FCC lightens the load: Carriers to pay less than expected through June

Interexchange carriers came out winners last week when the FCC said that all carriers will pay no more than $675 million during the first half of 1998 to help schools, libraries and rural health care facilities buy advanced telecommunications services.

The six-month cap-including $625 million for schools and libraries and $50 million for medical clinics-means carriers won't pay the maximum amount allowed to subsidize discounts on the purchase of Internet access, high-speed wiring and other services. Carriers could have paid up to $2.25 billion a year under an FCC order issued in May.

Starting Jan. 1, schools, libraries and health care facilities for the first time will share in universal service funds that have traditionally subsidized local telephone service for rural, low-income customers.

The Telecommunications Act of 1996 added these new recipients, allowing the institutions to buy commercial services at 20% to 90% discounts.

Some carriers have long argued that the $2.25 billion cap was too high and that they shouldn't have to pay a lot into a fund that schools and libraries aren't ready to tap fully. Those arguments, pressed especially by IXCs, held sway with the FCC as the program's start drew near. Spending caps for the third and fourth quarters of 1998 will be set next year.

Commissioner Harold Furchtgott-Roth dissented, saying that all universal service programs should be put on hold until Congress studies them further.

IXCs such as AT&T and MCI will benefit most from the FCC's decision because contributions to the schools-and-libraries fund are based on gross revenues: The larger the company, the higher the contribution. "There was a lot of concern about the size of the fund. What [the FCC] has done is helpful," said Randy Coleman, vice president of regulatory affairs at the Cellular Telecommunications Industry Association.

The FCC left alone the contentious issue of whether carriers can list a separate charge on customer bills reflecting contributions to the schools-and-libraries fund. The FCC has no authority over carriers' billing formats, but carriers should "tell the whole story-that overall rates are declining at the same time that universal service mechanisms are implemented," said FCC Chairman William E. Kennard.