The USF contribution factor could spike in Q3 from 17.4 percent to 19.6 percent or more of carriers' U.S. interstate and international (long-distance) telecom end-user revenue, said industry consultant Billy Jack Gregg in his quarterly email update. He cited Universal Service Administrative Co. projections of increased USF demand, particularly for E-rate school and library discounts, as the driver, and said the contribution (or assessment) factor could go even higher if projected industry revenue declines, as it has been trending. A 19.6 percent factor would be "the highest assessment factor ever." The previous high was 18.2 percent in Q1 of 2016, he said Wednesday. Some reacted to us with concern.

Now that the U.S. Court of Appeals for the D.C. Circuit won't hear en banc review of FCC net neutrality regulation (see 1705010038), focus shifts to the Supreme Court. Conventional wisdom is justices are unlikely to grant cert to hear an appeal, especially since the FCC is pursuing a do-over. Some opponents of the order think conventional wisdom could be wrong. Industry parties that sought en banc D.C. Circuit review didn't comment, including USTelecom, CTIA, AT&T, CenturyLink, NCTA, American Cable Association and Alamo Broadband.

A court denial of further challenges to the FCC 2015 net neutrality order was decided 6-2 by the active judges of the U.S. Court of Appeals for the D.C. Circuit (see 1705010013). The six judges voted Monday to deny petitions for en banc rehearing of a June ruling by a three-judge panel that upheld the FCC order, which also reclassified broadband to be under Title II of the Communications Act. Two judges dissented and three others didn't participate in the ruling in USTelecom v. FCC, No. 15-1063.

A federal court denied appeals of a 2016 panel ruling that upheld the FCC's net neutrality and broadband reclassification order under Title II of the Communications Act. The petitions for rehearing en banc of the June three-judge ruling were rejected by a majority of the active judges of the U.S Court of Appeals for the D.C. Circuit in an order Monday in USTelecom v. FCC, No. 15-1063.

Cincinnati Bell Any Distance asked the FCC for a waiver of a payphone rule mandating annual audits of call tracking systems. The Cincinnati Bell subsidiary "requests the Commission to consider the disproportionate and unduly burdensome cost of the annual payphone compensation system audit and waive its applicability to CBAD," said a petition posted Wednesday in docket 96-128 seeking expedited approval. "The audit requirement is overkill in CBAD’s case and should no longer be required." Sprint filed a similar petition (see 1704070067), and USTelecom backed it and sought broader relief for all covered carriers (see 1704240017).

Capitol Hill Democrats pledged massive pushback to FCC Chairman Ajit Pai’s NPRM to roll back the 2015 open internet order's classification of broadband as a Communications Act Title II service, set for a May 18 commission vote. GOP lawmakers presented a largely united front in praise of Pai and Senate Commerce Committee Chairman John Thune, R-S.D., told us Tuesday this should kick off legislative negotiation (see 1704250062). Little bipartisan negotiation has seemed underway, and Republicans disagreed among themselves on what’s the basis for open internet legislation. Pai will go to a bipartisan member briefing Friday for House Commerce members, an aide said.

Rural telcos continued to urge the FCC to extend by at least 18 months a freeze on the jurisdictional separations of rate-of-return telco cost calculations, while a consumer group voiced further concern about an extension becoming indefinite. Parties filed replies posted Monday and Tuesday in docket 80-286 responding to initial comments (see 1704180023). The FCC proposed extending the freeze, which expires June 30, by 18 months so a federal-state joint board could make recommendations on "comprehensive separations reform" by next April and the commission could consider those recommendations. In its reply, WTA said it believes the freeze should be extended by at least six months beyond the date the FCC adopts new Part 36 separations rules, which "may or may not be longer" than the proposed 18-month extension. The RLEC group said "it does not expect this further extension to 'continue indefinitely' as claimed to be feared" by the National Association of State Utility Consumer Advocates in initial comments. WTA also said initial comments by the "Irregulators" were focused on Verizon and had "no relevance" to the freeze needed by rural telcos. NTCA's reply said the freeze should be extended long enough for the joint board and FCC to "get it right." The RLEC group said NASUCA's concerns about the consumer impact "only bolster the case" for extending the freeze, because failure to do so could harm "consumers and providers alike." But NASUCA said NTCA essentially proposed "an indefinite extension" in initial comments. "Given the billions of dollars per year in harm to consumers from the freeze and the sixteen year delay so far, any additional delay is too long," said NASUCA's reply. It also objected to USTelecom's initial comments that certain carriers should be allowed to choose between continuing the freeze and readjusting their cost allocations if it's in their interest. Separately, the joint board on separations asked parties to refresh the record in light of the FCC's request for recommendations. The board sought comment by May 24 and replies by June 8 on "comprehensive permanent separations reform," including specific proposals, said a public notice listed in Tuesday's Daily Digest. In another public notice, the panel sought comments by May 24 and replies by June 8 on Part 36 separations issues raised by the FCC's recent order streamlining its Part 32 ILEC accounting rules (see 1702230051).

The FCC asked a court to continue to hold two cases in abeyance -- on technology transitions and a business data service (BDS) tariff order -- while the agency considers related regulatory issues. The commission noted it adopted two items April 20 that were relevant to USTelecom's challenge to FCC 2014 and 2015 orders on industry tech transition rules and backup power duties, in an agency status report (in Pacer) Monday to the U.S. Court of Appeals for the D.C. Circuit in USTelecom v. FCC, No. 15-1414. It said one item was a rulemaking notice and request for comment on eliminating a "functional test" for implementing Communications Act Section 214 discontinuance requirements and on reversing a decision to apply Section 214 to wholesale services when their discontinuance causes carrier-customers to discontinue retail service to end users (see 1704200046). It said the other was an order completing a BDS rulemaking, which included a rule, when it becomes effective, to terminate an interim wholesale access rule challenged in the USTelecom case (see 1704200020). In light of those actions, the FCC said the court should continue to hold the case in abeyance until the agency completes its new rulemaking. The FCC also noted the April 20 BDS order in updating a separate case in which AT&T is challenging a 2016 BDS tariff investigation order. Although the recent BDS order adopted rules going forward, "it did not directly address the lawfulness of the tariffs at issue in this litigation, said a commission status report (in Pacer) on AT&T v. FCC, No. 16-1166. The agency said the parties "must now evaluate how best to proceed" and it asked the court to keep the case in abeyance for the time being.

USTelecom backed a Sprint petition to lift a payphone call tracking audit duty and asked that the relief be extended to all covered carriers. "Given the continuing decline in the number of payphone calls over the past decade, this audit requirement has become unnecessary and unduly burdensome," said a filing Friday in docket 96-128. Sprint said requiring providers to certify there have been no material changes to carriers' payphone audit compliance essentially requires them to complete an audit every year, which the company said should be waived in light of the costs and industry trends (see 1704070067). "Given that for years USTelecom’s member companies have consistently shown compliance with the compensation rules, despite the declining nature of the payphone regime, coupled with the exorbitant cost of an annual audit, they agree that a waiver of the audit requirement is not only justified but also in the public interest," USTelecom wrote. It also said it supports Cincinnati Bell's comments in a telecom biennial review proceeding, "which echo the need for deregulatory measures with respect to the payphone compensation rules."

AT&T was the giant among Q1 lobbying spenders at $4.58 million. That's more than double what others such as Charter Communications and Qualcomm spent, and exceeded Verizon's spending by more than $1 million. It beat what trade associations tended to expend, with such entities as NAB spending $3.76 million and CTIA $2.7 million. Comcast was another big spender, at $3.7 million. The lobbying disclosure forms were due Thursday.