USF Reform Among New Initiatives
Much of the Obama-Biden plan for technology involves unleashing new initiatives that were previously buried or cast aside by the Bush administration. Here are four new initiatives that Obama is likely to bring to the table early this year:
• USF reform: Obama promises to reform the USF as a means to achieve universal broadband. His Web site states the administration’s goal to “work towards true broadband in every community in America through a combination of reform of the [Universal Service Fund (USF)], better use of the nation’s wireless spectrum, promotion of next-generation facilities, technologies and applications, and new tax and loan incentives.”
The USF fee is 9.5% for the first quarter of 2009. Enterprises are charged on interstate and international services as well as on wireless services.
There have been many recent proposals for USF reform, such as the numbers proposal, where the fee would be a flat rate of $1 per end user line instead of a percentage of the total bill.
Though USF reform would enable more effective broadband deployment, the ‘numbers’ proposal is leaving a lot of organizations hoping it doesn’t happen. Paying $1 per line (including many inactive lines) would ultimately cause universities to spend a great deal more on USF fees than they are currently spending, says Wendell Barbour, ACUTA legislative & regulatory affairs committee chair.
“Our hope is that if this happens, it will be done in such a way that a new contribution methodology will not force higher education into reengineering its telephone switches to avoid unacceptable charges,” says Dave Ostrom, former ACUTA legislative & regulatory affairs committee chair.
Higher education telecom managers might not have to worry: USF reform has been on the docket for years with no action. If anything happens, it will be a slow transition guaranteed, says Andy Regitsky, president of Regitsky & Associates, a consulting firm in Reston, Va. that provides regulatory policy expertise.
• Special access rates: FCC mandates have kept special access rates charged by big vendors such as Verizon and AT&T down. However, the freezes on these prices are on their way out the door: Verizon’s freeze expired in July 2008, and AT&T’s is set to expire in June 2010 [VR 4/24/08]. In order to keep rates down, the new administration and FCC will have to impose more restrictions on these rates.
“Currently, the local phone companies are able to charge excessively for special access, and bring in rates of return that are considered very high,” Regitsky explains. Right now, enterprises don’t have any real competitive choices, and the FCC has done nothing for the last two years on the subject, he says. Regitsky believes that the new democratic FCC might be able to speed this process along.
• Net neutrality: The Obama administration plans to support the principle of network neutrality to preserve the benefits of open competition on the Internet, according to the technology agenda outlined on the president-elect’s Web site. Net neutrality refers to a network design principle that a network containing public information should treat all sites, content and platforms equally.
Some telecom managers are hopeful that net neutrality will have a better chance of becoming either regulation or law under the new administration, ACUTA’s Ostrom says. Telecom managers in higher education, for example, have concerns that a closed, controlled network could stifle innovative actions, he explains. For instance, distance education could be adversely affected by strict control on certain content or platforms.
• Environmental sustainability = more use of telecommunications: Obama’s push for environmental sustainability could indirectly help the world of telecom, says Jan Dawson, VP of Ovum, a London-based international consulting firm. The combination of the administration’s request that carbon-friendly options be utilized, along with Obama’s promise to invest in clean energy and reduce emissions, could raise the corporate demand for telecommuting, telepresence and telemedicine, he predicts.
When a new administration takes office, all pending litigation goes off the table and must be reintroduced. Here are three important examples of legislation that will be tabled if the new Congress doesn’t decide to reignite their flames:
• Taxing personal usage of CRUs: In April 2008, Congress introduced two bills that would effectively remove cell phones from listed property. This change would remove the current law that requires businesses to keep track of – and tax end users for the value of – personal calls made on corporate-liable cell phones [VR 8/14/08]. The House passed the “Taxpayer Assistance and Simplification Act of 2008” (H.R. 5719), which includes a provision to relieve cell phones of their listed property designation, on April 15 by a vote of 238 to 179. However, when this bill and the similar “Modernize Our Bookkeeping In the Law of Employee’s Cell Phone Act of 2008” (S.2668) were introduced in the Senate, they were not acted upon.
Michael Lloyd, counsel at Washington, D.C.-based law firm Miller & Chevalier, believes there’s still a lot of bipartisan support for the removal of cellular devices from listed property. However, he admits that Congress’ focus on fiscal stimulus might not leave a current opening for this issue to be brought back up. “We do remain optimistic that the support to address this issue will result either in legislation or administrative guidance to provide relief from existing rules,” Lloyd says.
• Early termination fees: Congress has been considering reducing early termination fees (ETFs) for cell phones. In September 2007, two democratic senators introduced the “Cell Phone Consumer Empowerment Act”, which calls for ETFs to be pro-rated. For example, a customer who exits a two-year contract after the end of the first year pays only half the ETF [VR 7/31/08]. There has been no action on the bill since Oct. 2007.
• Wireless taxes: Congress has been trying to curtail cell phone taxes since last spring. The “Cell Tax Fairness Act of 2008” (H.R. 5793), introduced April 15, would restrict any state or local jurisdiction from imposing a new discriminatory tax on cell phone services, providers or property. Similarly, the “Mobile Wireless Tax Fairness Act” (S. 3249), introduced July 10, had the same restrictions. Both bills proposed a five-year hiatus on new state and local wireless taxes, but neither was acted upon by the House or the Senate.
Changes in FCC Regulation and Competition
Under Obama, the new FCC will have a 3-2 Democratic majority for the first time in eight years.
After the expiration of republican Commissioner Deborah Tate’s term in early January, the expected resignation of republican Chairman Kevin Martin, and the possible resignation of republican Commissioner Robert McDowell, Obama will have two to three appointment choices to create the new democratic majority, Ostrom says.
It is probable that Obama will appoint former Internet executive and FCC official Julius Genachowski to the post of FCC chairman, reports The Associated Press on Jan. 13. “Knowing that this classmate and possible new appointment comes from a similar background in terms of technology at Harvard, I think they will be on the same page,” Regitsky comments.
“We are hopeful about the possibility of a new FCC that might include fewer backroom deals and more open discussion,” Ostrom says on behalf of ACUTA.
The new FCC will most likely stray away from the minimalist approach to regulation and put forth much stricter rules for mergers, competition and regulation, says Ovum’s Dawson. He predicts that there will be more emphasis on consumer rates, and that the new FCC will be more likely to block large mergers.
The democratic FCC will be less market- and enterprise-oriented; instead, it will be more regulatory and consumer-oriented, ACUTA’s Barbour says. “It will protect the interests of the consumer above all.”
Changes won’t be too drastic though, Regitsky says. There will be no rewriting of the Telecom Act of 1996, and large telcos will not be forced to disperse. The new FCC will simply be more understanding of smaller companies, and at the most, large companies might have to unbundle their networks to cooperate with new regulations, he predicts.
Though there is a lot to look forward to in the next year, we may have to wait a few months before large changes are seen in the FCC, since regulation is not the first item on the agenda for the administration, Ostrom says. (