House and Senate conferees agreed Fri. to exempt the universal service fund (USF) from Anti-Deficiency Act accounting rules for a year, and to bar the FCC from limiting USF support to primary lines. Senate Commerce Chmn. Stevens (R-Alaska) brokered the USF deal Thurs. night with House Commerce Chmn. Barton (R-Tex.), who wants to overhaul USF. Stevens thought he had sewn up the arrangement, but learned after the Thurs. conferees’ meeting that the primary-line provision wasn’t in the bill. “I didn’t sleep last night because of this amendment,” he told conferees during Fri.’s meeting, arguing passionately that the primary-line provision is essential in rural areas.

The House Commerce Committee released an updated draft of its telecom bill Thurs. that telcos welcomed for its emphasis on market-based competition. The new version of the bill drops a “carve-out” provision that would have addressed buildout requirements for video providers - something that telcos opposed. But the updated bill does prohibit redlining, a mandate most telcos said they would accept. The bill contains 4 titles with regulations covering broadband Internet transmission services, VoIP, video and national consumer standards.

The 6th U.S. Appeals Court, Cincinnati, ruled Wed. that the federal excise tax is unlawful, the 2nd circuit to say so. The 11th U.S. Appeals Court, Atlanta, made a similar ruling in May. The IRS recently said it will keep collecting excise tax on communications while appeals in other circuits are pending. USTelecom said the ruling “again rejects the IRS’ demand that telecom carriers collect an illegal and costly tax from American consumers.”

Telecom ‘05 Notebook: A new NTIA spectrum advisory body of industry, academic and consumer representatives will make recommendations, offer expertise in helping review policy proposals and “make sure the U.S. remains a world leader” in wireless technology, NTIA Dir. Michael Gallagher said at the Telecom ‘05 convention in Las Vegas Thurs. The panel arose from a 2004 Administration directive to improve spectrum policy. As the USTelecom show wound down Thurs., Gallagher and other Administration members called telecom integral to world affairs. The industry’s value to the economy keeps growing, Gallagher said. “Other countries see innovation as the province of government” but the U.S. believes innovation comes from the private sector, he said. Amid threats, whether computer viruses or outside aggressors, private industry’s engagement lets the U.S. be “nimble,” Gallagher said. “Communications has to be robust so we can communicate no matter what the threat is,” he said: “It’s absolutely critical for homeland security.” David Gross, U.S. coordinator for international communications at the State Dept., said “everyone recognizes the importance of telecommunications for economic development and with broadband the case becomes clearer.” However, there’s another part -- telecom’s use internationally, including issues involving the free flow of information -- that’s increasingly important to U.S. policy, he said. A simple example of telecom’s role in world affairs was the use of cell phones when voting began in Iraq, he said. At first fearful of violence, few Iraqis came to vote, but when those who did saw the polls were safe they reached out via cell phone, greatly increasing turnout, Gross said. “That technology didn’t exist under Saddam,” Gross said. Agriculture Secy. Mike Johanns described the “business case” for developing telecom infrastructure: Without broadband infrastructure, education can be limited, limiting the number of skilled workers and hampering business development, which reduces jobs, ultimately sapping rural communities’ vigor. USDA, which provides loans for broadband infrastructure in rural areas, is “doing what it can to connect rural America because so much is at stake,” Johanns said.

SEC promotes Peter Bresnan and Walter Ricciardi to deputy dirs., Div. of Enforcement… Wendy Carey leaves Senate Finance Committee staff to join George Washington U. media relations office… Skip Frantz, Alltel, becomes USTelecom chmn… Michael Farrell resigns from C-Cor board… Jong-Seog Koh to represent KT Corp. on WiMAX Forum board.

Telecom ‘05 Notebook: Cox CEO Jim Robbins’ criticism of telecom companies during a speech at Telecom ‘05 (CD Oct 26 p1) shows how much telecom companies have evolved, said incoming USTelecom Chmn. Skip Frantz in an interview. A few years ago, the telecom industry wouldn’t be viewed as a competitor to video companies and a cable executive wouldn’t be complaining about its stance on video franchising, said Frantz, who’s exec. vp of Alltel. “I'm glad he came, glad he also thinks franchising needs to be reformed,” said USTelecom Pres. Walter McCormick: “We appreciated his reaching out and sharing his opinion.” It’s clear the telecom industry is turning into an integrated communications business when Disney CEO Robert Iger agrees to keynote USTelecom’s next show in March, the new TelecomNext, McCormick said. The evolution has created “tremendous opportunities for content providers,” McCormick said. USTelecom’s members “aren’t the ILECs of the past,” said Frantz.

LAS VEGAS -- FCC Chmn. Martin told Telecom ‘05 he'd like to see action on IP video franchising at the FCC’s Nov. agenda meeting. Martin said he wants comments on whether there’s a role for the FCC in assuring new entrants into video services aren’t impeded by local franchising activities. Martin spoke live by satellite link because he didn’t want to leave Washington. His wife expects to deliver their first child any day. He told the group appearing “virtually” may be particularly appropriate at a conference that has been emphasizing technology as a way to make life more efficient.

FCC Chmn. Martin won’t appear in person at the Telecom ‘05 show today (Wed.) in Las Vegas as planned, but will appear via live video link, USTelecom officials said. Martin will speak for 10-15 min., then take questions. Show officials didn’t say why Martin won’t appear, but with the FCC set to act Fri. on the SBC-AT&T and Verizon- MCI mergers, USTelecom’s convention has seen many cancellations. SBC Chmn. Edward Whitacre cancelled a keynote set for Tues. Top FCC staffers involved with the merger decision have dropped off panels, including Comr. Copps’ telecom aide Jessica Rosenworcel.

The IRS said telecom carriers must keep collecting U.S. excise tax on communications despite a May 10 ruling by the 11th U.S. Appeals Court, Atlanta, that the tax is unlawful (CD May 13 p6). An IRS guidance issued late Thurs. said it will assess and collect the tax around the U.S., including the area covered by the 11th Circuit, while appeals in other circuits are pending. USTelecom Senior Vp Ed Merlis said the decision “penalizes consumers” by forcing telecom carriers “to collect the out-dated, regressive, and, in some parts of the country, illegal federal communications excise tax.”

FCC Comr. Adelstein canceled appearances next week at Las Vegas conventions being held by the Community Bcstrs. Assn. and USTelecom. The groups were told Adelstein’s promised appearances conflicted with an Oct. 28 FCC agenda meeting expected to include action on the SBC-AT&T and Verizon-MCI mergers. If past is prologue, the commissioners will spend much of next week negotiating the orders’ wording, sources said. FCC Chmn. Martin still is scheduled to speak Oct. 26 at the USTelecom show but faces another possible conflict: Wife Catherine is expected to deliver the couple’s first child the first week of Nov.