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Tele-Tech Updates

July 2012

Second Quarter Timeline

April 2012
- Connect America Fund Phase 1 launched
- End of Link Up, the reimbursement program for initial connection charges under Lifeline, except on Tribal lands
- USF Contribution Reform FNPRM released
- Second Order on Reconsideration (USF/ICC) released
- New Cramming rules adopted

May 2012 
- Third Order on Reconsideration (USF/ICC) released 

June 2012 
- New Lifeline eligibility rules begin
- Order clarifying transition of intrastate switched access rates released
- Public Notice for comments on CAF Phase II model design and data inputs released

"In a Nutshell: USF/ICC Reconsiderations and Clarifications"

With the FCC now on its third Reconsideration Order, it's evident the goliath Universal Service Fund (USF) and Intercarrier Compensation (ICC) Transformation Order is raising all kinds of questions. Despite the Commission's clarifications and corrections, carriers and telecom vendors remain confused as they attempt to implement new regulations under the imposed deadlines.

On June 5, the Commission released an Order clarifying issues related to the transition of intrastate switched access rates. To recap, the USF/ICC Transformation Order requires carriers to bring intrastate switched access rates to interstate levels by July 2013. A bill-and-keep framework is the ultimate end state. Most ICC rates have already been capped as of January in accordance with the multi-year transition. Another step in that transition happened in July, when LECs reduced the intrastate rate to half the difference between its current level and the interstate rate.

The June 5 Order clarified that the reduction to intrastate switched access rates can be made to the rate level for any intrastate switched access rate, so long as the lowered rates produce a reduction in revenues equal to the total reduction required in 2012. Also, non-CMRS reciprocal compensation traffic exchanged pursuant to a bill-and-keep arrangement should not be included in demand for the purpose of Intercarrier compensation rate transition calculations.

The Transformation Order also requires LECs to transition down the default rate for intrastate VoIP traffic to interstate levels. It's a rule that Frontier and Windstream, along with the Rural Associations, petitioned against back in December 2011. One of the requests, was that the Commission clarify the Order does not apply to intrastate originating access rates for calls originating on the PSTN and terminating VoIP.

While the Commission rejected the group's interpretation of the Order, it did modify the rules so that originating intrastate VoIP traffic could be assessed at the intrastate, rather than interstate level. As part of the Second Order on Reconsideration, adopted April 24, LECs may now tariff a higher transitional default rate for originating intrastate toll VoIP traffic until June 30, 2014.

The Third Order on Reconsideration, released May 14, addresses a variety of issues related to Eligible Telecommunications Carrier (ETC) reporting requirements, financial reporting deadlines, reporting of end user rates, USF Support for Alaska and more (NECA offers a concise summary of the Order).

Again, July 2013 is the deadline to bring intrastate access rates down to interstate levels. It's likely the Commission will release additional clarification and/or reconsideration Orders before that date.

"States, ETCs Implement New Lifeline Eligibility Rules"

Eligible Telecommunications Carriers (ETCs) must now verify eligibility before enrolling an applicant in Lifeline, according to new rules that went into effect in June.

ETCs can determine eligibility using one of the following three methods:

  1. A social services eligibility database
  2. Rely on the state agency or administrator to make the eligibility determination
  3. If neither of the above options is available, the ETC itself must review documentation to determine eligibility

The second option posed big compliance challenges for ETCs because several states that determine eligibility would not be able to provide subscriber certifications to the ETC, as required under section 54.410(d), by the June 1, 2012 deadline. That was one of the main arguments in the United States Telecom Association (USTelecom) Petition for Waiver filed in April.

Not surprisingly, the FCC on May 31 granted in part some of the requests filed by USTelecom, the California PUC, the Oregon PUC and the Oregon Telecommunications Association, and the Colorado PUC.  

The states listed in the USTelecom petition have until December 1, 2012 to comply with sections 54.407(d), 54.410(b)(2)(ii) and 54.410(c)(2)(ii) and 54.410(e).

The California PUC was also granted more time to obtain the last four digits of a subscriber's social security number and date of birth, comply with recertification requirements and determine whether the Lifeline subscriber's address is permanent or temporary.

So far, the FCC has not responded to the Petitions for Reconsideration that were filed in April by the American Public Communications Council, General Communications, Nexus Communications, Sprint, T-Mobile, TracFone and USTelecom.

One of the chief complaints among those petitioners is the requirement to re-verify a subscriber's temporary address every 90 days. Verizon in its reply comments agreed, stating the Order already requires ETCs to recertify subscribers every year, thus making the 90 day provision a duplicative burden.

Lifeline and Broadband
Lifeline's shift toward broadband picked up momentum, as the FCC collected applications for its "Broadband Adoption Lifeline Pilot Program", which were due July 2.

The program's goal is to gather data on how to increase the broadband adoption rate among low-income Americans. Selected participants will share a $25 million award to fund their projects, which the Public Notice describes as year-long "field experiments" to begin in the fall. The projects have yet to be announced.

"FCC Seeks Comments on USF Contribution Reform"

The FCC is attempting once again to reform the Universal Service Fund (USF) contribution system. Commissioners adopted a Further Notice of Proposed Rulemaking (FNPRM) at their April 27 Open Meeting.

The Notice seeks comments on what services and service providers should contribute to the fund, how contributions should be assessed, how to reduce costs and promote transparency, and limitations on how providers recover their USF costs.

Carriers pay a percentage of their interstate and international revenue into the USF, and how much they contribute has dramatically increased because long distance revenues are declining. The contribution factor for first quarter 2012 rose to a record high 17.9 percent. Currently, the proposed rate for third quarter is 15.7 percent.

The FCC acknowledges that the USF contribution system, with its increasing costs and complex compliance rules, is an inefficient program that creates unfair advantages for some providers. Some say that's especially true for wireless carriers. The Cellular Telecommunications Industry Association (CTIA) released a statement shortly after the FNPRM was adopted, saying, "roughly 44 percent of the contribution burden falls on wireless providers and their customers."

Comments are due July 9; reply comments due August 6.

"Cramming, Bill Shock and Stolen Smart Phones"

In October 2010, FCC Chairman Julius Genachowski stated he was pursuing an "aggressive" Consumer Empowerment Agenda. So far within the last year, he's announced three projects aimed at fulfilling that promise.

1. Cramming
New rules adopted in April should protect subscribers from receiving unsolicited third-party charges, known as "cramming", on their landline phone bills. Cramming is an illegal practice where unauthorized charges are often disguised to appear like legitimate services offered by the phone company. According to survey results cited in an FCC press release, as many as 15 to 20 million U.S. households are affected by cramming.

With the new rules, telephone companies must notify subscribers of the option to block third-party charges from their bills, if the provider offers that option. Subscribers must be notified at the point of sale, on each bill and on the company's website. The new rules also strengthen the Commission's requirement to separate third party charges from normal usage fees. Comments are being sought on whether providers should get consumer consent before placing questionable charges on their bills, if the company already offers to block those charges.

The new rules apply only to landline bills.

Senator Jay Rockefeller, Chairman of the Senate Committee on Commerce, Science, and Transportation, recently introduced legislation that would ban third-party charges on all landline phone bills.

2. Bill Shock
Also in April, the FCC launched a website that identifies wireless providers committed to alerting subscribers when they're about to exceed their plan limit.

An agreement between the FCC and a number of wireless carriers was reached in October 2011 to help consumers avoid "bill shock", the phrase used to describe subscribers' reaction to a sudden and unexpected increase in their monthly wireless phone bills. 

The changes are part of the voluntary Consumer Code for Wireless Service sponsored by CTIA, a wireless trade group. Those following the code will provide an alert when the subscriber is about to incur overage charges and another when they exceed the plan allowance. Alerts will also be sent when a subscriber who is traveling abroad is about to incur additional international roaming charges.

Subscribers will automatically receive these alerts. Participating carriers have agreed to start sending them by October 2012.

3. Stolen Smart Phone Database
Wireless companies are working to create a national database for stolen phones in an effort to curb smartphone theft, which has grown into an epidemic in major cities. Wireless providers and law enforcement agencies are participating in this FCC initiative, announced in April.

That means by late fall, subscribers should be able to call their provider to report a stolen wireless device. The provider will then enter the device's unique identifying number into a database and block it from being reactivated. The goal is to integrate the databases nationally within 18 months.

Lawmakers also plan to introduce legislation that will make it a federal crime to tamper with those numbers.

KFR News