Lawmakers Eye Changes In Universal Service Fund

Telecom Policy Report, Sept 17, 2003

Boyle contends that any USF assessment on intrastate traffic would ignore a U.S. Supreme Court decision that the separation of interstate and intrastate property, revenue and expenses of phone companies "is essential to the appropriate recognition of the competent governmental authority in each field of regulation."

She adds that such a move might open the door to erosion of separation between state and interstate commerce.

The proposal favored by Rowe and others would have the effect of lowering the fees on business and other high volume interstate users and impose a fee on those who do not use interstate services. Many of those who do not use long distance are low-income subscribers, the large majority of whom do not qualify for USF-backed Lifeline/Linkup or similar low-income programs.

From the perspective of Boyle and other state-level regulators who oppose the intrastate plan, adoption of the proposal would ignore or mask existing federal USF problems and inequities. "Before such a proposal should be considered, first the existing expenditures and, more importantly, the exemption of significant sources of revenue must be examined," Boyle told Burns.

Boyle and others told TPR that federal approval of any plan to bring intrastate revenues into the federal USF mix could have a significant impact on states with their own universal service funds. Lacking reciprocal statutory language authorizing the states to assess interstate services, an undue burden could end up being placed on state funds.

For example in Nebraska, the rate on interstate revenues would go from 9 percent to 3 percent, while the rate on state revenues would increase from 7 percent to 10 percent, resulting in more than three times the burden on state services than on interstate services, Boyle said.

"As we are aware in Nebraska, universal service resources are finite," Boyle said in her letter to Burns. "The federal program must recognize that there are constraints on the amount of funding that is available and operate under those constraints."

One source who is intimately familiar with NARUC noted that during the association's Denver meeting, NARUC did not "reject" the draft resolution on tapping intrastate revenue for USF inclusion. The resolution was removed by a decision of the NARUC board from the package of resolutions that were to be presented to NARUC's general membership for consideration.

The NARUC board decision was made just before the state commissioners' portion of the conference was to begin, the source said. The board took that action after it became clear that a significant number of NARUC commissioners hadn't been briefed on the resolution, and that many of them were deeply concerned about other related issues.

For one thing, a significant number of state commissioners didn't care for the direction of the resolution. Nor did they like that it only focused on increasing the size of the fund and didn't propose to deal with any of the other concerns that many commissioners have regarding the federal USF rules.