Moving to numbers-based Universal Service Fund contribution is a “reasonable approach,” but the change by itself isn’t sustainable long term, said the Organization for the Promotion and Advancement of Small Telecommunications Companies. To be effective, a revamp must increase the contribution base, OPASTCO said. The FCC should require all facilities-based broadband Internet providers, regardless of platform, to “contribute equitably to the federal USF,” it said.

The Iowa Utilities Board called for comments by Oct. 13 on whether it should implement a state universal service fund. The IUB addressed the issue in 2003 but chose not to move ahead. Now, the board said it’s time to take another look at the question and see if changed industry conditions now call for a state USF. The IUB said some local exchange providers have advocated a new look at the issue of state universal service subsidies because they believe recent and anticipated access charge reductions may impair their ability to provide local service at reasonable rates. The IUB said it appears access charges have been providing implicit subsidies for local rates, and that moving to explicit subsidies might offer economic and policy advantages. The IUB (Case NOI-08-2) asked commenting parties whether a state USF is needed, what services, providers or technologies should be subsidized, and what the goals of a state USF should be. The IUB also asked for comment on how contributions and subsidy levels should be set, whether there should be a limit on the number of subsidized carriers in a market, and whether a third party should be retained to administer the fund. Further procedural steps will be set after the comments are reviewed.

The FCC wants comment on how to strengthen Universal Service Fund management, administration and oversight, it said in a notice of inquiry. The FCC also seeks input on how to “define more clearly the goals of the USF,” new ways to gauge performance and whether to write new rules on document retention and enforcement. The notice, adopted Aug. 15 and released Friday, was to be voted on at the Aug. 22 FCC meeting but commissioners voted early, 5- 0. The agency hopes to build on results of a 2007 Inspector General audit, it said. The FCC already has moved to strengthen oversight, but is “concerned about the error rates the Inspector General identified,” it said. Among other goals, the FCC wants to prevent improper USF payments and fight waste, fraud and abuse, the agency said. “To ensure continued success, we must remain committed to monitoring, auditing, reviewing and reinforcing this program,” Commissioner Jonathan Adelstein said. “Part of that process is being responsive to criticisms of the Commission’s management.” The NOI is “quite timely, if not overdue,” said Commissioner Michael Copps.

The FCC seems to be setting up intercarrier compensation and Universal Service Fund overhaul proposals for its Nov. 4 meeting. Whether Chairman Kevin Martin will propose a complete overhaul there was still fluid, sources said. A court order gave the commission until Nov. 5 to explain the statutory basis for its ISP-bound traffic compensation regime. Industry officials said the Wireline Bureau is soliciting comments on several comprehensive proposals.

Carriers must contribute 11.4 percent of their long distance revenue to the Universal Service Fund in Q4 2008, the FCC said Friday. That was same as the Q3 levy. To set the carrier “contribution factor,” the agency divides projected carrier revenue by expected USF subsidies for a given quarter. Of an estimated $1.97 billion in Q4 subsidies, about $1.18 billion is for the rural high-cost program, $528.56 million for the E-rate program, $208.04 million for low-income support and $49.87 million for the rural health-care program.

SAN FRANCISCO -- State policymakers mainly turned a cold shoulder to industry pleas for tax breaks in a discussion at last week’s CTIA conference. The wireless industry can keep saying “till you're blue in the face” that mobile service is overtaxed nationwide, but policymakers won’t budge, said Daryl Bassett, a Republican member of the Arkansas Public Service Commission.

AT&T and Verizon pushed for numbers-based Universal Service Fund contribution, in a meeting Wednesday with the Wireline Bureau, according to an ex parte. They filed a joint plan detailing how a numbers regime would work. A numbers scheme would base USF contribution on the quantity of phone numbers the carrier owns. Currently, the FCC collects USF based on interstate revenue. AT&T and Verizon’s proposal “will benefit consumers, stabilize the universal service contribution base, and significantly reduce the administrative cost and complexity of [USF] contribution for the FCC,” Universal Service Administrative Co. and contributors, the carriers said.

Only audio bridging service providers supported two petitions to reconsider and clarify a June order that would force Intercall and other audio bridging companies to pay into universal service (CD Aug 12 p10). Unsurprisingly, Intercall backed the petitions, urging the FCC to declare audio conferencing an information service. Multi-Point Communications, another audio-conferencing provider, termed the FCC order “procedurally defective,” because it didn’t give “appropriate notice and comment to the teleconferencing industry.” The FCC provided 11 days to comment, and Multi- Point “was given only last-minute notice that it must adopt and implement procedures to fulfill its new [USF] obligations,” it said. Meanwhile, Verizon demanded that the petition be rejected outright. “There are no grounds for reconsideration,” the carrier said. The petitioners didn’t participate in the initial proceeding, they raise no new questions of law or fact and their arguments lack merit, it said. Others asked the FCC to clarify that the Intercall order changed no rules. Cisco said it believes the Intercall order confirmed existing FCC rules, but could be misread as rewriting them. It urged the FCC to make clear that the former -- and not the latter -- is true. The FCC “should confirm that this decision applied existing precedent, and did not adopt a new test for what constitutes an integrated information service,” said the VON Coalition. Also, the FCC should clarify the decision’s scope and say that it doesn’t cover information services including a functionally integrated voice communications function, the Coalition said.

The FCC should more narrowly target Universal Service Fund high-cost support, Embarq said. In a Wednesday meeting with the Wireline Bureau, the carrier proposed new high-cost support reforms that it said would boost broadband deployment, stabilize support for carriers of last resort and leave the door open for further USF reform. Embarq urged the FCC to be explicit in targeting support using wire centers, rather than implicitly targeting it through study area averaging. “The use of average cost calculations assumes that a CoLR’s rates will be averaged and, therefore, that higher returns in low-cost areas will offset negative returns in high-cost areas,” Embarq said. “Competition has invalidated this assumption, however, as competitors charge lower rates and win customers in low-cost areas, thereby reducing the CoLR’s revenues and eliminating the higher returns that were implicitly subsidizing the below-cost service in high-cost areas.” Embarq suggested that the FCC replace today’s non-rural high-cost support mechanism with a new “Broadband and Carrier-of-Last-Resort Support (BCS) mechanism that supports wire centers with average loop costs greater than a national benchmark.” Once established, the BCS would be capped at its initial level, rising only through FCC action, the carrier said. The FCC would need no new USF funding to create the BCS, Embarq said. Instead, money would come by adding access replacement funds received by wireless carriers, it said. The proposal promotes broadband deployment because BCS support recipients in price-cap areas would commit to building out a minimum of 1.5 Mbps broadband in at least 85 percent of their wire center lines, Embarq said. To keep CoLR service affordable, recipients also would commit to providing local service at rates meeting an FCC- designated benchmark. Failure to meet the benchmark would mean forfeiting the difference between its actual rate and the benchmark, multiplied by the number of lines served, Embarq said. The company’s proposal “would not necessarily take support away from wireless CETCs,” unlike the FCC’s reverse auctions proposal, Embarq said. “Rather, these CETCs would be eligible for support under the new BCS mechanism, provided they meet the conditions to build out network throughout each supported wire center and meet the broadband commitment in those wire centers.” Embarq plans to file a full proposal and support documents this week, it said.

Rate-of-return incumbent carriers should be allowed to allocate federal Universal Service Fund audit costs solely to interstate operations, said the National Telecommunications Cooperative Association. In a Friday petition, NTCA urged the FCC to clarify and/or waive a rule on how rate-of-return carriers should assign USF audit costs via the jurisdictional separations process. “Federal USF audit expenses are solely interstate in nature,” NTCA said. “Consequently, it is appropriate that those expense be allocated to the interstate jurisdiction.” Rate-of-return carriers now can be denied recovery of federal USF audit expenses if a state declares the costs to be “clearly interstate in nature,” NTCA said. “Should these carriers not be allowed to recover all of the costs spent on USF audits, their ability to serve their customers will be impaired, to the detriment of the public interest.”