| April
16, 2003
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, DC 20554
Marlene H.
Dortch
Office of the Secretary
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554 Re:
Reply Comments on Federal-State Joint Board on Universal Service
CC Docket
96-45
CC Dockets 98-171, 90-571, 92-237, 99-200, 95-116, 98-170 To:
The Commission
The
National Grange of the Order of Patrons of Husbandry (the "Grange") hereby submit
these reply comments to encourage the Commission to adopt equitable and non-discriminatory
regulations related to assessments for the Universal Service Fund. The Grange
is the oldest general farm and rural public interest organization in the United
States. Founded in 1867, today the Grange represents over 200,000 individual
members affiliated with 3000 local, county and state Grange chapters across rural
America. More than 70% of all local Grange chapters are located in communities
of 2500 persons or less.
The Grange recognizes the importance of the Universal Service Fund (USF) to the
public welfare, especially in rural communities. In rural America, there is an
admitted lack of overall communications services. Rural areas with many small
towns and villages are considered to be on the wrong side of the "last mile" of
telecommunications services. A major purpose of the USF is to help rural areas
achieve parity in telecommunication standards that is comparable to the more densely
populated metropolitan areas of the United States. The National Grange also believes
that full and fair competition is the only way to provide state-of-the-art telecommunications
services to rural populations, especially those contained within the "last mile."
Section 254(d)
of the Communications Act requires that "[every telecommunications carrier that
provides interstate telecommunications services shall contribute, on an equitable
and nondiscriminatory basis, to the specific predictable and sufficient mechanisms
established by the commission to preserve and advance universal service." Today,
all telephone companies that provide telephone service between states or internationally
contribute to the USF. The exact amount is adjusted every quarter, based on the
projected universal service needs and the projected revenues generated by interstate
and international calls. Currently, each company makes a business decision regarding
whether and how to assess customers, in order to recover their USF costs. Wireless
service providers have a special provision that is based on a flat rate calculation
of estimated total revenues rather than actual revenues generated by interstate
telephone calls. The Study estimates that wireless connections will grow by more
than 50 million between 2002 and 2007 while land line connections are expected
to grow by fewer than six million over the same time period. Current,
proposals that have been submitted to the FCC suggest that major changes are necessary
in the collection of universal service funds. One comment period for that topic
has already passed. Following that, the FCC issued a public notice seeking reply
comments on a staff study (the study) regarding alternative contribution methodologies.
The study undertakes to project the effects that alternative collection based
methodologies would have on the universal service fund. The
Grange strongly disagrees with the assumptions that major changes are necessary
in the revenue based methodologies used to currently collect funds for the USF.
The following observations and comments are submitted by the Grange in response
to the study and in support of our position. Various
methodologies used by the Commission staff project significant shifts in the burden
of payment among long distance carriers, local exchange carriers and wireless
carriers. Under the baseline projection for revenue based methodology the share
of contributions by industry segment would shift from 59% for long distance carriers,
26% for local carriers and 15% for wireless carriers in 2002 to 41%, 32% and 27%
respectively by 2007 However, all baseline projections for connection or telephone
number based methodologies shift a disproportionate share of the USF funding responsibility
away from long distance carriers to local carriers and wireless carriers. In 2002
the long distance carriers were responsible for 59% of USF revenues. Under Proposals
1, 2, and 3, respectively, that responsibility would fall to 22%, 29% or 13%.
The financial responsibility for maintaining the USF would shift dramatically
to local carriers and wireless carriers under any of the connection based methodologies
examined in the study. With this shift would come significant shifts in the financial
burden on individual consumers, especially in rural areas, with no apparent benefit
to consumer populations that are dependent on USF funding to maintain telephone
service. In
contrast, The National Grange believes a modified revenue based methodology is
the most reasonable alternative for funding the USF because it will result in
the fewest disruptions in the long standing relationships among various companies
and their consumers. We
do not see how any of the connection or phone number based methodologies fit the
intention of the Telecommunications Act of 1996 Act or Section 254(d). Connection
based methodologies would fail to meet the requirement that every telecommunications
carrier contribute to the USF. Connection based methodologies will disproportionately
affect low volume long distance callers, residential customers, and customers
on fixed incomes. All of these customer groups are disproportionately represented
in rural communities. The since one of the major purposes of the USF is to provide
or enhance telephone services in high cost rural residential areas the Grange
do not see the logic in any methodology that would effectively increase USF contributions
from consumers who already reside in high cost rural areas. Connection
based methodologies would also significantly reduce the responsibility of high
volume, business users of long distance telephone services to financially support
the USF by effectively imposing additional USF charges on intrastate telephone
calls. Connection
based methodologies would remove the current responsibility that each company
has to decide whether and how to assess customers to recover USF costs. Instead
it would replace those business decisions with de facto USF surcharges on every
telephone connection. In the best interest of fairness in competition, the consumer-driven
marketplace should dictate the success or failure of a business plan, not the
manner in which the government structures its fees. To shift the burden of payment
from one type of business model to another in a seemingly arbitrary manner would
be inequitable and unfair treatment of private business entities. On
December 12, 2002, the Commission issued an interim rule regarding modest changes
to the current revenue based methodology. The interim rule modified the current
revenue base to increase the minimum assessment that wireless carriers pay USF
charges on from 15% to 28.5% of revenues. This change better captures the industry
wide proportion of wireless calls that involve long distance service, but is still
an imperfect measure of the contribution that the individual wireless carriers
make to overall interstate service. The interim rule also changed the assessment
base from "revenues accrued" to "projected revenues" to address concerns by some
long distance carriers related to the declining customer base that some carriers
are experiencing. Finally the interim rule prohibits telecommunications carriers
from charging customers any "mark-up" above their relevant contribution factor
for their USF assessments. The National Grange believes that these changes are
sufficient to maintain the solvency of the USF for several years on a basis that
is equitable and nondiscriminatory to the various segments of the telephone industry.
As a group
whose membership is overwhelmingly from rural America, the National Grange views
the universal service fund as a necessity in the achievement of parity of services
to all segments of the United States. Therefore, we support the current revenue-based
methodology as the most fair and least market intrusive manner in which funds
are collected. The
National Grange encourages the Commission to continue to study the issues surrounding
this proceeding and to make small changes to correct minor inefficiencies or inequities,
as done in the recent past. For example, the Commission should move away from
"safe harbor assessments" for the wireless carrier industry and replace them with
methodologies that accurately reflect each wireless company's proportion of the
long distance market. In addition, we respectfully urge the Commissioners to allow
an adequate passage of time between implemented changes, to allow valid observations
of the results. For
the reasons explained in these comments, the Grange urges the Commissioners to
reject the connection-based methodologies to fund the USF. We oppose any drastic
changes to the method of collection of universal service funds. Instead the Grange
urges the Commission to retain the basic structure of the current revenue based
methodology for assessing USF contributions. In addition, the interim changes
put in place in December of 2002 should be given a chance to work. Additional
modifications to fine-tune the existing revenue based methodology should be explored
to assure both sufficient USF revenues and an equitable distribution of USF fees
across various segments of the telephone industry as well as across the various
segments of the consumer population, including rural consumers. Respectfully
submitted, Leroy
Watson, Director of Legislative Affairs
The National Grange
1616 H Street,
N.W.
Washington, D.C. 20006 | 
