Walter McCormick, president and CEO of trade association USTelecom, threw his organization’s weight behind a recommendation from the Federal-State Joint Board on Universal Service this week to temporarily cap further growth of fund distribution to wireless carriers and competitive service providers.

Reminiscent of unbundling and equal access arguments in recent years, debate over how best to reform USF contribution and distribution is pitting incumbent service providers against USF-eligible competitive local exchange carriers. However, this time around wireless providers are in the thick of the battle and CTIA president Steve Largent provided his own counterweight.

On May 1^st, the Joint Board recommended that the FCC take immediate action to control the growth in high-cost universal service support disbursements by imposing an interim, emergency cap on the amount of high-cost support that competitive eligible telecommunications carriers (ETCs) may receive for each state, based on the average level of competitive ETC support distributed in that state in 2006.

The board also sought comment on issues and proposals such as the use of reverse auctions to determine high-cost universal service support, the use of geographic information systems technology and network cost modeling to calculate and target support, disaggregation of support, methodologies for calculating support for competitive ETCs and the promotion of broadband using USF.

But it was the temporary cap that has drawn fire and support.
In a letter to the FCC, McCormick urged the Commission to take immediate steps to address the short-term and long-term needs of the Universal Service Fund. He endorsed the Joint Board’s recommendation, saying it provides a solid move toward reforming universal service distributions.

To detractors he said, "Claims that temporary limits on universal service support to competitive ETCs would not be technologically or competitively neutral ring hollow.”

McCormick said incumbent carriers have been subject to similar limits since 2003 for similar reasons: to prevent excessive growth' in the size of the Universal Service Fund. “The Board's proposal would simply extend to wireless and other carrier funding the same discipline used on the wireline side,” he said.

McCormick pointed to the current 11.7% contribution factor and the expected $1.3 billion funding for competitive ETCs as two compelling reasons for the Commission to act. "A temporary cap on universal support for competitive ETCs would allow the Commission additional time to develop and implement much needed fundamental reforms. Doing nothing in the near term, which would only serve to raise the cost of communications services purchased by consumers, is simply not an option," he said.

Some of that reform should come in the area of calculating support. “Because competitive ETCs typically obtain study area waivers and serve, on average, lower-cost areas than do the incumbent ETCs on whose costs support is calculated, the current approach of calculating wireless support likely distributes excessive support to competitive ETCs in violation of the Act,” McCormick said.

Largent on the other hand, complained not only about the proposed cap but also about the time it has taken to see any movement at all on the issue. “Almost three years after being assigned the task of developing recommendations to reform the high-cost universal service system, the Joint Board has missed the mark,” Largent said. “The Joint Board’s bias toward legacy wireline networks will undoubtedly disadvantage rural consumers, the majority of which now view wireless as their primary mode of telecommunication. In neglecting to propose a comprehensive set of technology-neutral, market-oriented reforms to the high-cost universal service system, the Joint Board has effectively told rural consumers that they don’t deserve high-quality wireless services.”

One provider of service to those rural consumers is Citizens Communications. Yesterday during her company’s earnings report, chairman and CEO Maggie Wilderotter said she was glad to see the temporary cap. “Anything that can be done to make the funds more predictable is a good news story for us,” she said.