1. Universal Service Roy Lathrop NCTA NARUC Telecom Committee 54 th MARC Convention 2008 Grand Traverse Resort, Michigan Funds

2. 2 Universal Service Funds Good news: NOT an intercarrier comp panel

3. 3 Current Intercarrier Compensation Rates The System is Broken High (¢/min): 1.5 8.9 9.9 34.9 6.8 35.9 0.3 0.1 8.9 0.3 Low (¢/min): 0.5 0.3 0.4 0.7 0.2 0.4 0.0 0.0 0.2 0.0 Average Rates in Cents per Minute LONG DISTANCE CALLS LOCAL CALLS WIRELESS CALLS Large ILEC Interstate (0.6) Small ILEC Interstate (1.8) Large ILEC Intrastate (2.5) Small ILEC Intrastate ( 5.1) CLEC Interstate (0.6) CLEC Intrastate (3.0) CMRS – ILEC InterMTA ( 0.6) CMRS – ILEC IntraMTA (0.2) Recip Comp Voice (0.2) Recip Comp ISP ( 0.1) 23

4. 4 Universal Service Fund Contribution Distribution Broadband?

5. 5 Universal Service 12.9% Contribution

6. 6 Universal Service Distribution  FCC Rural Health Care Pilot $ 417m Federal Program2008 Amount High Cost$ 4,478m Low Income$ 819m Schools / Lib$ 1,760m Rural Health$ 49m Total$ 7,106m 62%

7. 7 High-Cost Fund $2.6b in ‘01 $4.3b in ‘07

8. 8 Universal Service Distribution  Mechanisms not kept pace with technology & competition More providers + services = more USF !  When competition justifies deregulation, it justifies reduced support

9. 9 State Universal Service Funds  Assessments vary by program  Periodic adjustments  Programs & rules can change California: 6 programs (Adv. Svcs. 12/07)

10. 10 Broadband: Part of USF? Lifeline/Linkup Pilot Program NTIA / RUS rules for ARRA Rural Broadband Report (Copps) National Broadband Plan (FCC)

11. 11 Broadband: Part of USF? Control voice USF first Any USF support: unserved areas, underserved populations Pole rates, assessment

12. 12 Not interested Hotspots, corporate and government users Available, Relevance

13. 13 Climate Change? Energy Issues? Health Care? Broadband: What About

14. 14 Broadband Initiatives: Ongoing Challenges Eyesores or salvation? free vs. $10–20 / mo ATT withdrew app for 850 boxes in SF Envtl review 8/10/08

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