Not only is major telecommunications reform completely unlikely in Washington this year, but significant issues that once seemed headed for action now are languishing, overshadowed by larger developments such as the war in Iraq and immigration.

There are a few certainties – the Federal Communications Commission’s 700 Megahertz auction is taking place beginning in January and rules for that auction must, by law, be established in advance, said Carol Mattey, national leader of the Regulatory Consulting Services Practice at Deloitte & Touche, and a recent speaker at the NXTcomm trade show in Chicago. The big issue there is whether the FCC will require incumbents who acquire spectrum, which is being surrendered by broadcasters, to open it up for third party use.

“We would like to see a third channel into the home,” FCC Commissioner Jonathan Adelstein told a NXTcomm audience this week. “There are real concerns about whether that is going to come about through auction, whether anyone will get a national footprint.”

While the FCC would like to lean toward flexibility in establishing rules, he added, if it sees there isn’t going to be a third national player, in addition to cable and telco incumbents, then it might make sense to set the rules so that other companies could get access to this spectrum to provide broadband wireless into the home in competition with the incumbents.

“That is one of the interesting things on the horizon,” Mattey said. “Who is going to win that spectrum and what are they going to do with it? Will they be a competitive force and how will that change the market dynamics?”

Incumbents are balking at what amounts to wireless unbundling and Danielle Jafari, senior director and general counsel of government affairs for the Telecommunications Industry Association, points out previous efforts to force unbundling rules on the incumbent telcos for wireline services served to slow investment.

Universal service, an issue that seemed certain to be addressed this year, is now looking less likely, Mattey said, in large part because of its complexity.

“I think various members will continue to introduce bills, and will have hearings, but at the end of the day, I’m skeptical Congress will enact anything with respect to Universal Service,” she said. “There are a lot of difficult and intractable problems. If it had been easy to figure out how to solve it, people would have done it already.”

FCC Chairman Kevin Martin, speaking to a NXTcomm audience via video, said he favored updating Universal Service policies to facilitate broadband deployment, an idea Adelstein also endorsed. Martin added that the commission “might not be able to continue to let subsidies flow to multiple providers in rural areas,” as funds are limited.

Limiting the number of “eligible telecommunications carriers” or ETCs, is something the FCC can do on its own, and is more likely to happen this year, Mattey said.

“The staff recommended a cap, comments came in, a number of interests are in support, but wireless carriers are opposed to such as cap,” Mattey said. “The FCC could very well move forward and adopt this as an interim step pending long-term reform. This is an example of what is more likely to be happening the short term.”

In general, everyone favors encouraging broadband penetration, although there is much debate as to how this should happen, and even if the U.S. is lagging the rest of the world in broadband penetration, as figures from the Organization for Economic Cooperation and Development would indicate. Because those figures don’t take into account wireless broadband, corporate broadband and institutional broadband such as government and universities, many people believe they don’t accurately reflect broadband penetration in the U.S.

Sen. Daniel Inouye (D-Hawaii) introduced a bill that would establish a public-private partnership on broadband data collection, Jafari said. At the same time, the FCC has issued a Notice of Inquiry to help it determine how to redefine broadband, currently described as any service over 200 kilobits per second.

Mattey believes, however, that broadband penetration is another issue that will be much discussed, but see little real action.

“The real disparity in broadband penetration is between rural areas served by rural telephone companies and those served by incumbents,” she said. “Rural telephone companies have actually undertaken a significant effort to upgrade their plant to provide DSL to their customers. It’s the areas that are served by larger incumbent telephone companies, which for economic and other reasons have focused DSL on larger and urbanized areas, that are underserved. As a matter of public policy,does Congress have the wherewithal to create incentives to create greater broadband penetration for those areas? If you fund out of USF, what is the price tag? Is it $10 billion a year, more than $10 billion a year?”

Whatever the price, the government – and the taxpayers – would be the ones paying, Mattey said.

Another much discussed issue, Network Neutrality, also seems to be losing steam, even in a Democratic-controlled Congress where proponents were thought to hold more sway.

“I’m very skeptical that Congress will move forward on network neutrality, because it is a very politically charged issue,” Mattey said. “To date, there is a lack of consensus on what network neutrality is. You can’t enact something if you can’t agree what the terms are or what the issues are.”

And while the FCC has issued an inquiry into the issue, that’s a long way from taking action, she said.