H.R. Universal Service Reform Act of 2006

A section by section summary from the bill's authors:

Section 1: Establishes the short title as the "Universal Service Reform Act of 2005."

Section 2: Includes the draft’s findings and purposes.

The findings include that the current mechanisms used to collect and distribute universal service support are not sustainable; providing unlimited universal service support to multiple competing providers in the same service area results in an excessive demand for universal service support; universal service support mechanisms should be explicit and should increase the availability of broadband services; and support should be collected from a broad base of service providers in a more competitively and technologically neutral manner.

The purposes include ensuring that communications and broadband services are made available throughout the United States, extending the cap on the high cost support fund distributed to rural local exchange carriers to the entire high cost support fund, broadening the contribution base of the fund in a competitively neutral manner, strengthening the criteria for eligible recipients of universal service support and making broadband services and facilities eligible for universal service support.

Section 3: Defines a "communications service provider" as any entity that: (1) currently pays into the universal service fund (e.g., local exchange service and long distance providers); (2) uses telephone numbers or IP addresses, or their functional successors or equivalents, to offer real-time voice communications in which the voice component is the primary function (e.g., cable telephony and VoIP providers) or (3) offers a network connection for a fee to the public (e.g., DSL, cable modem, WiMax and broadband over powerline providers).

Defines "high speed broadband service" as a two-way network that uses Internet protocol or a successor protocol to enable end users to receive communications, including voice, data, video or any other form, in Internet protocol format at a download receiving rate of at least one megabit per second. The FCC is directed to review the one megabit per second speed requirement every other year and make adjustments to move to higher speeds as deployment and advancement of new technology allows communications service providers to provide higher broadband speeds to end users in an economically efficient manner.

Section 4: Directs the Federal-State Joint Board on Universal Service and the FCC to initiate proceedings to implement the Act. The Joint Board must make recommendations to the FCC within 9 months after the date of enactment and must complete a proceeding within 15 months after the date of enactment.

Directs the Joint Board and the FCC to base policies for the preservation and advancement of universal service on the principles that quality services be available at just, reasonable and affordable rates; access to telecommunications, advanced telecommunications and information services should be available throughout the United States at reasonably comparable rates; all communications service providers should make equitable contributions to the universal service fund and elementary and secondary schools and classrooms, health care providers and libraries should have access to advanced telecommunications services supported by a separate fund.

Defines universal service as the services defined as universal services as of the date of enactment plus high speed broadband services and an evolving level of telecommunications services to be identified by the FCC.

Establishes an expanded contribution base for the universal support fund. Contributions will be based on the intrastate, as well as the interstate and international, revenues of any entity that: (1) currently pays into the universal service fund (e.g., local exchange service and long distance providers); (2) uses telephone numbers or IP addresses, or their functional successors or equivalents, to offer real-time voice communications in which the voice component is the primary function (e.g., cable telephony and VoIP providers) or (3) offers a network connection for a fee to the public (e.g., DSL, cable modem, WiMax and broadband over powerline providers).

Extends the cap which currently applies to high-cost support for rural local exchange carriers to all universal service support programs other than programs supporting schools, libraries, rural health care and lifeline and link-up service. Sets the cap at the amount collected for all universal service support programs other than programs supporting schools, libraries, rural health care and lifeline and link-up service in the year prior to enactment of the Act. Raises the cap annually based on the growth factor used by the FCC to adjust the cap for high-cost support for rural local exchange carriers today – the annual percentage change in the total number of rural local exchange carrier working loops plus the annual percentage change in the Gross Domestic Product-Chained Price Index.

Provides that, except for the changes to the rural health care support mechanism set forth in the bill, nothing in the Act shall limit or change the amount of support or means of distribution for the schools and libraries, rural health care, lifeline and link-up programs.

Allows universal service fund recipients to use universal service support to fund the deployment of high-speed broadband services.

Reimburses universal service recipients (eligible telecommunications carriers) based on their actual costs. Today, support for eligible telecommunications carriers like CLECs and wireless providers is based on the support received by the incumbent local exchange carrier in a service area, rather than on the CLEC’s or wireless provider’s actual costs. Compensating carriers based on their actual costs will help contain distributions from the fund.

Changes the calculation methodology for the non-rural high cost carrier portion of the fund from geographic to wire center averaging while ensuring that no provider will receive less funding after enactment than it is receiving under the current methodology.

Requires telecommunications carriers to identify all traffic which originates on their networks so carriers that terminate traffic can seek appropriate intercarrier compensation.

Directs the FCC to adopt rules to calculate the level of support to be distributed to all eligible recipients.

Requires the FCC to establish reporting requirements for communications service providers receiving universal service support.

Makes changes to the rural health care support mechanism so that support for advanced telecommunications services is based on the difference between the cost of service in an urban area and the cost in a rural area, instead of the flat percentage rate discount under current law. Clarifies which entities are eligible for support under the rural health care support mechanism. Conforms the definition of "rural" for the rural health care support mechanism to the definition used by the Department of Agriculture’s Rural Utility Service for broadband grants and loans and grandfathers any community that qualified as rural under the FCC’s rules prior to December 2004.

Section 5: Clarifies the criteria communications service providers must meet to be eligible to receive universal service support by codifying the criteria adopted by the FCC for eligible telecommunications carriers in February 2005, including using their own facilities to make universal services available throughout a service area, advertising supported services and associated services throughout a service area, advertising the availability of lifeline and link-up services to reach those most likely to qualify for those services, remaining functional in emergency situations, satisfying consumer protection and service quality standards and offering local usage, or an amount of free minutes of local exchange service established by the FCC, comparable to that offered by other communications service providers in the service area. The FCC currently does not require local exchange carriers to offer any free minutes of use.

Requires universal service fund recipients, within five years of the date of enactment, to be offering high speed broadband service with a download receiving rate of at least one megabit per second. This requirement may be waived by the FCC for renewable periods of three years for providers for whom offering such service would be technically infeasible or from an economic standpoint materially impair the ability of the carrier to offer local exchange service.

Clarifies that nothing in the Act prevents any State from using general tax revenues for additional universal service support.

Section 6: Eliminates the "parent trap," which provides that a carrier which acquires telephone exchanges from an unaffiliated carrier receives universal service support at the same level for which those exchanges were eligible prior to the transfer. Eliminating it will encourage the sale of exchanges to rural carriers.

Section 7: Permanently exempts the universal service fund from the Anti-Deficiency Act to avoid the need to renew the exemption annually.

Section 8: Directs the FCC to report to Congress every three years concerning the availability of universal services to all Americans.