Lawmaker targets USF disparities
The FCC has been studying the problems plaguing the universal service fund for nearly two years and hopes to have a substantive solution by the end of this year.
But U.S. House Rep. Lee Terry of Nebraska isn’t waiting.
Terry has introduced legislation that would adjust the formula that determines how subsidies from the large-carrier portion of the fund are allocated. Under current rules, eight states are expected to divide $234 million this year, while 42 states will be shut out. Three states — Mississippi, Alabama and West Virginia — would account for 82 percent of the subsidies.
“There is an inequity here,” Terry said. “I don’t know why no one has taken the initiative to do something about it.”
In order to qualify for a subsidy under the current formula, large carriers must demonstrate that their average loop costs in a particular state exceed 135 percent of the national average. A problem arises when the funding mechanism is used to calculate average costs in states that are predominantly rural, but have one or two major urban centers that distort the per loop cost results, according to Michael Rubin, vice president of federal affairs for Qwest Communications.
“If you’re operating in a state — no matter how rural — that has a city of any size, it’s going to skew your costs,” he said.
Terry’s bill, which Qwest supports, would compare individual wire centers to the national average. Any wire center that has costs exceeding 375 percent of the national average would qualify for a subsidy. Also, the total subsidy any state could receive would be capped at 5 percent of the large-carrier fund. The result, Terry said, is that 46 states would divide the $234 million expected this year, not just eight. Mississippi, which would receive $120.8 million this year under current rules, would receive just $11.7 million under the Terry bill. Conversely, Nebraska and Nevada — two states which, under existing rules, would receive nothing this year — would receive $9.6 million and $11.7 million, respectively.
Opponents of the bill prefer a holistic approach to fixing the USF, and point out that the large carrier portion of the fund accounts for just 7.1 percent of the $3.3 billion in total subsidies that will be distributed this year.
“There is a huge problem with USF,” said Herschel Abbott, BellSouth’s vice president of governmental affairs. “Demands for funding are increasing, but the revenue stream from which USF subsidies are drawn is decreasing every day. An effort that would redistribute 7 percent of the fund is not a good use of legislative time.”
Although the bill would slash BellSouth’s subsidy for its nine-state region from $166.1 million to $40 million, Abbott said that has nothing to do with the RBOC’s opposition to the bill. Rather, he said that states not benefiting from the large-carrier portion of the fund are subsidized through other channels and that BellSouth’s opposition is more to do with fairness.
Many states that receive nothing from the large-carrier portion receive total USF subsidies that far exceed the national average. For example, North Dakota receives $246 per switched access line, compared with the national average of $20, South Dakota receives $173 and Arkansas receives $115. Terry’s home state of Nebraska receives $54 per line, which is nearly triple the national average.
“These states are already getting subsidies that are way above average, and this bill would add to that,” Abbott said. “It doesn’t seem like a fair or rational response.”
Large carriers have contributed to how the fund is allocated by focusing their service efforts on urban areas in many of the predominantly rural states they serve, an FCC official said.
“Every state has rural areas, but you have to look at what areas the carriers are actually serving,” the official said. “Qwest, for example, has sold off a lot of exchanges to rural carriers.”
Bischoff writes for Telephony magazine, a sister publication of Mobile Radio Technology.
