Incumbent telcos would be the clearest winners, and small providers of interconnected VoIP the biggest losers, if the FCC and Senate proceed as they have been on changes in the Universal Service Fund (USF), according to interviews with industry executives and analysts. Satellite would benefit by becoming eligible under a new fund for places unserved by broadband.

The VON Coalition urged the Commission not to go through with an interim plan to require VoIP providers to pay into the Universal Service Fund (USF) based on a percentage of their revenue (CD May 31 p1). The coalition said in a filing Wed. it was concerned the action, which is on the agenda for the June 21 open meeting, could delay broader reform of the USF contributions system. It said it supported FCC Chmn. Martin’s proposal to eventually move away from revenue as a basis for contributions and feared this interim plan, because it’s based on revenue, would stymie that move. The FCC in essence would be setting up an interim contributions process for VoIP providers and then turning around and setting up a 2nd one once full reform was accomplished, the coalition said. That would mean requiring 2 “fundamental shifts” in tracking and billing practices, the group said. The coalition also questioned whether adding VoIP providers to the pool would make up for contributions lost when DSL providers stop paying into the fund, which reportedly is one of the purposes of the interim plan. “The VON Coalition recommends that, instead of potentially putting the sustainability of the [USF] in jeopardy… the Commission should move promptly to adopt comprehensive reform measures.”

The FCC is poised to impose a mandate on VoIP providers that they pay into the Universal Service Fund (USF) and also may raise significantly the “safe harbor” for wireless carriers. FCC Chmn. Martin began to circulate a USF item last week, timed to the June 15 agenda meeting -- likely the first with new Comr. McDowell.

The FCC denied a Telco Group petition seeking exclusion of international revenue from the base used to calculate payments into the Telecom Relay Service Fund, or at least exclusion of Telco Group’s international revenue from its own contribution base. The FCC rejection of the requests said the TRS fund isn’t limited to supporting domestic relay service, but also is used to fund international relay calls. Telco had argued international revenue should be excluded because it’s excluded from contributions into the universal service fund. The FCC said that’s a different situation because USF money isn’t used for international service.

U.S. colleges could see a “staggering annual increase” in phone fees if the FCC moves to a numbers or connections system for collecting universal service fund contributions, the Keep USF Fair Coalition said Thurs. The group -- which has conducted a long-running campaign against the numbers approach proposed by FCC Chmn. Martin -- said colleges could see an increase of as much as $480 million, which could translate to phone service cuts and higher tuition. The coalition said a study shows that colleges could see their USF fees rise to an average of $82,999 from $8,971 now. The fees, paid by telecom carriers, usually are passed on to customers. Under a numbers approach, carriers would contribute to the USF by paying a per-phone number fee, probably around $1, rather than making contributions based on a percentage of revenue, as in the current system.

Rural telcos want a wider contribution base for the universal service fund, plus support for broadband deployment, according to Wed testimony before the House Subcommittee on Rural Enterprises. Groups lauded the approach in a bill (HR-5072) by Reps. Terry (R-Neb.) and Boucher (D-Va.) that would require all 2-way voice services to contribute, create a fund for broadband deployment in unserved areas and put a limit on the fund’s growth.

Prospects are good for passage of a telecom bill the President can sign this Congress, House Telecom Subcommittee Chmn. Upton (R-Mich.) told a Tues. National Journal breakfast. “Their bill is not all that far away from ours,” Upton said, referring to a Senate telecom bill introduced Mon. (WID May 2 p3). That bill, especially its franchise provision, offers a “hook” to get something into conference where the 2 can be reconciled, Upton said.

Prospects are good for passage of a telecom bill the President can sign this Congress, House Telecom Subcommittee Chmn. Upton (R-Mich.) told a Tues. National Journal breakfast. “Their bill is not all that far away from ours,” Upton said, referring to a Senate telecom bill introduced Mon. (CD May 2 p1). That bill, especially its franchise provision, offers a “hook” to get something into conference where the 2 can be reconciled, Upton said.

Asked what they would do to increase broadband deployment, a panel of attorneys Tues. offered a panoply of ideas, ranging from tax incentives to better consumer education to more reliance on powerline communications. Some panelists at a symposium sponsored by Catholic U.’s law school Tues. also recommended more dependence on the marketplace and less on regulation, although others said regulators better be sure that marketplace remains open to competition.

FCC Chmn. Martin and others are using a “phony crisis” to justify a proposal to change how Universal Service Fund (USF) contributions are collected, the Keep USF Fair Coalition told reporters Mon. The group, which opposes Martin’s proposal of a flat collection method based on telephone numbers, said the current revenue-based method isn’t broken. Coalition Exec. Dir. Maureen Thompson released a report she said “debunks the hoax” that USF collection reform is needed. The report shows the long distance revenue base for USF contributions isn’t dwindling, as opponents argue, Thompson said. According to the report, long distance revenue base, $76.6 billion in 2003, is projected to be $78.9 billion in 2006. Projected revenues drop slightly in 2007 to $76.8 billion -- still slightly over the 2003 level, Thompson said in an audio news conference. If needed, the current revenue base easily could be expanded by making it more “technology neutral,” meaning revenue could be added from VoIP and other advanced technologies not directly contributing to the fund now. If that were done, the expanded revenue base for USF would be $104.5 billion in 2006 and $105.9 billion in 2007, Thompson said, calling that a more “common-sense” approach to enlarging the fund. The coalition opposes a numbers-based system because it might lead to higher fees for low-volume users of long distance service. Although contributions to the fund come from companies that offer long distance service through a percentage of revenue, the firms pass the fees onto users. The coalition’s announcement came on the eve of a Senate Commerce Committee hearing on USF contributions today (Tues.). The Pacific Research Institute (PRI) took advantage of today’s scheduled hearing to issue a call for more sweeping USF change. The think tank said the USF has “spiraled out of control,” giving “wasteful subsidies [to] entrenched local carriers.” Rather than expand USF to include contributions from high-tech services such as VoIP, Congress should target needy consumers with vouchers and add rules that “ensure public accountability and safeguard cutting-edge innovations,” PRI said.