FCC acts quickly to facilitate re-purposing of USF payments left behind by Verizon Wireless and Sprint-Nextel

Last September we reported that the FCC had proposed to grab hold of certain Universal Support Fund (USF) moneys that would no longer be distributed to competitive eligible communications carriers (ETCs) when Verizon Wireless and Sprint-Nextel gave up their ETC status in certain markets (in fulfillment of conditions placed on approvals of their mergers).  And as we reported in October, the expectation is that the relinquished funds will be used for a new mobility broadband support fund.

The FCC has quickly adopted its proposal and made it effective immediately, to take advantage of anticipated relinquishment of ETC status in several markets by Sprint-Nextel on December 31, 2010.

Each state has a cap on ETC support from USF.  Historically, when a carrier gave up support, for whatever reason, the cap stayed unchanged.  With the same number of dollars available in the state, but fewer supported carriers, the remaining ETCs claimed the right to an increase in their own payments.  But the FCC had other ideas, seeing an opportunity to fund part of its planned mobile broadband support program.  It proposed not to allow the remaining ETCs to get any of the relinquished funds.

The new rule confirms that whenever a carrier relinquishes its ETC status and so gives up its USF financial support, the cap in that state will be reduced by the same amount the relinquishing ETCs used to receive, meaning that there will be no additional dollars to distribute to remaining ETCs.

What is not clear is how the new rule will provide funding for a broadband mobility fund, because slush money is available only if the public has to keep contributing at the old rate.  If the state ETC caps are reduced, it seems that the amount to be charged to the public should also go down.  That is obviously not what the FCC has in mind.  Rather, the Commission wants to keep collecting the money from consumers and repurposing it for mobile broadband studies.

Just a couple of weeks ago, the FCC announced that the consumer contribution factor for the first quarter of 2011 will be a whopping – and record-busting –15.5%.  We anticipate a fair amount of grousing from the public over a figure that will raise total taxes and fees on nearly all telephone bills to the 20-25% range.  That pushback may get the FCC to think twice about how far it can boost telephone taxes before the public brings down the building walls.