Federal Universal Service Program

1. Federal Universal Service Program Network Policy Council 2-4-07 Jeri A. Semer Executive Director, ACUTA jsemer@acuta.org

2. Objectives: • Describe the federal Universal Service program • Discuss the current contribution methodology • Discuss the potential impact of proposed changes • Describe higher education community actions to date • Discuss 2007 legislation and other potential future developments

3. Background • Telecom Act of 1996 created four current programs: • Low Income (Lifeline/Linkup) • Schools (K-12) and libraries—“E-rate” • Rural healthcare • High cost (rural and other high cost areas) • Cost of the USF • 2006 cost $6.5 billion/year • Projected at $7.5 billion in 2007

4. Revenues: High-cost: $3.864 billion Low-income: $813 million Rural health: $33.2 million Schools and Libraries: $2.172 billion Total: $6.883 billion Expenditures High-cost: $3.824 billion Low-income: $809 million Rural health: $26 million Schools and Libraries: $1.862 billion Total: $6.520 billion 2005 Revenue and Expenditures

5. 2005 Distribution of USF Payments • High Cost: 58.7% • Low Income: 12.4% • Schools & Libraries: 28.6% • Rural Health: .4%

6. Current Contribution Methodology • Carriers pay a % of interstate and intl. LD revenue • % adjusted quarterly • Universities are customers---billed by carriers for % of LD expenses

7. History since 2000 is available at http://www.fcc.gov/omd/contribution-factor.html 2000 (first year): 2nd Qtr: 5.7% 3rd Qtr: 5.5% 4th Qtr: 5.7% 2004: 1st Qtr: 8.7% 2nd Qtr: 8.7% 3rd Qtr: 8.9% 4th Qtr: 8.9% 2005: 1st Qtr: 10.7% 2nd Qtr: 11.1% 3rd Qtr: 10.2% 4th Qtr: 10.2% 2006: 1st Qtr: 10.2% 2nd Qtr: 10.9% 3rd Qtr: 10.5% 4th Qtr: 9.1% 2007: 1st Qtr: 9.7% USF Contribution Factors

8. Proposed Changes • Rationale: Shrinking LD revenue resulting in unstable base and (until this Qtr.) increasing % charges • VoIP providers not participating (until now)

9. Alternative Methods • Revenue-based (current) • Connections-based (would vary based on capacity) • Numbers-based (favored by FCC Chair and supported by many industry players)

10. Potential Impact of Numbers-Based System

11. Potential Impact of Numbers-Based System • Based on survey of ACUTA member institutions in 2005 • Based on $1.00 per month per telephone number. • FCC staff speculated 10/2 that this could go as high as $1.25, so increase these figures by 25% • Does not include additional charges for high capacity lines

12. Higher Education Community Actions • HE Community supports USF, but has concerns with unreasonable impact of numbers-based system on institutions • ACUTA written comments in 2005-06 • Meetings with FCC Commissioners and Staff 2005-06 • Joint ACUTA/EDUCAUSE White Paper, May 2006 • ACE Comments, March 2006 • Numerous letters from institutions to FCC

13. Interim FCC Actions June 2006 • Included interconnected VoIP providers, with 64.9% safe harbor • Increased “safe harbor” amount for cellular providers to 37.1%. • Court action exempted DSL from USF beginning mid-August 2006 • Long term impact unknown. Contrib. % decreased to 9.1% in 4th Qtr. 2006; increased to 9.7% in 1st Qtr. 2007

14. Interim FCC Actions • Solicited public comment in Aug. 2006 re: using reverse auctions to allocate high-cost support (to lowest-cost bidder). • No decision on this yet.

15. Rural Health Care Pilot • FCC adopted a two-year pilot program that will provide universal service funding to support the construction of state or regional telemedicine and telehealth broadband networks and services • The pilot program will provide funding (up to 85%) to support the cost of connecting the networks to Internet2 • National LambdaRail, Inc. (“NLR”) asked the FCC to reconsider or clarify its decision to adopt the rural health care pilot program. In its current form, it appears the pilot program will only fund connections to Internet2. NLR, however, wants the pilot program to fund connections to its network as well.

16. Potential Future Actions • Comprehensive reform is not imminent • ACUTA and EDUCAUSE will continue to monitor and advocate • Keeping ACUTA and EDUCAUSE members and institutional Federal Relations representatives informed • Institutions may be asked to write letters---timing TBD

17. Potential Future Actions • NPC agenda for 2007 • Monitor and comment on USF/Telecom Reform legislation • If numbers-based system is adopted, reconfiguration of campus communication systems is possible to reduce the number of DID telephone numbers

18. S. 101 (Stevens) Introduced 1/07 • Gives FCC flexibility to adopt one or more contribution methods • Gives FCC authority over interstate, intrastate and intl. contribution assessments • Would permit discounts for residential group or family plans. • Would exempt USF from various budget laws • Would extend a number of rights and requirements to facilities-based VoIP providers, and wd. prevent telcom carriers from refusing traffic solely because it is IP enabled • Would extend a max. of $500 mil per year for USF support of broadband eqpt. and infrastructure in unserved areas; and wired, wireless and satellite providers would be eligible for support • Would require USF support to be “competitively neutral, not favoring a particular technology

19. S. 101 (Stevens) (cont.) • Sets reporting and quality standards for ETCs. • FCC could not limit USF support to a primary line • Addresses “phantom traffic” • Contains audit, integrity and accountability requirements, and calls for progress reports and performance standards for schools and libraries. • Contains misc. measures on rural health care, states that support will be available to public and nonprofit healthcare providers in rural areas. • States Native American libraries and library consortia are eligible for support • Establishes addtl. support for “insular areas”, specifically Hawaii

20. Other Legislation • HR 42 (Velazquez): • Would add Internet access and broadband high speed Internet access to Lifeline Assistance and Link Up programs • Would require the FCC to conduct a study and submit a report by 5/1/08

21. USF Resources • ACUTA/EDUCAUSE White Paper, May 2006: http://www.acuta.org/?1495 • Facts and Myths about USF: http://www.acuta.org/?1494 • ACE Comments to FCC, March 2006: http://www.acenet.edu/AM/Template.cfm?Section=Search&template=/CM/HTMLDisplay.cfm&ContentID=15259 • FCC Universal Service Overview: http://www.fcc.gov/cgb/consumerfacts/universalservice.html • FCC Schools and Libraries Program: http://www.fcc.gov/cgb/consumerfacts/usp_Schools.html • Universal Service Administrative Company http://www.usac.org/default.aspx

22. USF Resources (cont.) • FCC 2006 Monitoring Report: http://www.fcc.gov/wcb/iatd/monitor.html • S.101 (Stevens): http://commerce.senate.gov/public/index.cfm?FuseAction=PressReleases.Detail&PressRelease_id=248710&Month=1&Year=2007

23. Contact Information: Jeri A. Semer, CAE Executive Director ACUTA: The Association for Communications Technology Professionals in Higher Education 152 West Zandale Drive, Suite 200 Lexington, KY 40503 Ph: 859-278-3338, ext. 225 jsemer@acuta.org www.acuta.org