In the ongoing debate over Universal Service, most of the attention is focused on how it's funded. But one area that deserves a quiet death, according to David M. “Mike” Anderson, vice president of external affairs for Iowa Telecom, is the part revolving around support for newly acquired exchanges.

Rule 54-305, commonly called the Parent Trap rule, limits the amount of support carriers can receive for acquired exchanges to the amount that was received by the former parent company. The idea was to keep the USF out of transaction discussions and prevent companies from gaming the system. It has worked well in the past, but with millions of lines potentially being spun off by Bell companies in the next few years, does it still make sense? To Anderson, whose company was formed by acquisition of former GTE/Verizon properties, the answer is simple.

“Because we're a price-capped rural carrier carved out of the non-price-capped RBOC, we look more like an RBOC than a rural carrier from a USF perspective,” he said. “[The rule] is clearly about historic investment in your territory. It's kind of the horse chasing the carrot. We can invest and invest, and we may never get there.”

Current bills to reform universal service address the rule in various ways, but in an environment where Washington is fretting over the lack of broadband deployment in rural markets (with much of the slacking coming from RBOC-controlled rural turf), perhaps it's time to reconsider the whole concept of limited funding.

“There's a disconnect between price and cost in the price cap regime,” Anderson said. “It forces carriers to take cost out of the investment.”
— Vince Vittore

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