The Universal Service Fund (USF) should be tied to all forms of communication, Senate Commerce Committee Chmn. Stevens (R-Alaska) said Tues. at a hearing on the fund’s contribution rules. “This technology is changing so fast” a law is needed that can work for some time, Stevens said. It doesn’t make sense for Congress to rewrite complex rules and then have to change them again because of technology changes. He said the Committee is determined to get a fair set of principles on “who pays in and who pays out” and to eradicate abuses in the program.

The FCC is using a “hoax” argument that the Universal Service Fund (USF) contribution process is broken to justify fee hikes, a citizen group charged Fri. The USF contribution formula “requires at most minor adjustments that can be accomplished without hefty increases in federal phone fees,” the Keep USF Fair Coalition said. The group opposes FCC Chmn. Martin’s proposal to move from a long distance revenue- based system to one based on how many telephone numbers a carrier serves, claiming it would penalize low-volume long distance callers. At a news event set for today (Mon.), the group will discuss “the phony USF funding crisis.” A Tues. Senate hearing will address USF contribution methodology. Progress & Freedom Foundation Pres. Ray Gifford said the coalition’s view “is contrary to established fact.” The long distance industry, which is the basis for the current contributions system, “is in decline and it makes no sense as a funding vehicle for universal service in the age of VoIP technology.” A PFF working group has endorsed per-line fees.

CTIA officials are promoting a new proposal for USF reform that combines the “numbers-based” approach to collections promoted by Chmn. Martin with a capacity-based assessment for large users. CTIA began circulating its version of USF reform the past few weeks, a spokesman said. CTIA Pres. Steve Largent highlighted the USF proposal Mon. during a lunch with reporters, calling it one of the Assn.’s top priorities.

Using a flat-fee system to support the Universal Service Fund (USF) would hit Latino customers with higher costs, several citizens organizations warned Thurs. A proposal supported by FCC Chmn. Martin would base carrier contributions to the USF on a flat, per phone number basis. Since carriers pass those costs onto customers, low-volume customers would pay the same as those who make a lot of phone calls, said the groups, part of the Keep USF Fair Coalition. The USF is now funded on a revenue basis, so low-volume customers pay less than high-volume users. Those who make few long-distance calls or use prepaid wireless phones will either have to pay more or start paying for the first time, said the League of United Latin American Citizens, the Latino Issues Forum and Consumer Action. “Other than older Americans, Latinos and Hispanics account for the largest number of Americans who would end up paying more under the Martin plan for USF” because they are very low income according to Census Bureau data, the groups said in a news release.

FCC Comr. Adelstein has “long supported a revenue approach” for raising money for the Universal Service Fund “because it’s easier to administer,” he told OPASTCO members Wed. at their winter meeting in Maui. That doesn’t mean he would reject proposals to move away from revenue, he told them. “I'm open to exploring all alternatives; I don’t reject any of these” proposals for reforming the USF contributions system, but none of them is “a panacea,” he said. The FCC is considering changing the way carriers contribute to the USF because of concern the current revenue-based approach no longer works due to changes in industry technology. Adelstein told the group universal service reform is one of the top 3 issues before the FCC this year. Others are intercarrier compensation and IP-based services -- and all 3 are interrelated. “I don’t know if we ever had such a big nut to crack” at the FCC, he said: “Each one of those 3 proceedings is a huge challenge and complicated on its own” and all have to be done in concert. During a Q-&-A session after Adelstein’s speech, rural telecom executives emphasized their concern about phantom traffic. Phantom traffic needs to be dealt with before the FCC takes on USF reform because “the basics need to be handled first,” said a telecom official from Minn. Adelstein said he agreed there was “a good argument for doing it first.” He told the group that “some people, I think, prefer to have this [issue] out there as a driver” to force consensus among supporters of various proposals. However, phantom traffic “may be harder” to fix if regulators wait, he said. In answer to another question, Adelstein said FCC rules require video content providers to offer nondiscriminatory access to their content at reasonable rates but the rules are limited. It’s “contrary to the intent” of the rules for companies to use their “vast hold on the market” to impede access to content, he said. One audience member asked if it made sense for rural carriers to keep “pouring” money into networks while intercarrier compensation and USF reform remained pending. Adelstein told him the FCC, and the Senate Commerce Committee, strongly support USF. “We can’t afford to let these networks go. They are critical to future economic competitiveness.”

A bill introduced by Sen. DeMint (R-S.C.) that would give the FCC authority to define what constitutes fair competition for consumers is based largely on ideas from the Progress & Freedom Foundation’s project on telecom reform. The bill, which has no co-sponsors, includes a substantial section on universal service fund (USF) reform -- the first major Senate telecom bill to address the matter. The provisions are based on research by experts PFF convened from universities, law firms and research groups (CD Dec 9 p3). DeMint’s bill would require the FCC to adopt within 6 months after enactment a new contribution mechanism based on phone numbers; place a $3.6 billion cap on distribution, in the form of performance-based block grants to states.

FCC Chmn. Martin made it clear he still backs a numbers-based approach to reforming the way companies contribute to the Universal Service Fund (USF), despite concerns about that method’s effect on low-volume telephone users. User groups have said a phone number- based approach would hike USF fees carriers pass on to customers.

Were the FCC to base the universal service contribution system on telephone numbers, elderly and low- income people would suffer financially, a coalition of public interest groups said Thurs. Emphasizing FCC Chmn. Martin’s support for a numbers-based plan, members of the Keep Universal Service Fund Fair Coalition said at a news conference the plan would hike phone charges paid by “the most vulnerable of Americans.” The current revenue-based collection plan only charges when long distance calls are made, but the numbers-based plan would charge a fixed $1 or $2 a month, said Linda Sherry, Consumer Action dir.- national priorities: “One of the most alarming aspects of the numbers-based proposal is that no one has yet produced an estimate of the effect of the change on low-income consumers… It does not make sense for the FCC or Congress to change the collection of USF funding without first taking a long, hard look at who would pay the piper for the so-called ’simplicity’ of a numbers-based plan.” The coalition released a report it said offers “the first public estimate of the number of vulnerable consumers… and the extra dollars they would be forced to pay” whether directly through higher USF costs or indirectly through higher phone rates. According to the report, about 16 million households, mostly low-income or elderly individuals, that generally make no long distance calls, would pay up to $383 million more “under the Martin scheme.” Another group of 27 million low-volume users would pay up to $324 million more, the report said. The FCC is considering several ways to reform the contributions system, which now collects from carriers about 10% of revenue that long distance calls generate. Carriers pass the costs on to consumers. The coalition offered a “compromise” plan in which the current revenue- based system would continue but with VoIP revenue added. The plan would cap contributions at 12-15% of interstate revenue. If that didn’t collect enough money to support the USF program, a small numbers-based contribution -- “cents rather than dollars” -- would take effect as a “fall back,” Sherry said. The FCC now uses a “pay as you use it” system and shouldn’t move to a numbers-based “pay as you don’t use it” plan, Sherry said. FCC officials didn’t comment on the groups’ analysis because a contributions reform plan hasn’t been proposed yet.

Universal service fund (USF) support would be used for broadband deployment, under a discussion draft released Thurs. of a bill by Reps. Terry (R-Neb.) and Boucher (D-Va.). The bill would expand the USF base by requiring payments into the fund by service providers that use telephone numbers or IP addresses or sell network connections. “To change USF, I believe that all who play must pay,” said Terry. He called the draft a vehicle for reform that would remedy “inequities that exist today.” Boucher said he’s seeking comments on the draft by Dec. 23 and plans to introduce a bill next year.

Clearer rules and procedures would go far to improve management of the universal service fund (USF), the FCC was told by a variety of organizations. USF management can be confusing and inefficient for contributors and recipients, according to some comments, but many said the problems don’t stem from the Universal Service Administrative Co. (USAC) the non-profit that administers USF. The agency had sought comments on the entire USF program, including the high-cost fund, E-rate and smaller programs (CD June 15 p8).