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For Immediate Release: October 24, 2012
Contact: Robert J. Thormeyer, 202-898-9382, rthormeyer@naruc.org

Universal Service Reform Preempts States, Countering Congressional Intent: Litigants

WASHINGTON—A federal effort aimed at reforming the Universal Service Fund and Intercarrier compensation runs against congressional intent and preempts crucial State oversight, the nation’s State utility regulators, consumer advocates, and a host of small and rural telecommunications companies said.

In two briefs filed Tuesday before the U.S. Court of Appeals for the 10th Circuit, the National Association of Regulatory Utility Commissioners and fellow petitioners said the Federal Communications Commission’s proposed USF/ICC reform order expands the agency’s jurisdiction and does so in a way counter to existing law.

The FCC late last year released its long-awaited order reforming the Universal Service Fund and intercarrier compensation rules. The order, among other things, adopts new interpretations of the universal service without identifying crucial terms, and infringes on a host of crucial tasks reserved by congress to the States, including setting intrastate telecommunications carrier-to-carrier fees, establishing the rates for trading traffic in arbitrations to interconnect between carriers, and considering waviers seeking suspension of certain rules. The order also avoids crucial definitions that undermine the structure of the Act and a host of State universal service programs.  

In early January 2012, NARUC sued the agency, arguing that the orders greatly expand the FCC’s jurisdiction and preempt traditional State regulatory authority. Over 30 others filed separate lawsuits against the order as well. The U.S. Court of Appeals for the Tenth Circuit consolidated the suits into one case (No. 11-9900).

The two briefs reflect the concerns of the multiple parties involved in the case, though not every party joined every element presented. For each parties’ specific positions, please refer to pages i-xvi in the Intercarrier Compensation brief, and the first footnote to the argument in the USF brief. The FCC will have an opportunity to file reply briefs.

For NARUC, the complicated case is actually quite simple: The FCC overstepped its bounds when it set “reciprocal compensation” rates for all intrastate and interstate telecommunications service. Reciprocal compensation refers to paying for local telephone calls. Generally, the company serving the customer making the phone call pays the company serving the receiver.

“Sixteen years after passage, in the face of unambiguous statutory text, the FCC attempts to expand its jurisdiction under [the Telecommunications Act] to set compensation for all intrastate and interstate traffic—including associated exchange-access charges—on the theory that the 1996 Act gives it jurisdiction over compensation relating to all ‘telecommunications’,” the pleading said. “The FCC nowhere provides an adequate explanation of its departure from the prior interpretations. Read in context, it is clear that [Sections] 251b5 and  251(g) [of the Telecommunications Act] cannot authorize including access charges as reciprocal compensation.”

The FCC also neglected to refer the matter to the Federal-State Joint Board on Separations as required by Congress, NARUC said. The Joint Board consists of State and federal commissioners, and it is charged to make recommendations on separations matters.  Because the FCC order revises elements of the intrastate revenue requirements “without the Joint Board referral on the changes and recommended decision mandated [by law], it must be vacated,” the petition said.

In the USF brief, NARUC joined in arguments pointing out the FCC’s auction process unlawfully bypasses the State’s statutory role in the designation process for participants, undermines State initiated plans for broadband deployment, and fails to specify that only carriers that provide a telecommunications service can qualify for federal universal service support.

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NARUC is a non-profit organization founded in 1889 whose members include the governmental agencies that are engaged in the regulation of utilities and carriers in the fifty States, the District of Columbia, Puerto Rico and the Virgin Islands. NARUC's member agencies regulate telecommunications, energy, and water utilities. NARUC represents the interests of State public utility commissions before the three branches of the Federal government.

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