Verizon Wireless wrongfully “pocketed” Universal Service Fund support without talking with states’ regulators and now is “seeking absolution for sins committed across the country” from the FCC, lawyers for competitive eligible telecom carriers said in an ex parte notice filed Tuesday. “There is no legal authority supporting Verizon Wireless’ position -- only the informal and non-binding staff advice that Verizon Wireless claims it was provided.” The lawyers responding to Verizon’s assertions last week that it had not used Alltel’s CETC designation to obtain USF for non-Alltel lines (CD Feb 22 p8). “Perhaps most disturbing about Verizon Wireless’ rather arrogant actions is the significant harm it causes to rural citizens,” the lawyers said. “We urge the FCC to refrain from interfering with ongoing state proceedings and investigations, and to follow the law and the facts to conclusions that serve rural consumers, not any one company’s interests. … It is disingenuous for Verizon Wireless to claim that the act of commingling should cause everyone to conclude that nothing can be done. Quite to the contrary, there’s a simple solution that is both just and reasonable.” The lawyers said the FCC “should immediately suspend all high-cost support to Verizon Wireless and open an independent investigation by the Enforcement Bureau,” wait for states to finish their review of Verizon’s eligibility and have support “disgorged” if it’s found that Verizon wasn’t an eligible carrier, and have Verizon Wireless start “anew” in its quest for USF support in the states. Company officials couldn’t be reached for comment Tuesday.

Arguments that Verizon Wireless wasn’t eligible for high-cost Universal Service Fund support in states such as Nevada “cannot be squared” with the FCC’s “rules and decisions,” the carrier said in meetings with the Wireline Bureau. “For example, in the Corr Wireless Order, the commission gave Verizon Wireless two options for receiving high-cost support: Option A, which would have capped the company’s universal service at levels established at the time of the Verizon Wireless-Alltel merger, or Option B, under which its ‘high-cost universal service support will be recalculated each quarter based on current data for that quarter,'” the carrier said in an ex parte notice released Friday. “Option B necessarily contemplates that Verizon Wireless and its affiliated companies remain eligible to receive high-cost support following Verizon Wireless’ acquisition of RCC and Alltel and furthermore, that its eligibility is not limited to legacy Alltel or RCC lines.” Verizon Wireless bought Alltel for $28.1 billion in early 2009 but agreed to phase out high-cost support 20 percent each year for five years as a deal condition. Competitive ETCs have accused Verizon of improperly obtaining USF support by using Alltel’s ETC designation to get support for non-Alltel lines. Nevada Attorney General Catherine Cortez Masto is investigating, and there are similar accusations in Wisconsin (CD Feb 7 p6). Verizon officials have cast the controversy as the result of state and CETC anxiety over commission plans to phase out competitive funding altogether.

The FCC should impose net neutrality conditions on the CenturyLink-Qwest deal, Free Press said in meetings with commission staff. In an ex parte notice published Friday, the group that supports such rules said it also asked the commission to require the merged company to forgo Universal Service Fund support for broadband projects. “We noted that the merging parties are making, and will be held to buildout requirements as a condition of the merger and that the combined entity should not expect to use USF monies to meet these commitments,” Free Press Policy Counsel Aparna Sridhar wrote in the notice.

The Universal Service Administrative Company should “examine, identify, explain and categorize the cause(s) of error(s)” found in a series of audits of the high-cost fund, FCC Managing Director Steven VanRoekel said in one of three letters to USAC published Thursday. The audits, released in a final report in December, found, among other problems, “inadequate/missing” documents, “inaccurate line count/loop data,” accounting problems, errors in subscriber lists, eligibility problems and revenue reporting errors. VanRoekel said “we recognize and appreciate USAC’s efforts to date in indentifying and reducing improper payments under the high-cost program,” but a tighter review is “critical in further reducing improper payments and improving the efficiency and effectiveness of administration for the high-cost program.” In a separate letter published Thursday, VanRoekel asked USAC to explain why it wants to put furniture and other “fixed assets” purchased with Universal Service Fund cash on USAC’s own books. For “several years,” USF was “billed based upon USF profit and loss expenses rather than USAC’s actual cash disbursements,” VanRoekel said. But USAC has claimed that “this methodology understated USF expenses and resulted in a cumulative adjustment to USAC’s administrative expenses and a reduction in USAC’s Due To/Due From balance.” USAC has said it wants to modify its bookkeeping so the $16.5 million that USF spent on furniture, computers and other fixed assets should be chalked up to USAC’s accounts. “Given USAC’s past accounting practices for USF fixed assets and to further consider USAC’s proposal, we are requesting that USAC provide us with a legal and accounting justification for recording all fixed assets,” VanRoekel said. Finally, VanRoekel ordered USAC to conduct disaster recovery tests “of all its major applications and general support systems” at least once per year, to re-authorize “all systems under USAC control” every three years “or when a significant change to the information system occurs” and to “document a security authorization letter for the USAC General Support System that includes the authorization decision, terms and conditions.” An FCC official described the directives as a housecleaning necessary to help the FCC in its proposed overhaul of the Universal Service Fund and intercarrier compensation regime.

A broad state role is critical to modernize and streamline Universal Service and Intercarrier Compensation policies, state members of the Federal-State USF Joint Board told an FCC workshop Thursday. Speakers debated proposed changes in fund size.

President Barack Obama’s broadband stimulus program was “vindicated” by new NTIA findings that up to two-thirds of America’s schools can’t get broadband at speeds they need, NTIA Administrator Lawrence Strickling. Thursday, the agency unveiled its new broadband map. The map indicated that up to 10 percent of Americans can’t get broadband. The map is based on more than 125 million searchable records in the new mapping database, with information from some 1,600 broadband companies. “All of these records can be analyzed in countless ways,” Strickling said. “But the data continues to show that a digital divide continues to exist."

Good oversight doesn’t include “wholesale attacks against agencies … for political purposes,” House Communications Subcommittee Ranking Member Anna Eshoo, D-Calif., told reporters Thursday. She rejected amendments to the Continuing Resolution -- debated Thursday -- that would affect FCC operations. Eshoo said at a media briefing that her priorities for this Congress include spectrum reform, overhaul of the Universal Service Fund and building a public safety wireless broadband network.

The FCC will structure reverse auctions carefully so all carriers will have a shot at federal funding for broadband, Wireline Bureau Chief Sharon Gillett assured state regulators at the NARUC meeting Tuesday. “The intent is to be neutral,” she said. The commission’s recent rulemaking on the Universal Service Fund and intercarrier compensation asks broad questions about reverse auctions but is essentially neutral about implementation -- focusing on census blocs, for instance, instead of geographic alignment, Gillett said.

The time may finally be right for an overhaul of the Universal Service Fund and of intercarrier compensation, said FCC Commissioner Michael Copps. He’s hopeful a “method” will be found to turn things like the rulemaking notice, approved by commissioners at last week’s monthly meeting, into “momentum” for making fixes to update the rules for the broadband age, he told us in a Q-and-A after his FCBA luncheon speech. “I think we've teed up an item that really raises all the issues,” he said, saying the regulator should hold stakeholder hearings on the issue. Copps used the speech to defend public broadcasting against Republican legislators’ efforts to cut funding and to urge the FCC and Chairman Julius Genachowski to do more to promote media diversity.

House Republicans will try to use the Continuing Resolution to stop the FCC from acting on its net neutrality order. In a speech Tuesday, House Communications Subcommittee Chairman Greg Walden, R-Ore., said he filed an amendment prohibiting the FCC from spending any money to implement the rule. Also at the NARUC meeting, Walden said he’s considering legislation to overhaul FCC process. He questioned the White House’s FY 2012 budget estimate for money that could be raised by voluntary incentive spectrum auctions.