FCC to defend its reform of U.S. phone subsidies
By Aaron Pressman
WASHINGTON, April 9 (Reuters) - The Federal Communications Commission Friday will deliver a report to Congress that
tries to quell an erupting controversy over the agency's reform of the complex web of subsidies in the U.S. phone system.
But telecommunications analysts and lawyers see little room for the FCC to manuever between lawmakers seeking to enhance
the current subsidies by imposing charges on Internet services and others opposed to any FCC regulation of the Internet.
''The politics are just awful for the FCC,'' Scott Cleland, analyst at the Legg Mason Precusor Group, said. ''Either they get
creamed now by the Internet people or they get creamed much worse later on by the telecom people.''
The 1996 Telecommunications Act requires the FCC to make explicit the subsidies paid mostly by long-distance and business
customers. These so-called access charges are used in part to fund universal service, subsidizing residential phones in rural and
low-income parts of the country.
Friday's report is expected to cede little to critics in Congress and the phone industry. The agency will largely defend decisions
made last year to reform the subsidy system and not require Internet companies to pay into the system, people familiar with the
report said.
But the report is expected to give some ground on the issue of long-distance phone services provided over the Internet or other
private networks resembling the Internet.
The agency will consider in the future imposing some form of access charges on such services that allow customers to make
calls using an ordinary telephone and bill each call on a per-minute basis, people familiar with the report said.
That is anathema to firms like Qwest Communications International Inc. (QWST - news) and IDT Corp. (IDTC - news), which
want to offer Internet long-distance service at rates as low as 5 cents per minute. AT&T Corp.(T - news) has also announced
plans to offer a similar service.
''That would be a radical departure,'' Qwest senior director Joe Garrity said. ''Historically, that type of transport has been
exempt.''
But lawmakers from states highly dependent on universal service subsidies fret that the system will be undermined as the market
share of Internet long-distance companies grows from less than 1 percent currently to much greater levels.
Led by Senate Appropriations Committee Chairman Ted Stevens, an Alaska Republican, they demanded the FCC report due
on Friday.
''The FCC's whole regime has started to fall apart,'' said Earl Comstock, an attorney at Sher and Blackwell in Washington who
formerly worked for Stevens.
If the agency allows Internet providers to remain outside of the subsidy system, ''they will set in play a process which eventually
is going to crater the whole regime,'' he added.
On the other side, Washington Republican Rep. Rick White, chairman of the Congressional Internet Caucus, sent a letter to the
FCC this week warning the agency not to tamper with the Internet or impose access charges on Internet telephony.
''It is counterintuitive that Congress, in a sweepingly deregulatory act, would seek to smother a competitive industry under
layers of new obligations,'' White wrote. The FCC ''should be very careful not to impose a regulatory framework that is the
legacy of a century-old telephone system on new, value-added services that will drive tomorrow's economy.''
Last May, the FCC decided to make charges more explicit by reducing per-minute access charges on long-distance calls but
creating new per-line charges to support universal service. The agency also implemented a new multibillion-dollar program
required by the act to subsidize Internet connections for schools, libraries and rural health care providers.
The agency continued its previous policy of exempting Internet service providers from access charges, since the 1996 law
distinguished between telecommunications providers and information service providers.
The FCC's access charge reform was attacked from all sides. Bell companies challenged the plan in the 8th U.S. Circuit Court
of Appeals, which earlier struck down FCC pricing regulations arising out of the Telecommunications Act. The court is
expected to issue a decision any time. |
