In a surprise move, a new draft of a telecom bill by Sen. Stevens (R-Alaska) contains language sharply limiting state controls on wireless service (CD June 17 Special Report). Though carriers view this as a potential win, it has raised consumer group and state regulator ire. State regulators said Mon. the wireless language will be controversial and could keep the bill from progressing this year.

The FCC should postpone action on plans to increase the wireless safe harbor for Universal Service Fund contributions and add VoIP providers to the contributions pool for the first time, the Small Business Administration Office of Advocacy said in a June 15 letter to FCC Chmn. Martin. The agency hasn’t properly analyzed either action’s economic effect or submitted a regulatory flexibility analysis meeting Regulatory Flexibility Act (RFA) requirements, the SBA said: “Doing so will bring the FCC into compliance with the RFA and will afford the Commission the opportunity to legitimately solicit input from small businesses on the regulatory costs of compliance as well as garner recommendations for significant alternatives that would minimize the impact on small businesses.” Last week NTCA also weighed in on the proposal, which is on the agenda for the FCC’s open meeting Wed. NTCA said it opposes eliminating DSL revenue from the USF contribution pot, which reportedly is a reason the FCC is considering expanding contributions elsewhere. NTCA urged keeping DSL revenue and adding revenue from cable, wireless, electric, satellite and other broadband access providers. NTCA said excluding such providers from the contributions base will “conflict directly with [Senate Commerce Committee Chmn. Stevens’ (R-Alaska)] telecom rewrite legislation which ties the future of universal service to broadband deployment throughout the United States.” NTCA said “the regulatory classification of cable and wireline broadband Internet access service as an information service does not preclude the Commission requiring all providers of broadband Internet access service to contribute.” The association backs raising the wireless safe harbor and adding VoIP revenue to the pot, it said. But it warned the FCC that the legal basis for doing so might be tricky if VoIP is classified as an information service rather than a telecom service.

The 3rd draft of a telecom reform bill from Senate Commerce Committee Chmn. Stevens (R-Alaska) addresses net neutrality but doesn’t assuage critics’ fears that network operators like AT&T and Verizon will be able to discriminate against content providers like Google and Amazon.com, sources told us Sat. It goes further than Stevens’ previous draft, which simply required the FCC to conduct a study on the controversial topic. The new version of S-2686 is expected to become public Mon.

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 will vote on contentious multicast must-carry rules at its June 21 meeting, according to an agenda released Wed. The order, which would reverse a previous rulemaking, didn’t mention so-called digital downconversion, once rumored to be on the agenda. The meeting was delayed a week in part to give new Comr. McDowell a chance to review must-carry before he votes on it, sources said. Another media item to get a vote Wed. is a broad ownership review, championed by Chmn. Martin. The FCC also will take up a rule newly imposing universal service charges on VoIP and raising the safe harbor percentage for wireless payments into the USF. Also on the agenda: a broadcast satellite NPRM addressing 17.3-17.7 GHz, known as the “reverse DBS band.” The rulemaking will consider licensing and service rules for the satellite spectrum, which will be available effective April 1, 2007, substantially increasing DBS bandwidth over the U.S.

The House subcommittee overseeing the FCC Wed. marked up a bill that would give the Commission $294 million -- $4.5 million more than last year but $8 million less than the agency requested. The bill would enable the FCC to conduct more audits and oversight of the Universal Service Fund (USF), where “reports of waste, fraud, and abuse plague the program,” according to statements by House Appropriations Science, State, Justice & Commerce Chmn. Wolf (R-Va.).

FCC wrongly used TNS Telecoms bill-harvesting data as a source for a new universal-service wireless safe harbor of 37.1%, Verizon and Cingular said. Cingular said that number, proposed for approval by the Commission (CD May 31 p1), seems to match one in a 2005 TracFone PowerPoint presentation filed with the FCC. “Neither TracFone nor TNS proffered that study for the purpose of modifying the wireless safe harbor, and -- as TracFone readily admits -- the TNS study is inherently unreliable,” Cingular said: “TracFone states that the errors are likely to understate interstate usage, but Cingular believes the study’s assumptions would just as likely overstate it.” Verizon told the FCC: “If the Commission decides to make any changes to its USF policies for wireless carriers it should not do so based upon the TNS study.”

Many VoIP providers may have to rely on a proposed 64.9% safe harbor to figure their universal service contributions, rather than being able to use traffic studies such as those the wireless industry uses, VoIP and wireless carrier sources said Fri. To wireless carriers’ relief, the FCC is signaling it will keep allowing traffic studies showing actual call volume as an alternative to using the safe harbor, sources said. Wireless carriers voiced alarm after reports surfaced (CD May 31 p1) the FCC planned to hike their safe harbor to 37.1% from 28.5%.

The House video bill’s passage (CD June 9 Special Report) doesn’t presage smooth Senate approval of franchise reform, including Commerce Committee Chmn. Stevens’ (R- Alaska) telco proposal, said industry and Hill sources. They give low odds on 2006 overhaul because between now and the midterm elections there’s little time to pass Stevens’ bill - - still in draft -- and then reconcile the 2 bills. Differences between House and Senate proposals further complicate the path, they said.

Net neutrality crusaders licked their wounds Fri. and promised to fight hard in the Senate. The House rejected 152-269 a measure sponsored by House Telecom Subcommittee Ranking Member Markey (D-Mass.) and backed by an amalgam of Internet firms, consumer and public interest advocates and religious and family groups (CD June 9 Special Report). While the movement has its supporters in the Senate, like Sens. Snowe (R-Me.) and Dorgan (D-N.D.), Internet players said it’s too soon to tell how they'll fare on the other side of Capitol Hill. Meanwhile, telco and cable hailed their House victory.