By David Hatch
(Tuesday, May 1) The wireless industry has a powerful ally in its opposition to universal service proposals issued by an FCC advisory board: Democratic Commissioner Michael Copps .
The panel recommended that the commission impose a temporary, "emergency" cap on money from the universal service fund awarded to so-called competitive carriers, mostly wireless firms. The freeze could last for 18 months or longer, sources said.
Competitive carriers have been blamed for increasing the fund's size by a billion dollars in recent years, prompting the proposed threshold as a way to curb growth while regulators explore permanent fixes. The USF, which subsidizes telecom and Internet connections in rural and underprivileged areas, also is the focus of legislative efforts on Capitol Hill.
"I have serious concerns that such a cap will be misinterpreted as a solution, even though it does not address -- or pretend to address -- the fundamental, comprehensive reforms to carry a viable and improved system of universal service forward," Copps, a board member, wrote in his dissent.
He was outvoted 7-1 on the Federal-State Joint Board on Universal Service, which is headed by Republican FCC member Deborah Taylor Tate. The group, which also includes state utility commissioners and a consumer advocate, announced plans to release comprehensive recommendations in six months.
"I think [opponents] face an uphill battle unless they can convince more lawmakers to pressure the FCC," said David Kaut, a telecom analyst at the investment firm Stifel Nicolaus. He expects the wireless sector to lobby the FCC to include traditional telephone carriers under the new threshold. Those carriers already are subject to some USF restrictions.
Republican FCC Chairman Kevin Martin, also a board member, emphasized that a cap should not be rigid. Wireless carriers whose costs match the levels of dominant wireline firms receiving subsidies should be exempt, he wrote.
"Almost three years after being assigned the task of developing recommendations to reform the high-cost universal service system, the joint board has missed the mark," Steve Largent, president and CEO of the wireless association CTIA, complained in a statement.
CompTel, which represents many competitive carriers, and Wireless Across America, a coalition of rural cellular services, also expressed opposition.
CTIA argued that consumers, who are increasingly gravitating to wireless, would be penalized under the approach. "The board should have looked at fundamental, wholesale reforms instead of simply denying consumers their preferred form of communications," spokesman Joe Farren said in an interview. "We're hoping the recommendation doesn't get acted on."
Verizon Communications, however, applauded the developments, emphasizing in a statement that the recommendations would help stabilize the fund and give policymakers time to focus on more substantive changes. "The USF has grown from $1.8 billion in 1996 to $7.2 billion today, and consumers have paid for these increases through increasing surcharges on their bills," Verizon said.
Meanwhile, the board urged the FCC to seek comment on several ideas, including reverse auctions that could help reduce the USF's size and expanding the subsidies to cover the rollout of high-speed Internet service to rural areas.
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