 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|
Prepared Witness Testimony The House Committee on Energy and Commerce
The Future of Universal Service
Subcommittee on Telecommunications and the Internet
Ms. Margaret H. Greene
Universal service is one of the most important issues facing the future of the telecommunications industry and its contributions to the country. Connecting virtually all Americans to the opportunity and security of the dial tone was one of the most important achievements of the last century. In today's Information Age, universal service continues to embody the nation's commitment to keeping the American dream alive in every community-urban and rural. The United States Telecom Association represents the entire local telecommunications industry-from my company, BellSouth, to small rural companies to a host of innovative companies in between. We have worked extensively to forge an industry-wide position to ensure a strong future for this vital national priority in a fundamentally altered communications world. The old rules, written for the old world, have less and less practical, constructive application today. These rules have to be adapted-as quickly as possible-to a new marketplace that is being defined today by rapid technological change and mounting competition. In a marketplace being defined by the fact that cable, satellite, wireless, wireline and Internet offerings all compete directly, it is imperative that outdated rules and antiquated regulatory classifications not be permitted to continue to distort what should be consumer-driven competition. This is the challenge for U.S. telecom policy. Universal service is no exception. The Fund is in significant jeopardy today, caught in a perilous limbo between our regulatory past and a future that's already here. The revenues that serve as the base for contribution to the universal service fund are shrinking, putting pressure on the revenue side of the Fund that is unsustainable. At the same time, demand for the Fund's resources is exploding in an undisciplined and arguably unproductive way. The issue of universal service must be dealt with in a comprehensive way. Both the assessment mechanism and the distribution formula must be addressed, and quickly, if we are to sustain this long held goal of affordable and robust communications for all Americans. The funding side of universal service is in trouble. It focuses on historical distinctions in geography and technology that no longer serve as viable definitions in today's telecommunications world. Universal service funding is derived from an assessment on wireline companies, local and long distance, and wireless companies, based on a factor applied to interstate revenues. In a world of bundled minutes delivered over at least four different technologies, this becomes increasingly meaningless. As communications migrate to broadband, the old world base of universal service funds-local and long distance wireline-is shrinking. And increasingly, alternate technologies, like cable modem and VOIP, offer directly competitive services while being exempt from the social responsibilities attendant to universal service. Like so many other aspects of our current regulatory scheme for telecommunications, this puts the historic providers of universal service, those living with the legacy of using wireline revenue flows to subsidize social goals, at a competitive disadvantage in a robustly competitive marketplace. This situation cannot exist without serious detriment to the regulated carriers and it must be fixed. Fixing this competitive/social policy mismatch means, for the issue of universal service, ensuring neutrality on both sides of the equation. Parity of obligation must exist between those who offer functionally equivalent telecommunications services. If broadband connections are to be assessed, as DSL is today, then functional equivalents, like cable modem service, must pay. Furthermore, users of intrastate as well as interstate services should contribute to universal service. The distinction between intrastate and interstate services is artificial and unsustainable in today's world. It creates perverse incentives to mischaracterize traffic and again places the burden of supporting universal service on less than the full universe of subscribers benefiting from universal service. It further puts a cost on the consumer of having to Fund the arcane regulatory exercise of allocating revenues to a particular geography or jurisdiction even though those revenues are derived from services, like bundled wireless or local and long distance minutes, designed to free the consumer from the constraints of geography. Besides these serious issues that constrain the funding area, demand for the fund's resources is exploding. This is due to the 1996 Act, which dramatically expanded the size of the Fund by declaring that universal service was no longer merely about ensuring folks in remote areas had service. Instead, it became about financing a choice of providers-a profoundly more expensive proposition in areas where the market economics make it difficult to support even one company at reasonable rates. This change opened the floodgates. Left unabated, it is expected to cost ratepayers an extra $2 billion [annually] in less than four years' time. On the distribution side, USTA believes this rise in demand on the Fund is unwise, unnecessary and unsustainable. Discipline must be brought to bear around distribution of the Fund. This can be accomplished by implementing some specific principles governing eligibility to draw from the Fund. Specifically, USTA asserts that the federal Fund should be asked to support only one ETC in each high-cost area. That ensures universal service. States that wish to subsidize competitors by designating additional providers should be permitted to do so, provided they pay the additional cost, so the Fund is not destabilized for the entire nation. Again, basic connectivity is the goal of universal service. To ensure connectivity, rates in high cost study areas should be comparable to rates in other parts of the country and, thus, widely affordable. To that end, universal service support should be used to encourage continued investment in and rehabilitation of high cost study area infrastructure and help recover the actual or embedded cost of such networks (not lines or services) consistent with the recognition of appropriate distinctions based on the size of the study area. Telecommunications is a capital intensive business and steady investment is required for consumers to be well served. Choosing only certain lines or services to support ignores the essential nature of telecommunications as a network industry. Each part of the network can support multiple lines or services. It is administratively burdensome as well as nonsensical to attempt to allocate support to only certain lines or services provided by a network that operates as an integrated organism. USTA also believes there should be one high standard for eligibility across all platforms. Either you deliver true universal service or you don't. Of course, it should go without saying that these public resources should serve their original purpose: helping offset the high costs of actual infrastructure. Given the candle-lit weekend so many East Coast residents have had in recent weeks, we as a nation have a newfound appreciation of the need for policies that ensure essential infrastructure remains robust and reliable. In terms of telecommunications, we can do that through a focused, adequately funded Universal Service Fund; through policy that encourages companies to invest on their own; and, by being less prescriptive in how networks are built. Today, universal service requirements go down to the service and the line. Why not demand one result? You've got to be willing to serve everyone; you've got to do it reliably; and you have to deliver service comparable in scope with what is provided elsewhere, including meeting all public safety obligations. This is precisely the constructive role that government should play today. Yes, consumers should define the market-prices, services, technology. But government can ensure essential services-from 911 to ready, affordable access to a dial tone-reach all Americans. And, U.S. policy should encourage vigorous investment that keeps our infrastructure sophisticated and strong. Grafting the old ways onto a new world doesn't get us there. That primarily is our concern with HR 1582. We certainly appreciate Congressman Terry's leadership, but we think this bill does not go nearly far enough to safeguard universal service. There are three large categories of support in the federal Universal Service Fund; the e-rate for schools, libraries and rural health care, the low income program, and high cost support for high cost areas. The Terry bill focuses in on one of about twelve categories of funding in the high cost support program and essentially redistributes funds from high cost rural communities in Mississippi, Alabama and West Virginia. Its companion measure in the Senate (S. 1380) spares West Virginia from harm and slashes funding from the Commonwealth of Puerto Rico by redistributing two categories of funding. In part to control the size of the Universal Service Fund and to ensure that support went to carriers providing a substantial amount of service to the highest cost, most rural areas, the FCC determined that levels of support for non-rural carriers should be averaged on a state-wide area. For large carriers, this is relatively consistent with the practice of averaging support on a "study area" basis, which for these carriers was generally an entire state. Those non-rural carriers with large numbers of lines concentrated in urban areas relative to their rural lines did not generally receive support from this category of funding. Funding went to those carriers in states serving large numbers of rural lines relative to total lines. The Terry bill seeks to change the granularity of calculation of the burden of high cost, largely rural lines from a state-wide average to a much smaller wire-center average and then impose an artificial "state-wide" cap of 5% in the House bill and 10% in the Senate bill on the distribution in the large company category of funding. The apparent purpose of those caps is to simply redistribute funding among large carriers without regard to the needs of affected consumers or actual investment. It in fact rewards carriers that have sold off rural exchanges and punishes those carriers that have consistently served rural communities. The Terry Bill does not truly impose new discipline, either in how many companies have access to the fund or what standard of service they provide. It robs from Peter (Puerto Rico) to pay Paul (Qwest) and even then addresses only the non-rural side of universal service, leaving out the lion's share of communities the Fund serves. Similarly, universal service cannot be looked at in isolation - the entire regulatory regime under which carriers operate today impacts their ability to provide universal service. Government managed competition is far inferior to the free market in its ability to efficiently allocate resources to provide quality ubiquitous services to consumers. Market based competition in telecommunications will lead to increased capital investment, new jobs, economic growth, and a positive impact on the ability of network operators to provide universal service with, in some cases, a lesser dependence on universal service funding. We need to be bold in preserving the future of universal service in a new communications era. And, time is of the essence. Without significant change, four years from now, ratepayers will have a tab that's $2 billion higher.Federal policy will continue to discourage investment in vital national infrastructure.and outdated government rules will continue to pre-empt the consumers' judgment in defining the shape of American innovation. By asking everyone to pay in and everyone to meet the same high standard for eligibility, we can deliver a true, fair and constructive universal service policy for the 21st century, one that keeps the nation's commitment to ensuring real opportunity in every American community.
|
|||||||||||
|
