June 22, 2006

The Federal Communications Commission has raised the amount that the wireless industry pays into the universal-service fund.

However, the FCC said it will continue to allow mobile-phone carriers to estimate their contribution amounts based on traffic studies.

The 5-0 decision to raise the safe harbor to 37.1 percent was expected, but the wireless industry had pushed hard for the continued use of traffic studies.

The universal-service fund system was set up in the 1930s to bring telecom services to high-cost areas by using a portion of long-distance revenues. Today, carriers contribute 10.9 percent of their long-distance revenues to the fund.

Since wireless carriers have a difficult time calculating what percentage of revenues come from long-distance services, the government uses an estimate (or a safe harbor) set today at 28.5 percent of all revenues.

Using traffic studies would benefit Verizon Wireless and T-Mobile USA Inc., both of which told the FCC that their studies indicate that their long-distance traffic is less than the current 28.5 percent safe harbor.

FCC Chairman Kevin Martin confirmed that the 37.1 percent number came from prepaid service provider TracFone Wireless Inc., which believes the safe-harbor percentage is no longer necessary since carriers can determine originating and terminating cell sites for each call-and therefore can tell whether a call is long-distance, international or local.

The increase in the safe-harbor percentage is being billed as an interim step since Martin has long favored changing the way USF contributions are assessed. Martin and wireless trade association CTIA favor an approach that would assess the fee based on the number of telephone numbers each carrier controls.

It appears that Martin was forced to go with an interim solution because groups like the Keep USF Fair Coalition oppose a numbers-based system. The Keep USF Fair Coalition says that changing from the current system to one that assesses a flat rate on every telephone number would "tax" 43 million Americans as much as $700 million.

CTIA did not comment on the FCC’s action but rather said the universal-service system needs reform.

“CTIA supports adoption of a numbers and capacity-based contribution methodology that addresses the concerns of low-income and low average revenue per unit customers. We look forward to working with the FCC on speedy enactment of meaningful reforms to the universal-service contribution methodology,” said CTIA President Steve Largent.

USTelecom, which represents landline carriers, said the changes—including assessing universal-service contributions on Voice over Internet Protocol traffic—ensures all carriers are treated the same, but urged reform of the intercarrier-compensation system.

“Today’s action is a good interim step by the FCC as it begins to reform comprehensively the nation’s intercarrier-compensation regime.

This decision acknowledges the tremendous changes in how American consumers communicate while also honoring the nation’s commitment to universal service.

We applaud today’s ruling for ensuring that all voice service providers are treated alike and will continue to work closely with the commission as it moves forward to revise the entire intercarrier-compensation system.

"The agreement would include stabilizing and strengthening the universal-service system,” said USTelecom President Walter B. McCormick Jr.

Source: RCR News