Universal Service Fund

Federal Communications Commission Chairman Ajit Pai sent a letter to Rep Colleen Hanabusa (D-HI) on August 21, 2017, in response to her letter regarding communications service to the Hawaiian Home Lands residents and the Commission's investigation of Sandwich Isles Communications. Pai responded to Hanabusa’s questions on whether Universal Service Funds have been paid to SIC since the suspension of payments by USAC in 2015, whether SIC was certified by the Hawaii PUC as an ETC at the time USF funds were suspended, if SIC remains eligible for the receipt of 2015 funds and the total amount of USF funds withheld from SIC in 2015.

The Universal Service Administrative Company, the nonprofit organization responsible for administering the E-rate program and other federal universal-service funds, announced August 8 that it would transfer more than $9 billion it oversees out of the private banking market and into the US Treasury.

Moving the funds into the Treasury was one of the recommendations in a report on problems with the Lifeline program recently issued by the Government Accountability Office. Among the reasons GAO cited for recommending such a move: lower fees, better management practices and regulatory safeguards, and the opportunity for the federal government to use the funds as an offset for its debts. The Aug 8 announcement prompted some concerns in a K-12 sector already jittery about the direction of the FCC—and especially its plans for the E-rate—under President Donald Trump and the chairman he appointed, Ajit Pai.

"While there might be some efficiencies associated with switching the E-rate program to a Treasury-managed account, we have concerns that program beneficiaries would lose the benefit of the significant interest that universal-service funds accrue in the private market," said Reg Leichty, a lawyer and lobbyist for the Consortium for School Networking, a professional association representing school technology officers. Leichty also expressed concern that the transfer of funds into the Treasury could be a step towards Congress assuming responsibility for universal-service funds, including an annual determination of how much should be allocated for initiatives such as the E-rate. "We would not want this successful program to be subject to the whims of the annual appropriations process, which has not functioned well for a significant period of time," he said.

The Lifeline Connects Coalition met with Federal Communications Commission Wireline Competition Bureau staff on August 10, 2017 to discuss the Lifeline National Eligibility Verifier. The Coalition discussed improvements to the timing of subscriber proof of eligibility for migration to the National Verifier, the recent decision not to provide a service provider application programming interface to the National Verifier, and the proper interpretation of the June 29, 2017 Public Notice regarding service provider liabilities under the National Verifier. The Coalition also discussed its Petition seeking reconsideration of minimum service standards and the GAO Lifeline Report.

A bipartisan quartet of Senators want the Government Accountability Office to fork over some details about the waste, fraud and abuse it identified in the Federal Communications Commission-administered Lifeline low-income broadband subsidy program. Sens Tom Carper (D-DE), Claire McCaskill (D-MO), Ron Johnson (R-WI) and Rob Portman (R-OH) sent the letter to the GAO asking it to send to the FCC and the FCC inspector general (currently David Hunt) details on the specific instances it identified in a report on Lifeline released by McCaskill in June.

They want the FCC IG to be able to identify and pursue the culprits if warranted. The senators also added a plug for the GAO report's recommendations on how the FCC can improve oversight of the program, something new chairman Ajit Pai has long called for. They also want GAO to turn over the results of its undercover testing of the Lifeline program to the committee.

On June 14, 2017, NTCA – The Rural Broadband Association (NTCA) and the United States Telecom Association (USTelecom) filed a joint petition pursuant to Section 10 of the Communications Act of 1934, as amended, requesting that the Commission temporarily forbear from application of universal service fund (USF) contribution requirements with respect to broadband Internet access transmission services provided by RLECs, whether tariffed or offered on a de-tariffed basis. The petition asks that the Commission forbear “until such a time as the Commission reaches a decision on whether any and all broadband services...should be required to contribute to support of federal USF programs or completes some other form of contributions reform.” Interested parties may file comments or oppositions to the NTCA and USTelecom Petition on or before September 13, 2017 and reply comments on or before September 28, 2017.

The Federal Communications Commission took the next step toward launching an auction that will provide nearly $2 billion over ten years to expand high-speed Internet access to consumers and businesses in rural areas that are currently unserved by fixed broadband. This proceeding represents the first use of an auction by the FCC to allocate ongoing Connect America Fund support for fixed broadband and voice services in rural areas.

Use of this market-based “reverse auction” mechanism will enable the FCC to expand and support high-quality rural fixed broadband and voice services at a lower cost and to maximize the value of its investment. The auction will commence in 2018. The Public Notice seeks comment on the proposed application and bidding procedures for the auction, including how interested parties can qualify to participate in the auction, how bidders will submit their bids, and how the FCC will process bids to determine the winners and support amounts. This first-of-its-kind auction of support for fixed broadband and voice service is expected to attract parties that have never participated in an FCC auction. Recognizing that, the FCC’s Rural Broadband Auctions Task Force, along with the Wireline Competition Bureau and Wireless Telecommunications Bureau, plan to provide detailed educational materials and hands-on practice opportunities in advance of the auction.

The Federal Communications Commission established the procedures for a robust challenge process to ensure that the FCC targets Mobility Fund Phase II (MF-II) support to primarily rural areas that lack unsubsidized 4G LTE service. Establishing the challenge process will enable the FCC to resolve eligible area disputes quickly and expeditiously.

In February, the FCC established the framework for the MF-II, $4.53 billion of funding over ten years, and sought comment on the process under which interested parties could challenge the eligibility of areas for MF-II support. This action establishes a challenge process that will be administratively efficient and fiscally responsible. This item adopts parameters for a one-time collection of 4G LTE coverage data tailored to MF-II. The FCC will use this coverage data, in conjunction with subsidy data, to establish the map of presumptively eligible areas. Interested parties will have a window after the release of this map to file challenges to areas deemed presumptively ineligible, and providers will have an opportunity to respond to those challenges. This item also includes an Order on Reconsideration, which resolves certain issues raised in petitions for reconsideration of the Mobility Fund II Report and Order adopted in February.

The Universal Service Administrative Company (USAC) filed an updated version of the Lifeline National Verifier Plan, which was created in response to the Lifeline Modernization Order on January 19, 2017. USAC said the plan contains a section detailing each of ten key components, as well as an introduction and a glossary of key terms. It also contains a section responding to public comments received on its draft plan, and has been approved by the Federal Communications Commission’s Wireline Competition Bureau and the Office of the Managing Director. This updated version reflects progress of the system build and its related processes.

Rep Austin Scott (R-GA) brought back his End Taxpayer Funded Cell Phones Act before House lawmakers left town. That’s the legislation that GOP leadership fast-tracked straight to floor consideration immediately after its introduction in 2016. (They tried to advance it under suspension of the rules, and it went down 207-143.) It now has 18 GOP backers, triple what it had before. “My bill will reform the Lifeline Program and restore it to its original purpose of providing landline services and prohibit Universal Service support for mobile services,” Rep Scott said. A GOP leadership aide said there’s no talk on when and if the measure may be brought to the floor this time around.

On June 22, 2017, Sens Jerry Moran (R-KS) and Joe Manchin (D-WV) wrote to Federal Communications Commission Chairman Ajit Pai, urging him to, "move forward with the Remote Areas Fund (RAF) to appropriately target Universal Service Fund support towards the most difficult to serve areas in our states that remain unserved."

On July 18, Chairman Pai responded by saying, " I was pleased to move forward with the bipartisan CAF Phase II Auctions Order earlier this year, which the Commission has now targeted to include extremely high-cost areas as well as the high-cost areas that were always part of the Connect America Fund. And that's why I was pleased that the Commission agreed to commence the Remote Areas Fund, which like the CAF Phase l1 Auction will employ technology-neutral rules, no later than one year after the commencement of the CAF Phase li auction."