FCC Seeks More Comment on Telecom Reforms

The U.S. Federal Communications Commission has decided to seek more comment on proposed changes to two programs, the Universal Service Fund and intercarrier compensation, that have been controversial for years.

Instead of moving forward with changes to both programs, as FCC Chairman Kevin Martin had pushed for, the other four commissioners decided late Wednesday to seek more comment on both programs. In July, U.S. Court of Appeals for the District of Columbia ordered the FCC to provide a valid legal reason why it was exempting Internet-based voice traffic from intercarrier compensation rules, which determine the rates that telecom carriers pay for using each other’s networks.

Martin had tried to schedule a vote for Tuesday on proposals to change both programs, but dozens of small telephone carriers and U.S. lawmakers had called on the FCC to study the issues longer. Martin’s proposals needed a public debate, those groups argued.

Martin on Tuesday said it was a “mistake” for the commission to put off action on the two items. He also said he was skeptical that the commission would be willing to act in December after another round of comments on the two issues, when the FCC has studied both issues for years.

“After years of deliberation, we are still unready to move forward with comprehensive reform of intercarrier compensation and universal service,” Martin said in a statement Wednesday.

The 430-page order that the FCC issued Wednesday responds to the appeals court ruling on intercarrier compensation, the four other commissioners said in a joint statement. The proposed order also “preserves the ability to move towards a more unified intercarrier compensation regime,” the statement said.

Large telecom carriers Verizon and AT&T, as well as providers of VoIP (voice over Internet Protocol) service and some tech vendors, have argued the commission should set a flat rate for the fees to carry and terminate voice traffic, instead of a complicated set of rules that generally allows small carriers to charge more to carry traffic from competitors.

A Verizon proposal made in September would cap termination fees at $0.0007 per minute. Some carriers charge 175 times that much, according to Verizon. The proposal would include VoIP providers in those rates, ending debates about the proper fees they can charge, Verizon said.

The Universal Service Fund (USF) is a related issue. Many critics have said the USF, which subsidizes telephone service to rural and underserved areas, is broken and puts too much emphasis on traditional telephone service, instead of broadband service.

The USF’s 2009 budget is US$6.7 billion, not counting the $4.2 billion E-Rate program, which helps schools and libraries in poor areas connect to the Internet. The U.S. government raises the funds through a tax on telephone service, and some mobile carriers collect the tax as well. Most of the $6.7 billion portion of USF subsidizes traditional telephone service.

Martin had proposed putting a $1-a-month USF tax on any device that has a telephone number assigned to it, including VoIP phones. USF fees are now based on a percentage of a customer’s phone bill, and for some people, the $1 tax would be an increase.

In November 2007, a board made up of FCC members, state utility commissioners and a consumer representative recommended significant changes to the USF. That group proposed shifting $300 million of the USF to broadband services. Those recommendations will not be implemented “at this time,” the statement from four FCC members said.

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