Demand for Rural Utilities Service loan funds dropped to 37 percent of the total amount of loan funds appropriated by Congress in FY 2012, Agriculture Secretary Thomas Vilsack and Rural Utilities Service Acting Administrator John Padalino told FCC Chairman Julius Genachowski Feb. 8, according to a letter sent Friday (http://bit.ly/UEgr4z). Current and prospective borrowers say they're hesitant to increase their outstanding debt and move forward with planned construction due to “the recently implemented reductions in USF support” and intercarrier compensation payments, Vilsack and Padalino said. The FCC must take action “to help restore certainty and stability for rural broadband investment,” they said.

The FCC’s November 2011 USF order reflected the goals in President Barack Obama’s Tuesday State of the Union address, said Commissioner Mignon Clyburn at a lunch event Wednesday in Washington. The president’s message, as Clyburn interpreted it, was “we need to do things smarter” and “more with less,” making use of coalitions, partnerships and more, she said. She framed the FCC’s actions in recent years as emblematic of this approach. At the event, hosted by Mobile Future, the National Coalition on Black Civic Participation and the National Association of Neighborhoods, she spoke alongside several entrepreneurs in a discussion about how to promote innovative technologies and what regulatory structures should oversee them.

The FCC explained the history of its universal service rules and exactly why a major revamping was necessary, in a brief filed with the 10th U.S. Circuit Court of Appeals Wednesday (http://xrl.us/bofga9). The intercarrier compensation that the FCC used to subsidize local phone service for decades “no longer serve[s] the evolving communications needs of 21st century America,” the commission wrote in its response to the joint preliminary brief of the petitioners, who are challenging many of the USF and intercarrier compensation rules in the commission’s landmark 2011 order. The FCC explained its rulemaking process, its solicitation of comment, and its review of the “voluminous” administrative record, before ultimately reforming and modernizing its “antiquated” rules. Universal service and ICC were “two dysfunctional regulatory regimes in need of reform,” the commission wrote. “The 20th century framework for intercarrier compensation no longer made sense in the modern communications market.” The commission also discussed the waste associated with the old systems, and how the USF/ICC order was designed to address those problems. Finally, the FCC reminded the court that the agency is entitled to Chevron deference, and where Congress has not spoken directly to the question at issue, the agency is entitled to adopt a “permissible construction” of the statute. “Judicial review of FCC action under the [Administrative Procedure Act] ‘is no more searching’ where (as here) the agency’s decision ‘represents a change in policy,'” the FCC wrote, quoting circuit precedent. The commission argued for a “deferential standard of review,” in which a court “may not displace the agency’s choice between two fairly conflicting views, even though the court would justifiably have made a different choice."

Hill Country Telephone Cooperative has a few less opponents in its struggle for USF support in Texas. Last fall, the telco asked the Texas Public Utility Commission for more than half a million dollars in state support (CD Nov 29 p10) because, due to Texas state law restricting the level at which it can raise its rates, it’s losing that large a sum from the FCC’s USF. The loss is associated with the FCC’s quantile regression analysis rate benchmark, implemented last July as part of the FCC’s November 2011 USF order. At the time and in months since, a coalition of Sprint Nextel, tw telecom of Texas and the Texas Cable Association had intervened, providing scrutiny of Hill Country’s petition. But on Jan. 31, the coalition asked to drop its intervention before the PUC (http://xrl.us/boffr8), a request the commission granted Wednesday in an order (http://xrl.us/boffsi). The coalition doesn’t want to stand between PUC staff and Hill Country as they're likely to reach an agreement, it said, despite the coalition’s disagreements with certain Texas regulations. “Section 56.025 [of the Texas Public Utility Regulatory Act] undermines the FCC’s policy determinations and constrains the Commission’s ability to make an independent determination of the extent to which the deliberative conclusions reached by the FCC should be, in effect, countermanded,” the coalition told the PUC. The Texas law allows for companies to seek replacement from the Texas USF of high-cost support money it’s lost federally. The coalition’s still not completely satisfied and said that nothing in recent months “provides the assurance that Texans should be entitled to with respect to the [Texas USF], namely, that they are not being called upon to provide a subsidy where it is not necessary” for Hill Country. But the Texas act “simply precludes the type of investigation that would make that assurance possible,” it said.

House Communications Subcommittee Chairman Greg Walden, R-Ore., said he hopes the FCC’s open Internet order falls when the U.S. Court of Appeals for the D.C. Circuit rules on the FCC’s authority to impose the regulations, he said at the NARUC conference Tuesday. If they do, Walden said he will block any legislative efforts to reinstate the rules. “Let me be clear, not on my watch,” he said.

The FCC’s Connect America Fund will be the subject of a cost-model order and a new boundary mapping tool soon, agency officials told state regulators at the winter NARUC meeting. But as the FCC moves full steam ahead on what it’s calling its highest priority, state regulators worried about boundary area mapping expressed concern that some of the FCC’s plans may be coming too soon for states and companies to handle.

State regulators tackled the significance of the FCC’s access recovery charge (ARC) early on at its winter committee meetings in Washington. Panelists struggled to make sense of the charge, which has spurred heated filings between the D.C. Public Service Commission and Verizon and is a concern that’s come up in other states, as FCC filings have shown. A panel of telco and state regulators met Saturday afternoon to discuss the contested charge, introduced to make up for revenue telcos lost in reduced access rates when the FCC issued its November 2011 USF order.

The Lifeline reform order generated over $213 million in savings to the USF in 2012, the FCC Wireline Bureau said Thursday (http://xrl.us/bod6oa). “The Commission exceeded its savings target goal” of $200 million, the public notice said, going from an estimated $2.4 billion without the reform, to $2.2 billion with the new rules in place to combat waste, fraud and abuse. The bureau said continuation of in-depth data valuations, first begun in 2011, resulted in about $45 million in savings; elimination of Link Up support for installation costs saved $93 million; and a cap on Toll Limitation Service saved $1.5 million. Additional requirements regarding active usage, and stricter proof for eligibility and certification, also “likely produced savings in 2012,” the bureau said.

The 2013 high-cost loop support caps have affected 60 percent more companies than last year’s caps, NTCA told aides to several FCC commissioners Tuesday (http://xrl.us/bodwyx). The association of rural telcos pushed for “near-term resolution” of the statistical and data-related shortcomings of the USF caps, arguing action is “all the more urgent in the face of significant and troubling shifts in the caps” announced this week (CD Jan 31 p10). The number of capped companies has risen from around 100 to 160 “overnight,” NTCA said. Seventy companies were “swept under” by the 2013 caps after being unaffected in 2012, the association said. NTCA urged the commission to add together the capital and operating expense values for 2013 support calculations, and extend the phase-in of the caps, in order to “mitigate serious harms."

Accipiter Communications received a waiver of some of the high-cost USF support rules until the end of 2014. The Phoenix-area telco asked for waiver of the rule limiting per-line support to $250 per month, and a waiver of the high-cost loop support benchmarks rule limiting reimbursable capital and operating expenses. A Wireline Bureau order Wednesday determined a waiver is in the public interest, is justified based on Accipiter’s “reasonable” expenses, and will ensure the telco’s customers continue to have access to broadband and voice service.