Change It But Keep It The Same

A Mix Of USF Allies: Change It But Keep It The Same

Political and pressure-group machinations surrounding the universal service fund (USF) ramped up again last week as a second Senate bill surfaced to encourage rural broadband deployment via the subsidy program. Hispanic/Latino organizations urged the Federal Communications Commission’s contribution methods not be changed to the perceived detriment of low-income households.

To be sure, both developments underscore strong support for maintaining the USF (we expect to hear lots more from the House Congressional Rural Caucus, for instance). Yet in what one might call a curious contradiction – perhaps merely semantic in nature – the proposed legislation seeks to change USF via a broader mission while the consumer group essentially wants USF to stay the same (TelecomWeb news break, Feb. 10).

And while lawmakers, consumer advocates and other industry groups clearly pronounce the importance of USF to assure affordable service and equal access for all Americans, it is equally clear they first take care of their own.

For Sen. Conrad R. Burns (R-Mont.), his introduction of the proposed Internet and Universal Service Act of 2006 (NetUSA) – designated S.2256 – is consistent with home-state constituents by adding broadband deployment in the mix of USF supported services and strengthening health care/telemedicine improvements in rural areas and other such small communities.

For the League of United Latin American Citizens (LULAC), the Latino Issues Forum, the Consumer Action group and others associated with the Keep USF Fair Coalition (KUSFF), preventive medicine translates into warnings that, after the fixed-income elderly, Hispanic and Latino customers are at particular risk of paying higher federal fees on their phone bills if USF contributions shift from a long-distance revenue basis to a flat-fee, telephone-number approach.

Cross Currents, Cross Talk

The USF topic easily produces a lot of cross currents, if not cross talk. Besides the rural broadband/health care intent, the Burns measure would expand USF monetary contributions to all voice-services providers and it would authorize greater oversight over fraud and abuse associated with the USF’s E- rate segment for schools and libraries. The latter is a popular stance; S.2256 would punish chronic miscreants by imposing sanctions on applicants or vendors that repeatedly and knowingly violate program rules.

The 29-page measure – an amendment to the Communications Act of 1934 – directs the FCC to employ and define aspects of USF implementations and directions to meet the bill’s goals. It also would give the FCC methodology discretion to assess contributions based on revenues, working telephone numbers or “any other current or successor identifier protocols or connections to the network.”

S.2256 lacks co-sponsors, but Burns reportedly is negotiating with Sen. John Rockefeller (D-W.V.) for cooperation; both are members of the Senate Committee on Commerce, Science and Transportation, where the bill is headed. The United States Telecom Association and the Coalition to Keep America Connected welcomed by the proposed measure.

The Burns bill is not unlike the Universal Service for the 21st Century Act (S.1583) introduced in the Senate last year to add broadband deployment to USF and to expand the contribution base (TPR, Aug. 1, 2005). Also at that time, the Broadband Investment and Consumer Choice Act of 2005 (S.1504) was proposed to revamp a wide range of telecom issues, but it virtually ignored USF.

Late last year (TPR, Dec. 19, 2005), the Digital Age Communications Act (S.2113) surfaced with a number of sweeping reforms, including a USF cap at about $3.65 billion annually, block grants to states for low-income households/high-cost areas and contributions from all possible sources configured off a numbers-based mechanism or some other successor method.

LULAC and Consumer Action – which co-chair KUSFF – did not take a position on the Burns proposal, and they have kept other legislative postures close the vest, but it’s apparent that USF caps and numbers-based contributions are not to their liking.

As KUSFF unfolded last year (TelecomWeb news break, Nov. 17, 2005; TPR, Nov. 27, 2005), LULAC and Consumer Action expressed fear about the flat fee – what has been described as a USF “stealth tax” on phone bills – being considered by the FCC and/or Congress without public comment or debate. And because FCC Chairman Kevin J. Martin typically has only mentioned such USF ideas in speeches to industry groups, the consumer advocates also un-affectionately call this the “Martin plan.”

Concerns Over The ‘Martin Plan’

The fundamental concern is that flat-fee, numbers-based USF charges will increase payments by phone users who currently make few or no long-distance calls (the traditional revenue base for USF contributions now often broken out on phone bills) or who use prepaid cellphones/cards (which essentially embed USF contributions in the total retail cost).

Hispanic and Latino users – in additional to typically being on the low- income end of the economic chain – also are characteristically low-volume, long- haul callers but they are high prepaid users, according to the advocacy organizations. As a result, they feel this double whammy would unfairly hike the costs for the Hispanic/Latino group if the regulator or lawmakers adopt the would-be USF proposals.

KUSFF extrapolated data from its previous research to show that Hispanic/Latino phone customers are – along with low-income, elderly Americans – the most likely to bear the brunt of higher USF charges; it keyed on populations in 20 cities in eight states.

The groups pointed out that the Hispanic Association on Corporate Responsibility and the FCC estimate Hispanic households collectively spend close to $8 billion on telephone services, individually averaging $833 a year.

[Copyright 2006 Access Intelligence, LLC. All rights reserved.]

COPYRIGHT 2006 Access Intelligence, LLC

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