A Universe of USF Response

Reactions were generally, but not universally, positive to the FCC's vote Thursday to reform the Universal Service high-cost fund and intercarrier compensation regime.

Most comments included the caveat that they had yet to vet the decision fully -- it was some 500 pages -- and included shout-outs to the commission and staff for succeeding in drafting and voting out an item. Here is a sampling:

"For too long, this system has been focused on supporting the technology of the last generation -- basic voice telephone service," said Senate Commerce Committee Chair Jay Rockefeller (D-W. Va.). "I am pleased it will now also tackle the challenge of the digital age -- bringing high-speed Internet and wireless service everywhere in this country. I recognize that reform means that some stakeholders will be unhappy because they prefer the status quo, but our Nation's communications infrastructure is too important to delay reform any longer.  Our economy cannot afford missing out on the opportunities broadband enables, such as expanding business, fostering innovation, increasing access to education and healthcare, and even transforming entertainment.  And consumers deserve more than a support system built only on the technology needs of the past.  So I commend FCC Chairman Julius Genachowski and his colleagues for this effort, and I look forward to learning more about the details."

During the FCC's public meeting on the reforms, FCC Chairman Julius Genachowski talked about the new mobility fund and delivering service to areas like that of the West Virginia mining disaster last year, something Rockefeller has cited on more than one occasion in his push for broadband build-out, including the creation of an interoperable emergency network.

Verizon's SVP of regulatory affairs, Kathleen Grillo, said: "Today's action by the FCC to reform the antiquated universal service and intercarrier compensation programs is a milestone for consumers and the communications industry. Chairman Genachowski and the Commissioners deserve credit for tackling this difficult challenge and making the tough choices necessary to bring these programs into the 21st century. While we have not yet had an opportunity to review the order, the FCC's overall approach apparently puts these programs on a sustainable path and will enable millions of American households to connect to the high-speed broadband networks that are playing increasingly important roles in our nation's daily life."

This from the National Association of Regulatory Utility Commissioners: "We are pleased with the proposals to prevent traffic pumping and eliminate inefficient fund disbursements, both of which are long overdue. We also appreciate that the agency recognizes the valuable and essential role Congress reserved to the States regarding carrier-of-last-report obligations and so-called ‘Eligible Telecommunications Carrier' designations...That said, we and many of our members have a number of concerns about preemption of State authority in other aspects of today's decisions. Some elements raise a host of unanswered legal and procedural questions but also the specter of unintended consequences for consumers. As we read through and digest the order, we will have more to say about these concerns. Overall, today's decisions appear to be a mixed bag. It is too early to tell just what the ramifications will be for consumers, but we will be reviewing these plans in short order."

AT&T had this to say: "While no one can say that it is thrilled with all aspects of what the FCC did today, we are cognizant that we shouldn't lose sight of the forest -- the significance of what this decision means to all Americans - through the trees.  In the future, the basic level of service that United States policy will encourage and fund will be broadband and not simply voice service. This is a significant achievement worthy of congratulations and its impact on all Americans should not be minimized.  With that said, we look forward to carefully reviewing the details of the FCC's order before we can fully understand all of its implications."

"Today, the FCC has taken a historic step to reform intercarrier compensation and to redirect what can only be called a broken universal service system to a more targeted system that encourages broadband," said Jerry James, CEO of COMPTEL. "COMPTEL looks forward to reviewing the details of this order. All of this hard work will be meaningless; however, if the Commission does not maintain its focus on achieving a robust, competitive environment for IP-based services, and it will be from this perspective that COMPTEL will evaluate the FCC's decision."

One of the FCC's reforms is to equalize the payments for exchanging and terminating VoIP and traditional switched telecom traffic, which cable operators and competitive telcos have said is only fair and the larger, incumbent telcos, have argued is paying them for services they don't render. The FCC concedes that treating the traffic equally is in part to provide an incentive to delivering IP-based phone service.

And this from Rural Telecom Associations NTCA, Opastco and the Western Telecommunications Alliance: "Positive aspects of today's FCC order appear to include the FCC's action to confirm that VoIP traffic falls within the ICC framework and to resolve long-standing concerns about so-called "phantom traffic" and other arbitrage schemes. The Rural Telecom Associations also are pleased that the FCC appears to have recognized the need for an ICC restructure mechanism to help carriers of last resort continue providing affordable services in rural America.  They commend the FCC for its leadership and engagement in moving this process and these issues forward.

"At the same time, the Rural Telecom Associations remain eager to push forward for a long-term USF reform plan that will provide greater certainty and sufficient support, and they remain concerned that parts of the current reform package will have substantial adverse impacts on rural consumers and the small, community-based carriers of last resort committed to serve them."

Former House Communications Subcommittee Chairman and USF reform advocate Rick Boucher weighed in in his capacity as honorary chairman of the Internet Innovation Alliance: "The FCC's unprecedented efforts to reform the outdated and antiquated federal Universal Service Fund are critical to ensuring that broadband reaches underserved and rural communities across the nation. These USF reforms will pave the way for millions more Americans to reap the enormous economic, health and educational benefits that broadband can deliver."

John Windhausen, director of the Schools, Health and Libraries Broadband Coalition (SHLB), was pleased that the FCC had made serving anchor institutions one of the public interest conditions to receiving broadband build-out funds.

"The SHLB Coalition applauds the FCC for following the recommendations of Representatives Matsui, Markey, Eshoo and Doyle to ensure that recipients of USF support must serve the broadband needs of community anchor institutions in rural America. We are particularly pleased that anchor institutions are given an opportunity to participate in the design of the broadband networks serving their areas and that the recipients of USF funding must include the anchor institutions served in their annual reports.  Providing rural schools, libraries, healthcare providers and other community anchors with affordable, high-capacity broadband will go a long way toward improving educational opportunities, medical care and economic growth in rural America."

The above-mentioned Matsui, Rep. Doris Matsui (D-Calif.), added her applause: "While meaningful reforms are never easy, the FCC's order opens the door for greater efficiency and transparency in the Universal Service Fund, and will help ensure it will properly serve all Americans as we move further into a Digital Age.  The Order also reaffirms the FCC's commitment to restrain any uncontrolled growth of the High Cost Fund to ensure adequate funding is available other critical USF functions.   

"I am particularly pleased that the FCC today confirmed its strong commitment to ensure broadband adoption is part of USF reform efforts moving forward.  The fact remains that 95 percent of U.S. households have access to broadband services today, yet only about 67 percent actually subscribe.  In today's economy, it is imperative that we promote broadband adoption policies that spur broadband adoption rates in both urban and rural communities across the nation so that more and more Americans are able to access the tools they need to compete and succeed in today's high tech world. I am also pleased that the FCC recognized the unique and critical role that America's anchor institutions play in our communities."

Ditto Rep. Anna Eshoo, also a D-Calif.: "Bravo to the Commission for its work leading up to the adoption of today's rules.  Ensuring affordable, robust broadband service to the 18 million Americans without access today is one of the most important infrastructure investments of our time."

The FCC signaled that VoIP should not be treated as the redheaded stepchild of traditional telecom delivery, and said exchanging and terminating VoIP calls should be compensated by carriers on an equal basis with switched traffic. That pleased cable operators but not incumbent telcos, who argue that there is a lot more to handling switched traffic and that cable operators were looking to be paid the same for less work.

But the FCC did not weigh in on the $64,000 question of how to classify VoIP, which did not please Public Knowledge: "We are deeply disappointed that the Commission has once again evaded the central problem which threatens to bring down the entire plan -- that of resolving the Commission's authority over interconnected Voice Over Internet Protocol (VoIP) and broadband services generally.  The Commission requested comments on the authority issue, but declined to deal with it. VoIP services are becoming an integral part of the telecommunications network, serving millions of consumers. By declining to address this issue, the Commission is condemning the industry to more years of uncertainty, consumers and others will be powerless to complain about industry practices and the future of the network is left in limbo."

Also in the less-than-enthused camp was wireless carrier C Spire Wireless. "The FCC Thursday made broadband mobility for the first time a universal service goal, but is also cutting back support to multiple wireless carriers as a way to free up funds for more targeted, broadband-centric support, which will mean a net decrease in payments to wireless companies. FCC Chairman Julius Genachowski said there were hard choices made, but the goal was to promote broadband while dealing within a limited budget."

"While the rest of the world feverishly invests and promotes wireless broadband, the FCC has unilaterally abandoned the future for a backwards-looking approach that will retard the economy for years to come," said C Spire Wireless VP Eric Graham. "The coup de grace is that, while wireless users continue to provide over 67% of the dollars for the Universal Service high-cost fund, with today's order wireless users will now only benefit from approximately 10% of the high-cost fund's support while also being forced to fund antiquated landline networks. With today's vote, we believe the FCC has reached beyond its statutory authority to deliver American wireless consumers an enormous setback that will result in reduced competition, reduced innovation, and reduced access to the telecommunications and broadband services they prefer and need to access 21st century commerce, educational opportunities, and healthcare services."

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.