The FCC revised its high-cost universal service support mechanism for the largest local telephone companies. In response to a remand by the U.S. Court of Appeals of the Tenth Circuit, the FCC was required 1) to define more precisely how its high-cost mechanism satisfied the statutory requirement to achieve reasonably comparable phone rates among rural and urban areas, 2) to better justify the cost benchmark used to determine support amounts, and 3) to develop a mechanism to induce states to assist in implementing the goals of universal service.
The FCC found that rural and urban phone rates generally are reasonably comparable today, based on data from a General Accounting Office (GAO) Report, and therefore concludes that current support levels should be maintained. In 2002, eight states received $233 million in support.
FCC Chairnan Michael K. Powell described the action aa "the ultimate truth-in-billing measure" although it does not eliminate all implicit support in local rate structures. Powell said that in a competitive market the goal of universal service can only be achieved by "creating an explicit support fund to benefit consumers who need it and by eliminating the vestiges of implicit support that misallocate resources and distort competition."http://www.fcc.gov
- Qwest Communications issued a statement condemning the FCC's "failure to fix the Universal Service High Cost Fund. Gary R. Lytle, Qwest senior vice president for federal relations, said more than 80% of the high-cost fund is funneled to just three states. The company is calling on the FCC to more "evenly distribute the hundreds of millions of dollars aimed at improving the lives of rural telecommunications customers."
