The USF: More Controversy, More Kudos

Telecom Policy Report, Feb 9, 2005

The FCC's Universal Service Fund (USF) remains in a somewhat dubious spotlight of attention again, this time with tug-of-war statements emanating from FCC commissioners themselves as well as from different advocacy groups taking positions on the uneven geographical distribution of potentially higher USF spending and new legal treatment of the USF's E-Rate subsidiary program for school/library Internet access.

As seen repeatedly this year, the USF is emerging as a flashpoint of criticism and a top priority for many reform proposals, including the concept and model of a new Digital Age Communications Act suggested by the Progress & Freedom Foundation (TPR, Feb. 2).

On Feb. 3, the FCC disclosed that Commissioner Michael J. Copps plans to rejoin the Federal-State Joint Board on Universal Service while Commissioner Jonathan S. Adelstein, who joined the Joint Board in 2003, plans to step down. The move appears to be anything but routine, based on a joint statement issued by the two minority-party commissioners: "We share the belief that universal service is critically important to this agency's mission. As minority members at the Commission, we traditionally are allotted only one of the three statutory slots on the Joint Board. This is why we established a rotation plan for our membership on the Joint Board. As in the past, we intend to coordinate closely on these issues to ensure that the decisions of the Commission and Joint Board adhere to the clear congressional directive to preserve and advance universal service. It is our duty to ensure that all Americans, no matter who they are or where they live, have access to quality services at affordable rates."

A New Definition Of Red, Blue States

That same day, a Washington, D.C., group called the Coalition for Equitable and Affordable Rural Service (CLEAR) maintained the FCC's recently released USF projections underscore there will be "enormous windfalls to a handful of states while excluding 40 others" and "are a clear sign the program is broken and needs a major overhaul." CLEAR claims to be an alliance of more than 80 independent organizations and state and local officials working to reform USF to ensure a more equitable distribution of funds.

The group pointed out that, in 2005, three states -- Mississippi, Alabama and West Virginia -- would will receive about 75 percent of USF funds available for "non-rural" carriers and 85 percent will be provided to states east of the Mississippi River; the state of Mississippi itself accounts for about approximately $148.4 million, or 50.7 percent, of the allotted $292.7 million. According to CLEAR, the government's own categories and carrier designations are confusing, resulting in only 10 states currently receiving any funding from this program.

No State Left Behind?

"I am sure there are many rural areas in Mississippi that deserve the government's help," says CLEAR spokesman Dale Curtis. "But the same thing can be said about the 40 excluded states, many of which have significant rural areas. Under the current FCC rules, millions of rural Americans in these states are left to fend for themselves."

Besides what the group called the "lopsided trend," statistics since 2000 also underscore the increased expense associated with USF in this category.

Meanwhile, CLEAR also applauded Sen. Gordon Smith (R-Ore.) and 19 cosponsors for re-introducing legislation that seeks to correct the USF funding imbalance.

"Good-faith efforts to persuade the FCC to adopt a fairer, more accurate funding distribution formula have fallen on deaf ears," says Curtis. "Sen. Smith's bill represents a good chance to bring affordable telecommunications services to all rural Americans, not just a lucky few. We understand there are many problems that need to be addressed in the overall USF program, but fixing this one is a 'no-brainer.' It's time for Congress to fix this problem immediately, rather than letting it get bogged down for years in more complex, controversial issues."

USF-related congressional accolades also were issued by the Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO) regarding a U.S. Senate bill recently introduced to permanently remove the USF and E-Rate from the Anti-Deficiency Act, which prevents government agencies from spending or promising money not in official coffers. The proposed legislation from Sens. Olympia Snowe (R-Maine), John Rockefeller (D-W.V.), Ted Stevens (R-Alaska) and Daniel Inouye (D-Hawaii) amplifies on a 12-month extension of the hotly disputed USF outlays that was allowed last year by an E-Rate-centric amendment to a larger 911-oriented telecom bill (H.R. 5419).

Groups Ask Congress For USF Certainty

"We've spoken with members of Congress, and we know that they want to do the right thing for schools, libraries, rural health care, and high-cost and low-income consumers everywhere," says OPASTCO President John Rose. "Now is the time for Congress to support this important bill. The sooner USF is made permanently ineligible to ADA requirements, the sooner we will have certainty that schools and libraries, rural health care providers, and low-income consumers and consumers in high-cost areas will have continued access to quality telecommunications and broadband services. And that certainty will boost investor confidence the telecommunications carriers that provide service to these groups."