FCC Releases Three NPRMs Regarding Universal Service Subsidies

January 29, 2008. The Federal Communications Commission (FCC) announced and released three Notices of Proposed Rulemaking (NPRMs) relating to reforming its subsidy program know as the universal service high cost support program.

First, the FCC released a NPRM [55 pages in PDF] regarding the recommendations [33 pages in PDF] of the Federal-State Joint Board on Universal Service (FSJBUS) regarding the FCC high cost universal service support program, which were released on November 20, 2007.

This NPRM is FCC 08-22 in WC Docket No. 05-337 and CC Docket No. 96-45

Second, the FCC released a NPRM [28 pages in PDF] regarding the recommendations of the (FSJBUS) regarding elimination of the identical support rule. This NPRM is FCC 08-4 in WC Docket No. 05-337 and CC Docket No. 96-45.

This NPRM states that "we tentatively conclude that we should eliminate the Commission's current ``identical support´´ rule -- also known as the ``equal support rule´´ -- which provides competitive ETCs with the same per-line high-cost universal service support amounts that incumbent local exchange carriers (LECs) receive. We seek comment on this tentative conclusion."

Third, the FCC released a NPRM [36 pages in PDF] regarding using reverse auctions as the disbursement mechanism for determining the amount of high cost universal service support for eligible telecommunications carriers (ETCs) serving rural, insular, and high cost areas. This NPRM is FCC 08-5 in WC Docket No. 05-337 and CC Docket No. 96-45.

This NPRM states that "We tentatively conclude that reverse auctions offer several potential advantages over current high-cost support distribution mechanisms, and that the Commission should develop an auction mechanism to determine high-cost universal service support." This NPRM seeks comments on numerous issues related to reverse auction design.

Initial comments on all three NPRMs will be due within 30 days of publication of a notice in the Federal Register. Reply comments will be due within 60 days of such publication. As of January 31, 2008, the FCC had not yet published this notice in the Federal Register.

Commissioner Deborah Tate wrote that "Going forward, the Universal Service Fund will continue to play a critical and increasing role in one of our top priorities at the Commission -- encouraging broadband deployment to all corners of America."

Chairman Kevin Martin wrote in his statement that "Changes in technology and increases in the number of carriers that receive universal service support, however, have placed significant pressure on the stability of the Fund. A large and rapidly growing portion of the high-cost support program is now devoted to supporting multiple competitors to serve areas in which costs are prohibitively expensive for even one carrier. These additional networks don’t receive support based on their own costs, but rather on the costs of the incumbent provider, even if their costs of providing service are lower. In addition to recommending an interim cap, the Joint Board has recognized the problems of maintaining this identical support rule."

And, Martin said, "I continue to believe the long-term answer for reform of high-cost universal service support is to move to a reverse auction methodology."

Commissioners Michael Copps and Jonathan Adelstein both dissented in part from the reverse auction NPRM.

Copps also wrote that "much would be accomplished if the Commission were to include broadband on both the distribution and contribution side of the ledger; eliminate the Identical Support rule; and increase its oversight and auditing of the high-cost fund. Additionally, Congressional authorization to permit the assessment of Universal Service contributions on intrastate as well as interstate revenue would be a valuable tool for supporting broadband."

Commissioner Robert McDowell wrote in his statement regarding all three NPRMs that "this system is in dire need of comprehensive reform. I have maintained that we must follow five principles when considering reforms to the Universal Service Fund. We must: (1) slow the growth of the Fund; (2) permanently broaden the base of contributors; (3) reduce the contribution burden for all, if possible; (4) ensure competitive neutrality; and (5) eliminate waste, fraud and abuse."