Three weeks after the FCC ruled that it would not depart from a progressive, revenue based collection system for the Universal Service Fund (USF) at this time, CTIA—the Wireless Association, continues to lobby for a flat, "numbers based" system for the USF.

On July 17th, two CTIA Vice-Presidents, Christopher Guttman-McCabe and Paul Garnett, met with two legal advisors to Commissioner Jonathan Adelstein, urging the Commission to implement "a numbers-based universal service contribution mechanism that addresses the concerns of low-income and low average revenue per unit customers."

The USF requires phone companies to tithe a percentage of their long distance revenue to subsidize basic telephone service for low-income consumers, rural areas, and for the "E-rate" program, which pays for Broadband for schools and libraries. The companies, in turn, pass that tax onto consumers.

But the funds collection base has shrunk over the last decade, according to the FCC, from $79 billion in 1994 to $74.4 billion in 2004. At the same time, the USF has been spending more money: from $4.4 billion in 2000 to about $6.5 billion in 2006.

New technologies such as VOiP and national wireless plans have made it increasingly difficult to track long distance calls, contributing to the decline in USF revenue. On June 21st, the FCC ruled that, for the first time, VOiP companies have to pay into the fund. The Commission also expanded that percentage of wireless revenue that could be taxed from 28.5 to 37.1 percent, although wireless firms can propose an alternative figure based on their own estimate of their interstate revenue. On July 5th the agency also required telephone calling card companies to contribute to the fund.

But while enacting these reforms, the Commission declined to abandon the present USF collection system in favor of a plan that taxes firms solely on the number of telephone numbers they provide.

A "consensus approach to reform has not developed," the FCC concluded on June 21st. "Thus, while we recognize that there may be merit to fundamental reform of the current USF contribution methodology, we find, at this time, that the discrete interim reforms we make to expand the contribution base will best promote" the Telecommunications Act of 1996. The Act calls for the FCC, in partnership with the states, to ensure affordable phone service for all Americans.

CTIA advocates the "fundamental reform" that the FCC has so far declined to adopt. The Association is part of a group that calls itself the "USF By the Numbers Coalition," and includes AT&T, BellSouth, Verizon, and USTelecom among its members.

A Coalition position paper argues that a collection system that taxes by telephone numbers rather than long distance revenue will be more precise, easier to administer, and will create a "level playing field" among competing telephone services.

"Flat fees based on working telephone numbers would minimize incentives and opportunities for carriers and customers to avoid contribution obligations," their statement argues. "Furthermore, flat fees based on working telephone numbers ensure that all providers of interconnected voice services contribute, thereby making funding for the USF more stable and secure."

But critics charge that the "By the Numbers" position paper does not address the main criticism of a flat fee system, that it will shift the revenue burden off customers who make the most long distance calls—businesses and more affluent consumers—and onto ordinary phone users.

The Keep USF Fair Coalition, an alliance of civil and disability rights groups, makes this case. Its studies contend that a flat collection system would result in higher USF taxes for "the most vulnerable of Americans"—about 16 million low-income households who rarely make or can afford to make long distance phone calls.

On July 11th, the Keep USF Fair Coalition challenged the "By the Numbers" group to estimate how many customers would wind up paying higher USF fees under a flat plan.

"The members of this industry-run coalition owe it to consumers to stop talking about meaningless USF averages and to start disclosing how many millions of their customers would pay more USF taxes under the industry’s numbers-based approach," KUSFF Coalition Executive Director Maureen Thompson said.

The "By The Numbers" position paper says that their plan exempts recipients of the USFs Universal Lifeline fund from paying any USF taxes.

This fight shows no sign of ending soon. The FCCs June 21st rulemaking asks for public comment on a variety of complex USF issues, among them whether the FCC should eliminate its "safe harbor" calculation—the USF taxable percentage of a phone services revenue Commission analysts believe comes from interstate calls—and just let the phone companies estimate that share themselves. It seems that every detail in the USFs operation offers a potential skirmish about the programs future.

More stories:

• Keep USF Fair coalition targets younger consumers with its message
• FCC will tax Internet phone calls for Universal Service Fund
• Universal Service Fund group says FCC "flat tax" proposal would cost higher education billions
• FCC charges that telecom firm ducked Universal Service Fund payments and fines it over $700,000