fund (USF) assessments on all voice-over-IP (VoIP) providers this week, cable operators expanding into telephony with IP-based offerings face the unappetizing prospect of having to compete by markedly hiking their rates for those services or cutting into their profit margins.

Incumbent telcos would be the clearest winners, and small providers of interconnected VoIP the biggest losers, if the FCC and Senate proceed as they have been on changes in the Universal Service Fund (USF), according to interviews with industry executives and analysts. Satellite would benefit by becoming eligible under a new fund for places unserved by broadband.

Telecom companies have much work to do to comply with FCC CALEA rules by May 14, 2007, especially since some probably don’t understand the complex requirements, panelists said Thurs. on a USTelecom webinar. Developing a system to give law enforcement access to subscriber activity is hard because such data usually are distributed over multiple networks, said VeriSign Vp Raj Puri. Real time access to content requires quickly identifying and isolating all services a targeted subscriber uses, he said.

USTelecom took offense at a Sprint Nextel executive’s call for heightened special access regulation in testimony at a Tues. Senate Commerce Committee hearing. In a Thurs. letter to Committee Chmn. Stevens (R-Alaska), USTelecom Pres. Walter McCormick said Sprint Nextel Senior Vp Robert Foosaner called for a “dramatic re-regulation” of the special access service offered by ILECs even though a federal court 2 years ago found wireless carriers’ reliance on ILEC special access wasn’t any entry barrier. “Sprint Nextel is asking Congress to force ILECs to subsidize the construction of its wireless networks rather than making the investment itself,” McCormick wrote. USTelecom said a working draft released May 24 by Committee minority staff would go even further “by extending special access regulation to all ILEC broadband services and entangling the United States Congress in setting specific prices for special access services.” The proposals by Sprint Nextel and the minority staff aren’t needed because special access markets are competitive, customers such as large carriers are capable of deploying their own circuits and the FCC has tools to ensure rates are reasonable, the letter said.

Net neutrality policy sparked a sharp clash of viewpoints at a Senate Judiciary Committee hearing Wed., where Chmn. Specter (R-Pa.) said he wants the committee to “play a significant role” in developing telecom legislation. He stopped short of saying he would write his own bill; he said he’s been collaborating with Commerce Committee Chmn. Stevens (R-Alaska). “I want to see what Commerce has and see if we can piggyback” on that legislation, Specter said.