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Joel Lubin

NARUC Panel Supports USF Reform

in FCC/Mobile Broadband/Universal Service by

WASHINGTON February 15, 2011 – On Monday, the Telecommunications Subcommittee of the National Association of Regulatory Utility Commissioners gathered a diverse group of experts to discuss the Proposed Rulemaking on Universal Service Fund Reform the Federal Communications Commission recently issued.

The panel brought together a wide range of experts, including Joel Lubin from AT&T, James Cawley from the Pennsylvania Public Utility Commission, and Parul Desai from Consumers Union. The group represented a range of opinions but they all agreed that the NPRM was an essential update to the Universal Service Fund.

“It was good to see that broadband was finally included in universal service and the goal of 4Mbps down  is promising,” said Desai.

Cawley was also supportive of the speed goal calling it “reasonable and measured”.

Mike Balhoff, from the consulting firm Balhoff & Williams, described how the group felt about the NPRM, saying, “the gun is to our heads and now necessary reform will have to occur.”

Eric Einhorn from rural broadband provider Windstream, indicated that his firm was particularly pleased that the FCC choose to be technologically neutral in their plan to modify high cost support to a single entity. Einhorn hoped this would allow for true competition between wireline and wireless.

“Under the new proposal, High Cost support will only be given after the entity reaches preset service goals,” said Billy Jack Gregg the former Director of the Consumer Advocate Division of the West Virginia Public Service Commission. “This is going to make sure that [the Universal Service Administrative Company] won’t have to continuously monitor recipients to ensure that service goals are being met”

Steven Morris from the National Cable & Telecommunications Association highlighted the fact that the USF now has a set budget, and the FCC must figure out how to find solutions under this budget.

Gregg echoed this statement, saying, “the USF is finally like other government programs with a set budget”.

The only problem that the group had with the NPRM is that it failed to address contribution reform. Balhoff, Cawley and Gregg each underscored that while contribution reform was not included in the NPRM it is likely that the issue will be addressed soon. Lubin predicted that it would happen in the late spring.

Universal Service Fund Needs Overhaul, and Most Want Broadband Included

in National Broadband Plan/Universal Service by

WASHINGTON, November 18, 2009 – The Universal Service Fund is in need of an overhaul to equalize costs among stakeholders and modernize programs to include broadband services, a group of industry representatives and regulators told the House Energy and Commerce subcommittee on Communications, Technology and the Internet during a Tuesday hearing.

The hearing examined a discussion draft of the Universal Service Reform Act of 2009, authored by subcommittee Chairman Rick Boucher, D-Va., and Rep. Lee Terry, R-Neb.

The Universal Service program, which existed for decades before being codified in the 1996 Telecommunications Act, is under “tremendous pressure” and requires a comprehensive effort to reform its operations, Boucher said during opening remarks.

Reform is needed because new technologies for long distance voice communications have reduced the available revenue that can be tapped to fund current programs, leading to soaring costs for consumers – a projected 14 percent of revenues in January of 2010, he said.

Such an increase and a maintenance of the status quo is simply “not sustainable,” Boucher said. The Boucher-Terry bill would cap the high cost portion of the fund while requiring wireless carriers who participate to do so through a competitive bidding process. Such legislative changes would include reporting requirements and auditing processes that critics of the fund say are long overdue.

Intrastate communications providers would also pay into the reformed fund under the Boucher-Terry bill, relieving pressure on long-distance carriers, and making the fund “sustainable,” Boucher said.

These changes would “bridge the divide” on USF issues between large carriers, which contribute more than they receive, and smaller carriers that receive more than they contribute under the current regime, he added.

And broadband services would finally be included in the list of services eligible for universal service subsidies. This move was applauded by Rep. Henry Waxman, D-Calif.

Waxman, who chairs the full committee, said USF reform must focus on how subsidies can contribute to broadband adoption. While 90 percent of households have access to broadband, Waxman lamented that adoption rates that have not kept pace with availability and have lagged beyond the national average among low-income households.

But ranking member Joe Barton, R-Texas, expressed skepticism that broadband should be considered a “civil right.” He said any addition of broadband into USF should be delayed until questions over definitions raised by the American Reinvestment and Recovery Act broadband grant programs have been settled.

State regulators strongly support the inclusion of broadband in any USF legislative effort, said Oregon Public Utility Commissioner Roy Baum. Baum, who chairs the telecommunications committee of the National Association of Regulatory Utility Commissioners, and who serves on the Federal Communication Commission’s Joint Board on Universal service, welcomed the Boucher-Terry bill.

“No one seriously disputes that reform of the existing mechanisms is long overdue,” Baum said.

Baum stressed the importance of incorporating broadband into USF. “Broadband deployment is of utmost importance to the economic productivity and quality of life of the entire country,” he said. Baum warned members that communities that lack broadband now will soon be as disadvantaged as those who lacked electricity in the first half of the 20th century. Inclusion of broadband in the discussion draft is a “major step forward,” Baum said.

Technological changes now warrant an overhaul of USF to focus around broadband where it once sought to deploy voice services, said National Cable and Telecommunications Association CEO Kyle McSlarrow. While McSlarrow acknowledged such a transition would entail “significant changes,” he recommended sweeping reforms to recognize the new reality, such as reducing the high cost program in areas where it is no longer required while ramping up programs to support broadband adoption in areas that lack access to such services.

Specially, McSlarrow reiterated NCTA’s support for including broadband in existing USF programs such as Lifeline and Link Up. “Expanding these programs to include access to broadband could help bring the benefits of broadband to low-income consumers,” he said.

Catherine Moyer, vice-chair of the Organization for Promotion of Small Telecommunications Companies, said OPASTCO “applauds” the inclusion of broadband in USF reform proposals, calling the draft a “forward looking move.” Such services are “rapidly becoming the mode of delivery for practically everything consumers may need or want regarding communications,” she said, including voice, data, education, health care and entertainment.

Support for broadband’s inclusion in USF reform was echoed by Joel Lubin, AT&T vice president for public policy services.

But Lubin cautioned against acting too quickly in light of the FCC’s forthcoming national broadband plan, due in just over three months. “Because the goals of the national broadband plan must include the availability of broadband services to every American within the near future, fundamental universal service reform is integrally related to the success of that plan,” he said. Legislative efforts must be “carefully calibrated” not to impede the FCC’s progress, he said.

Congress, Industry Execs Agree on Broadband in Revamped Universal Service Fund

in Universal Service by

WASHINGTON, March 12, 2009 – The Obama administration’s priority in broadband deployment injected an undercurrent of excitement into a Thursday hearing of the House Energy and Commerce Subcommittee on Communications, Technology, the Internet.

While the hearing was scheduled to be focused on reforming the universal service fund high-cost program, both members and witness spent much of the hearing debating how best to use the fund to deploy broadband internet access to all Americans.

“Broadband has emerged as a critical part of our telecommunications infrastructure,” said Chairman Rick Boucher, D-Va. “New funding sources must be tapped” in order to bring access to unserved areas, he said.

“Broadband is to communications today what electricity and telephone service were 100 years ago,” Boucher said. And while he acknowledged the impact of $7.2 billion in stimulus funding for broadband was a subject for debate, Boucher reiterated his view that broadband is “clearly deserving…of universal service fund support.”

But Ranking Member Cliff Stearns, R-Fla., said the stimulus plans made expansion of the fund irrelevant. Instead of expanding the USF, Stearns suggested examining the successes and failures of the stimulus program while it is implemented.

Congress should focus efforts on reducing waste and fraud in current USF programs and adding a cap prevent more “uncontrolled growth” of the fund, Stearns said.

“Throwing money at this crumbling program makes no sense,” he said. Instead of more subsides, Stearns suggested using “market-based, technology-neutral systems” to encourage broadband deployment.

Industry leaders were in agreement on Boucher’s plan for expanding the USF to include broadband service. “The core principle of competitive telecommunications for every American remains an important and worthy goal,” said U.S. Cellular Chairman LeRoy Carlson. “[T]he proper role of [the USF] must be to ensure that [rural] areas have modern, high quality telecommunications infrastructure” that is both feature and price comparable with their urban and suburban counterparts, he said.”

Broadband and mobile wireless services are two ‘must-have’ functionalities consumers expect and demand for home and business, Carlson declared,” whether they live in urban or rural areas. “I believe a reformed program can effectively…address those problems, and if tailored correctly, can even be complimented by leveraging the [broadband stimulus funds],” he said.

“A central goal of this program must be to provide rural citizens with access to high quality mobile voice and broadband services, everywhere that people live, work and travel,” said Carlson.

Verizon executive vice president Tom Tauke told the subcommittee he believes that consumers, industry and policymakers agree that modern and affordable communications services are “a prerequisite for economic growth, and an essential platform to address major social challenges.”

But the high-cost fund “remains focused on yesteryear’s technology,” Tauke said. “Attempts to fit new technologies into a telecom framework.” This process has not allowed the fund to meet its “fundamental objective: providing universal service.”

Qwest Communications Executive Vice President Robert Davis agreed for the need to reform the fund to allow for new technologies. “The grants for broadband deployment that will be provided by the [stimulus program] are a start,” he said, “but no one believes that this money will result in ubiquitous deployment of [broadband] to currently underserved areas.” There remains a crucial role for universal service funding,” David declared.

Adopting broadband as part of universal service would also resolve questions on how to stop what some lawmakers described as “runaway” increases in USF fees. AT&T vice president Joel Lubin suggested that moving from charging consumers based on a portion of their bill to a per-number charge.

While Lubin acknowledged revenues paid into the fund from telephone network access charges might temporarily decrease under such a plan, he predicted that the drop would be inevitable as more Americans move to voice over internet protocol (VoIP) services.

The increasing number of phone numbers used by consumers in next-generation technologies such as mobile phones, VoIP lines, and multi-line business systems would more than make up for the temporary drop, Lubin said.

“Broadband is a disruptive technology that redefines the game,” Lubin said. “Local calling areas are now the whole world.” A broadband based USF program would eliminate access charges while providing “more capability, without the complexity of old narrowband pipes”

Free Press research director Derek Turner noted both “critics and defenders of the high-cost fund all agree that broadband is the essential communications infrastructure of the 21st Century.” When USF was created in 1996, “internet access was an application that used telephony as an infrastructure,” he said.

By contrast, Turner said in today’s world, “telephony is one of the many applications that are supported by broadband infrastructure.” And while the FCC can take steps to modernize the USF regulatory structure, Turner emphasized that “meaningful and lasting reform” can come only from congressional action. “Achieving this goal…will require the complete upending of the status quo and direct confrontation of difficult and politically challenging choices,” he said.

When Boucher asked the panel if the law should explicitly allow USF to cover broadband, there was no disagreement that the 1996 Telecommunications Act should be changed to allow USF funding to explicitly cover broadband services.

But there was some disagreement over whether a “USF 2.0,” as one witness put it, should be limited to wireline services only. While Davis said a program should be “technology neutral” once speed and price targets had been determined, Carlson said that both were equally important – and that wireline and wireless could be subjected to different speed requirements.

And while Turner acknowledged wireless could have a role in reducing costs, he wasn’t convinced. “I’m not sure if checking Facebook while driving at 70 miles per hour is [needed in USF programs]. But Tauke pointed out that fixed and mobile wireless have different use cases and potentials. Rep. John Shadegg, R-Ariz., agreed, calling the two technologies “a different ballgame.”

The Federal Communications Commission is currently accepting comments on a proposal to expand the USF-funded Life Line and Link Up programs to include broadband services. In response to a question from Rep. G.K. Butterfield, D-N.C., Tauke said he didn’t support the proposal in its current form.

Tauke later said in an interview that Verizon believes it is important for all Americans to have access to broadband and that USF should be included, but he could not offer specific alternatives to the Life Line/Link Up proposal except to suggest the program be technology-neutral.

And while AT&T’s Lubin was wary of subsidizing access devices, he agreed that the choice of wired or wireline service, even under Life Line/Link Up, should be “in the mind of the consumer.”

The Life Line/Link Up proposal was endorsed by the National Association of Regulatory Utility Commissioners at its winter 2009 meeting last month.

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