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FCC Set to Press Forward on 'White Spaces,' But Pulls Comprehensive Overhaul of Telecom Payments

WASHINGTON, November 4 – The Federal Communications Commission on Monday deleted one of the four big-ticket items that it planned to tackle at its Tuesday open meeting, but resisted pressure to spike a rule that would force broadcasters to share the vacant spaces between television channels.

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News: Special Election Day Report

By Drew Clark, Editor, BroadbandCensus.com; and Drew Bennett, Special Correspondent, BroadbandCensus.com

WASHINGTON, November 4 – The Federal Communications Commission on Monday deleted one of the four big-ticket items that it planned to tackle at its Tuesday open meeting, but resisted pressure to spike a rule that would force broadcasters to share the vacant spaces between television channels.

In pulling FCC Chairman Kevin Martin’s plan to overhaul both the universal service fund and inter-carrier compensation system – or the rates that telephone companies pay each other to connect calls – Martin ran up against a four-commissioner revolt against his plan.

In dueling press releases on Monday, Martin blamed his fellow commissioners for seeking a one-month delay of the plan. He said that they will not “be prepared to address the most challenging issues” come December.

The other four commissioners – two Republicans and two Democrats – cited the need to circulate the comments more widely. “Any reform proposal [must] receive the full benefit of public notice and comment – especially in light of the difficult economic circumstances currently facing our nation,” said the four commissioners.

But Martin hasn’t backed down yet from his goal to force broadcasters to share the “white spaces” on the television dial. Broadcasters’ fears of interference have kept stations far, far, apart on the television dial. For example, in Washington, no more than four of the 21 channels between 30 and 50 are occupied: 32, 45, 47 and 50. That leaves 17 available as white spaces.

The channel numbers vary from city to city, and will likely change with the transition to digital television (DTV) on February 17, 2009. Still, a lot of vacant frequencies remain vacant in the airwaves.

Martin has resisted pressure from broadcasters and their allies – including the major football leagues, Broadway producers and mega-churches, including House Energy and Commerce Committee Chairman John Dingell, D-Mich. – and is apparently siding with the high-tech companies, including Google, Microsoft, Phillips and others, that seek to use the frequencies for transmitting broadband signals over low-power devices.

The commission is apparently set to accept a report of the agency’s Office of Engineering and Technology that would set technical parameters for the operation of such devices.

Additionally, the FCC is apparently also pressing forward to authorize the merger of mobile provider Sprint with Clearwire, a providers of wireless broadband, and the merger of Bell company Verizon and regional telecommunications company Alltel.

Pushing for Telecommunications Changes on Election Day

The universal service fund and intercarrier compensation (USF and ICC) regimes combine to dictate, to a large extent, the revenue and subsidy flows between large, integrated telecommunications providers that serve comparatively wealthy and urban populations on the one hand (Verizon, for example) and smaller rural carriers who serve comparatively lower-income customers in areas where deployment and service costs are high on the other (like Century Tel).

Among the key policy components of the inter-carrier compensation and universal service regimes the prices that rural carriers charge to terminate wireline voice services, the methodology by which subsidies are extracted from urban carriers to contribute to the USF, and the expansion of services that are eligible to receive universal service funding.

While most telecommunications stakeholder groups agree that inter-carrier compensation rates and universal service funding methods need to be changed, there was a great deal of discontent over the impact that Martin’s proposed rule changes would have on carriers that serve low-income and rural consumers, often at the highest costs.

Additionally, critics charged that Martin was rushing to overhaul a portion of telecommunications regulation that could severely impact the landscape of the industry for years to come – on the heels of his departure from the commission with a new presidential administration.

The National Telecommunications Cooperative Association reacted positively to news that the USF/ICC item had been pulled. The group, which represents rural telephone co-ops, praised the four commissioners “for recognizing the importance of due process and in providing all interested parties the opportunity to fully review and comment on the proposal.”

OPASTCO and the Western Telecommunications Association, which also represent rural carriers, were dismayed by the news. “OPASTCO and WTA believe that a delay in the vote for the comprehensive plan, as negotiated by the two associations,… will have extremely negative consequences for rural carriers and the rural customers they serve,” the organization said in a statement.

“We worked in good faith with the FCC, communicating with all of the FCC commissioners’ offices to ensure that each office understood the negative affects a plan without these modifications would create,” OPASTCO President John Rose stated.  “Delaying the vote from Nov. 4th will make it virtually impossible for the FCC to achieve such a beneficial comprehensive plan for rural areas.”

Randolph May, President of the market-focused Free State Foundation, said: “It is disappointing that the FCC won’t be voting on Chairman Martin’s plan to fundamentally reform the intercarrier compensation and universal service regimes. In this instance the public has had adequate notice and opportunity to comment on the substance of the proposals put forward by Chairman Martin.”

Wireline Regime Reform: Averting a Byzantine Failure

In 2006, FCC Commissioner Michael Copps commented that inter-carrier compensation “is Byzantine…it’s broken and has been dissolving quickly.” A recent discussion on Capitol Hill sponsored by the Free State Foundation also labeled both regimes “archaic” and featured Commissioner Deborah Taylor Tate who started the session by agreeing that “archaic is certainly an apt description” and submitted that changes to inter-carrier compensation and universal service are long past due.

Following Commissioner Tate at the Free State Foundation’s event, Gerald Brock, Professor of Telecommunication and of Public Policy and Public Administration at The George Washington University, described the long and tortured history of three of the open dockets involved that date back anywhere from seven to twenty years.

Intercarrier compensation rates, for example, were first structured in 1984, when the break-up of “Ma Bell” (AT&T) separated incumbent local carriers from long-distance and regional providers and dictated high access rates that these carriers would charge each other to complete a telephone call that passed over multiple providers’ wires. While these regulated rates are significantly lower today, they still disproportionately favor rural incumbents and are not sensitive to more sophisticated forms of service (like Internet service) that have evolved since the break-up.

The inter-related universal service regime, designed to fund the build-out of rural telephone lines, is also criticized as being cumbersome and punitive by nationally integrated providers who must pay the bulk of the fees. Meanwhile, the services that the fees fund have not evolved either and many telecommunications experts have cited a need for high-speed Internet services to be integrated into the regime.

In a September 22, letter to the FCC, the Mercatus Institute presented results from a variety of studies that show the antiquated access rates to be burdening consumer welfare with at least a $1 billion deadweight loss, as recently as 2002. The Mercatus researchers and other groups concerned with the economic burden placed on regional carriers and their comparatively urban and wealthy customer-base by the current regime recommend the Commission minimize the access charges on price-sensitive services like long-distance wireline telephone calls and wireless calls in general.

In a separate letter, Verizon Communications recommended the Commission set a reduced flat rate access rate for all carriers, all jurisdictions and all service types. In an effort to recover lost revenue for high-cost rural carriers, the regional carrier also recommends the Commission increase the monthly charge for an access line, a reform also referred to as a “numbers based approach” to Universal Service Fund reform.

Given this platform for potential reforms to be examined by the Commission, many interest groups also wanted to see the Universal Service Fund expanded to include broadband services.

Many Industry Groups Want Change to Wait

While an array of industry stakeholders agree with the likes of Tate and Brock that change is overdue, many perceive Martin’s recent efforts to be rushed and overly-ambitious.

“I am concerned that expedited consideration of this draft proposal won’t allow sufficient time for interested parties to review and comment on its impact,” Sen. Lamar Alexander, R-Tenn. said in a recent letter addressed to the Commission and signed by 60 other lawmakers.

The National Association of Regulatory Utility Commissions (NARUC) echoed the sentiments of this letter and urged the FCC in a press release last week to “allow more time for due process and public comments before it acts on a sweeping proposal that will revamp intercarrier compensation and the Universal Service Fund.”

NARUC, whose members include the state regulatory commissions that play a distinct role in setting compensation and universal service rates along with the FCC, is particularly concerned with the possibility that the federal commission will make the most drastic changes to rules that determine interstate rates that carriers charge and that currently fall under the jurisdiction of state regulatory bodies.

Without an official public statement regarding the exact rule changes that will be considered on November 4, NARUC and others are left to speculate and the association has recommended a stay of 90 days on any decisions and the issuance of a public notice “summarizing the…discrete issues…and proposed legal theories.”

Some groups have even levied cynical charges against the commission that imply a rush towards massive reforms on November 4th that might slip under the national radar in the midst election day.

“A ‘phony crisis’ is being manufactured by FCC Chairman Kevin Martin and some on Capitol Hill who want to change the USF fee on long-distance to a flat per-line charge that would increase phone taxes  by up to $700 million for 43 million U.S. households, most of them low-income seniors, rural residents and minorities,” said the report by the Keep Universal Service Fund Fair Coalition.

On the other hand, the agency faces a November 5 deadline to resolve issues concerning the termination of service bound for a dial-up internet providers.

Leveling the Playing Field or Tilting it Further?

Whenever the agency follows-through on the intercarrier compensation and universal service funding mechanisms, then the revenue flows between providers in the telecommunications industry could be dramatically shifted.

NARUC asked the Commission to consider whether reforms to the regimes will “increase wireless/cellular or broadband deployment in unserved or underserved high cost areas, or actually undermine deployment” and whether they will “put upward pressure on local rates.”

Some say that a “numbers based approach” to universal service reform may lower some consumers long-distance rates and it would also, according to Verizon’s letter, raise the monthly flat rate for owning a residential phone line from $6.50 to $10.50.

Consumer groups claim that the reaction to such a rate-hike by consumers in low-income areas would be to forgo telephone adoption altogether, cutting off a segment of the population from vital communication services, even in the case of an emergency.

Groups like the Mercatus Institute, however, counter with studies that reveal consumers to be more price-sensitive to long-distance charges then to flat rates for line ownership and are pushing for a numbers-based approach to reduce deadweight losses to overall consumer welfare that would be complimented by programs that ensure emergency connectivity for consumers who lack access otherwise.

Breakfast Media LLC CEO Drew Clark has led the Broadband Breakfast community since 2008. An early proponent of better broadband, better lives, he initially founded the Broadband Census crowdsourcing campaign for broadband data. As Editor and Publisher, Clark presides over the leading media company advocating for higher-capacity internet everywhere through topical, timely and intelligent coverage. Clark also served as head of the Partnership for a Connected Illinois, a state broadband initiative.

12 Days of Broadband

How Long Will it Take Congress to Revamp the Universal Service Fund?

Critics urged the FCC to expand the fund’s contribution sources, but the agency chose to punt the decision to Congress.

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Graphic courtesy of Dmitry Kovalchuk / Adobe Stock

From the 12 Days of Broadband:

The Federal Communications Commission this summer waived away the issue of revamping the Universal Service Fund, pointing to the need for Congress to give it the authority to make changes to the multi-billion-dollar fund that goes to support basic telecommunications services to low-income Americans and rural communities. 

Up to this point, the agency had a virtual megaphone to its ear with critics saying that it needs to make the changes necessitated by the fact that the nearly $9-billion fund this quarter is supported only by dwindling legacy voice service revenues as more Americans move over to broadband-driven communications services. 

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FCC

Chairman Pallone Says Service Providers May Be Abusing ACP

‘These reports detail problems customers have faced,” wrote Energy and Commerce Committee Chairman Frank Pallone

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Photo of Rep. Frank Pallone, Jr., D-NJ, obtained from Flickr.

WASHINGTON, October 26, 2022 – Rep. Frank Pallone, Jr., D-N.J., sent letters to thirteen leading internet service providers requesting information on potential “abusive, misleading, fraudulent, or otherwise predatory behaviors” engaged in through the Emergency Broadband Benefit Program and the Affordable Connectivity Program.

Pallone, chairman of the House Energy and Commerce Committee, expressed concern over allegations that providers are conducting business in violation of the programs’ requirements. Pallone cites as evidence several stories, including pieces from The Los Angeles Times and The Washington Post.

“These reports detail problems customers have faced, including either having their benefits initiated, transferred to a new provider, or changed to a different plan without their knowledge or consent,” Pallone wrote.

“Other customers have reported a delay in the application of the benefit or a requirement to opt-in to future full-price service, which has resulted in surprise bills that have been sent to collection agencies.”

“There have also been reports of aggressive upselling of more expensive offerings, requirements that customers accept slower speed service tiers, and other harmful and predatory practices,” he added.

Pallone asked the providers for several categories of records, including each company’s number of benefit recipients, complaint-resolution protocols, degree of knowledge of incorrect customer bills, protections against upselling, and more. Letter recipients include AT&T, Comcast, T-Mobile, and Verizon.

The ACP, established by the Infrastructure Investment and Jobs Act of 2021 and overseen by the Federal Communications Commission, subsidizes monthly internet bills and device purchases for low-income applicants. Non-tribal enrollees qualify for discounts of up to $30 per month, and qualifying enrollees on tribal lands for discounts of up to $75 per month. Enrollees also qualify for one-time discounts of $100 on qualifying device purchases.

The EBB program was the predecessor to the ACP.

The ACP, a favorite of many politicians and federal entities, including the White House, is no stranger to controversy. In September, the FCC Office of Inspector General issued a report that found the ACP doled out over $1 million in “improper payments” to service providers due to “fraudulent enrollment practice[s].”

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Universal Service

Lines Are Sharpening Over Who Drives the Future of Universal Service: Congress or Broadband Providers?

Big communications companies want Congress to tax telecom, while many others want higher fees on broadband service.

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Photo of panel moderator Julie Veach, Alex Minard, Greg Guice, and Angie Kronenberg at AnchorNets 2022.

CRYSTAL CITY, Va., October 14, 2022 – Should contributions to the Universal Service Fund originate from Congress or from fees paid by communications companies to an agency responsible to the Federal Communications Commission? A panel of experts speaking Friday at AnchorNets 2022 debated this issue.

The Universal Service Fund, created in 1997 to improve telecommunications connectivity nationwide, is funded primarily by voice-based services. In recent years, voice-based subscriptions have substantially dropped, creating a revenue crisis and leaving remaining voice-based customers to foot a climbing per-person USF bill.

To rectify this imbalance, industry players have proposed a variety of new funding sources. The two core options are direct taxation by Congress, or by broadening the base of the USF.

The latter option would require broadband providers to contribute to levies collected by the Universal Service Administrative Company, a non-profit entity accountable to the FCC.

Urging Need for FCC Action on Universal Service Fund, Expert Says Congress Too Slow

Speaking at the Friday conference of the Schools, Health and Library Broadband Coalition, Greg Guice, director of government affairs at Public Knowledge, argued that the FCC has the legal authority to require broadband service providers to contribute to the USF.

“The language of the statute says every carrier shall contribute and any other provider of telecommunications that the Commission decides may contribute to Universal Service,” he said.

Angie Kronenberg, chief advocate and general counsel at industry trade group INCOMPAS, said Congress shouldn’t be relied upon for intervention: “It is very helpful when Congress recognizes that there is a problem and is willing to appropriate, but that is not a sustainable, predictable model.”

Petition Challenges Constitutionality of Roles FCC, USAC Play in Universal Service Fund

The USF has of late made substantial investments in broadband projects, and many industry experts say broadband services should be required to contribute thereto. In August, however, the FCC declined to unilaterally reform the fund’s contribution system and asked Congress to review the matter.

“On review, there is significant ambiguity in the record regarding the scope of the Commission’s existing authority to broaden the base of contributors,” the Commission’s report stated.

Alex Minard, vice president and state legislative counsel at NCTA – The Internet and Television Association, suggested Congress should be the driver of USF reform.

Policy Groups Want Bigger Contribution Base to Shore Up the Future of the Universal Service Fund

“Maybe the FCC does have the legal authority – maybe – to include broadband revenues,” said Minard. “If we’re going to…newly tax such a significant part of the economy, maybe it’s Congress that should be making this decision, and not an independent federal regulatory agency.”

Minard also argued the need for USF reform is less urgent than some believe. “It has been in crisis for 20 years,” he said. “What’s a little bit longer?”

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