Comments on permanent fund reclamation rules due 21 days after publication in the Federal Register; Reply Comments due 14 days thereafter  

The Federal Communications Commission has released an Order and Notice of Proposed Rulemaking in the Universal Service dockets that will reserve high-cost Universal Service funds “as a potential down payment” on the broadband initiatives outlined in the National Broadband Plan. The move is in keeping with the Commission’s stated goals of reforming the Universal Service system in several aspects, including by using those funds to foster broadband deployment.

The item, arises from the conditions that the FCC placed on the ALLTEL-Verizon Wireless and Clearwire-Sprint Nextel mergers in 2008. It resolves a request for review filed by Corr Wireless Communications, LLC regarding the Universal Service funds surrendered by Verizon Wireless and Sprint Nextel as a result of the conditions placed on those carriers’ acquisition of wireless licenses in 2008. In addition, the item seeks comment on adopting permanent rules for the reclamation of high-cost Universal Service support. Initial Comments are due 21 days after the item is published in the Federal Register, and Reply Comments are due 14 days thereafter. We note that the item contains a typographical error with regard to the deadlines, but we have confirmed these comment intervals with the Commission and understand that a clarifying Erratum will be issued shortly. We will send a further Client Alert to apprise you of the comment deadlines after publication.

In the Order portion of this item, the FCC took two actions. First, it granted in part the Corr Wireless request for review regarding Universal Service funds that Verizon Wireless and Sprint Nextel were ordered to surrender. Each of those carriers was required, as a condition to their acquisition of licenses from ALLTEL and Clearwire, respectively, to relinquish Universal Service funds they received as Eligible Telecommunications Carriers (ETCs). Corr Wireless requested that those funds be redistributed to other ETCs. When the Universal Service Administrative Company (USAC) denied that request, and instead simply lowered the cap on the total amount of Universal Service funds to be distributed, Corr filed a request for review with the Commission, arguing that previous Commission orders state that reclaimed Universal Service funds would not affect the amount of the cap. The Commission agreed with Corr to the extent that USAC had misinterpreted those orders, but denied Corr’s request for immediate redistribution. The Commission held that USAC should not have lowered the cap, but “nothing ... requires the Commission to redistribute to other competitive ETCs the high-cost universal service support reclaimed from Verizon Wireless and Sprint Nextel.”

The Commission’s second action was to clarify the amount of funding that Verizon Wireless and Sprint Nextel must surrender. Each had carrier committed to return 20 percent of its ETC funding in equal amounts over a five-year period. In this Order, the FCC gives the carriers two options for calculating the baseline amount from which to make the incremental payments: either the 20 percent will be deducted from the amounts that each carrier received in previous years; or the 20 percent increments will be calculated from the total available ETC support in previous years. The election that each carrier makes will be applied for the duration of the five-year reclamation period. The Commission ordered USAC to provide assistance to Verizon Wireless and Sprint Nextel in calculating the amounts to be reclaimed.

In the Notice of Proposed Rulemaking, the Commission seeks comment on permanent rules for the reclamation of Universal Service funds and the redistribution of those funds “to help fund broadband universal service programs.” The proposed rules are:

  • Reducing the Universal Service high-cost cap by the amounts reclaimed from or surrendered by ETCs
  • Amending Rule 54.709(b) to permit USAC to reserve reclaimed funds “as we consider broadband universal service reform”
  • Developing an “administratively workable process” for instructing USAC to reserve funds, and whether such instructions must be in an order, a public notice, or some other form