FCC Says No To Non-Rural High-Cost USF Reform

The FCC won’t undertake Universal Service Fund reform specifically for the non-rural high cost support mechanism, it said in an order. The commission decided it has met its statutory obligation to provide sufficient support, it said late Friday. The FCC also found that “rural rates are reasonably comparable to urban rates if they fall within a reasonable range of the national average urban rate. … The current non-rural high-cost support mechanism comports with requirements of Section 254” in the Communications Act.

The issue was brought in 2001 to 10th U.S. Appeals Court in Denver when Qwest challenged the FCC’s rules that indicate some carriers with rural customers have too many lines to be considered rural. The court remanded the commission’s order in 2001 and again in 2005. The recent order shows that the commission “continues to ignore the direction of Congress and two federal court decisions,” Qwest said in a written statement. The order also “sustains a fundamentally flawed and unlawful program with a new legal justification instead of addressing the defects that were identified by the court,” said Steve Davis, a Qwest senior vice president.

The commission said it dealt with the three main issues the court directed it to address: To articulate a definition of “sufficient” that corresponds with principles outlined in Section 254; establish a proper definition of “reasonably comparable” with respect to rates; and “craft a support mechanism taking into account all the factors that Congress identified in drafting the Act and its statutory obligation to preserve and advance universal service,” the order said. The commission defined sufficient as “an affordable and sustainable amount of support that is adequate, but no greater than necessary, to achieve the goals of the universal service program.” In its conclusions, the commission said the current mechanism for non-rural high-cost support provides “sufficient support to achieve the universal service principles set forth in Section 254.” Some USF advocates believe the commission’s definition falls short.

The FCC has yet to tackle the real underlying issues that led to the Qwest appeal, USA Coalition attorney Todd Daubert said in an interview. The coalition recommends that the FCC look at its definitions of “sufficient support” and “reasonably comparable” in more detail, he said. “The decision doesn’t really get into the level of detail with which these terms need to be defined to reflect today’s communications marketplace."

In a separate order, the commission granted a Wyoming petition requesting supplemental high-cost USF support for rural residential customers of Qwest. More than $2.3 million will go to Qwest in Wyoming beginning in the third quarter, the order said. While there’s concern for increasing the growth of the fund, “Wyoming is the only state that has shown that its rural residential rates are not comparable to the nationwide urban rate benchmark,” Commissioner Robert McDowell said. He said the FCC should continue working to contain the size of the fund.