Consumer Advocates Urge FCC to Reject Incumbent-Backed USF Reforms

"Currently there is no effective competition for stand-alone basic local exchange service,” the advocates said in their letter. “While many households are choosing VoIP as their source for basic service, it is part of a broadband bundle and standalone VoIP basic service that remains far more expensive than ILEC basic service. In addition, while a great number of households have wireless service, the majority of households continue to purchase both landline and wireless service. Most senior citizens continue to rely on landline."

The letter signers include Maine state Rep. Diane Russell, a Democrat; Virginia Citizens Consumers Council President Irene Leech; Ohio Poverty Law Center Senior Attorney Michael Smalz; Chicago Media Action Co-founder Scott Sanders and Public Knowledge Legal Director Harold Feld. “The ABC Plan will harm seniors who may be less likely to migrate to new technologies, low-income consumers, and others who want to maintain voice services through traditional telephone service,” said Consumer Law Center staff attorney Darlene Wong in a statement: “Basic telephone service over VOIP tends to be offered as part of a more expensive package that many consumers simply cannot afford. Consumer protections for traditional landline phone service must be preserved."

Analysts have said consumer groups have the best chance of derailing the industry-backed proposals, but until now such groups had been largely silent on universal service reform (CD Sept 12 p8). Some consumer advocates and even FCC officials are worried that, having essentially outsourced universal service reform to industry, Chairman Julius Genachowski won’t be able to alter industry-backed proposals so late in the day.

The companies behind the ABC plan “appreciate the criticism,” but they're “focused on working with the FCC and all parties to get USF reform done,” Verizon spokesman Ed McFadden said. The companies worked “exceedingly hard” and “everybody gave up a little” to reach the ABC compromise, McFadden said. “The fact of the matter is this will provide broadband to a bulk of the people who are unserved,” he said. “If anybody has something better, they should propose it. If they have a serious plan and if they have a serious contribution to make to the discussion they should do it. They're more than welcome to engage."

Meanwhile last week, the Ad Hoc Telecommunications Users Committee said reform ought to focus on the most cost-efficient models. “Meaningful reform is impossible if incumbent providers are guaranteed a subsidy, regardless of need or efficiency, as the ABC Plan proposes,” the Ad Hoc committee said (http://xrl.us/bmdmsb).

State regulators, who earlier endorsed the reform process, have largely turned against the industry-backed reform proposals. Taking aim at the ABC plan last week, Pennsylvania regulator and universal service Joint Board Chairman James Cawley wrote in a blog that it will “turn the telecommunications industry on its head.” Landline customers will see costs increase and jobs and “economic opportunities” will be lost because rural areas won’t get broadband, Cawley said. “It could put several small rural telephone companies in at least technical default of their federal loans and force many to sell out at fire-sale prices,” Cawley said. “It will allow the abandonment of hundreds of thousands of rural customers by the big telephone companies so they can make more money elsewhere. And it will repose virtually all telecom authority in the FCC by preempting state laws and eliminating the local oversight of state utility regulators.”