Martin Signals No Cable USF Contributions

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Washington -- Federal Communications Commission member Kevin Martin signaled
Wednesday that he would oppose requiring cable operators to contribute to the
fund designed to keep local phone service affordable.

Martin, a Republican appointed by President Bush, will play a pivotal role in
coming weeks in deciding the regulatory classification of cable
operator-provided Internet access.

A possible outcome at the FCC is that cable operators might be required to
contribute a portion of their Internet-access revenue to the universal-service
fund, a complicated subsidy program that transfers billions of dollars within
and among telecommunications firms to keep phone rates low in rural and
high-cost areas.

Martin, speaking at a technology forum here staged by International Data
Group Inc.'s COMNET, said he would be reluctant to see cable migrated into the
universal-service contribution pool.

'I have been very hesitant to apply those kinds of legacy regulations onto
the cable industry,' he said. 'I think expanding those obligations into the
cable industry might not be the best outcome.'

The FCC is expected by many in the cable industry and elsewhere to classify
cable Internet as an information service.

The agency does not regulate information-service providers and does not
require them to contribute to universal service, even when an
information-service provider, like cable, owns its transmission facilities.

In a 1998 report to Congress, the FCC said it may be appropriate to
reconsider whether information-service providers that self-provision
transmission facilities should remain exempt from universal service, particular
if the information-service provider offers services that bear the
characteristics of telecommunications services, such as Internet-protocol
telephony.

In his comments, Martin did not disclose whether cable's exposure to making
universal-service contributions was a real option under debate at the FCC.

Instead, he stressed that requiring cable to contribute to universal service
to establish regulatory parity with phone companies failed to take into account
that cable pays local franchise fees other companies do not pay.

'Yes, it's true that telephone companies have to contribute to universal
service on some services and others might not,' Martin said. 'But there are also
different regulations that apply for [cable] at the local level. For example,
they might have local franchise fees.'

The FCC, he added, had to be careful about requiring universal-service
contributions from cable because such a move might deter investment in
broadband.

Although under current FCC rules, cable does not pay universal-service fees,
cable operators are eligible to receive universal funding under the FCC program
that provides subsidized Internet access to school classrooms and
libraries.

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