Update: Intercarrier comp, USF reform vote pushed to December

Though the Federal Communications Commission had scheduled a vote for next Tuesday on broad changes in intercarrier compensation and universal service fund (USF) policies, the prospects for passage of those major new initiatives — still unseen by the public — is diminishing as opposition grows. [Updated below]

In a note today, Stifel Nicolaus analysts wrote that they considered it unlikely that the FCC would enact comprehensive reform of intercarrier comp and USF “in the face of strong resistance, with so much still to sort out and so little time.”

“FCC officials appear to be struggling with the dizzying array of complicated legal, policy and business issues and implications, which appears to increase the risk of potential unintended consequences,” the analysts wrote.

In quarterly earnings calls in recent days, carrier CEOs had repeatedly said they hadn’t seen details of the complete proposal yet, and a growing number of US Senators and Congressmen as well as industry and consumer associations and state regulators have urged the FCC to postpone the vote until the proposal can be debated more thoroughly in public.

The current proposal, spearheaded by Chairman Kevin Martin, has been backed by Bell carriers and some rural local exchange carriers (it is rumored to include some RLEC concessions, such as more favorable USF rules and relief from “phantom traffic”), and that support “has generated momentum,” Stifel Nicolaus analysts wrote, adding, “There appears to be a serious chance the full commission could push the reform process forward on Nov. 4.”

However, any reform passed next week is likely to be limited, they wrote.

“Our sense is that even if the commission adopts substantive reforms next Tuesday, it’s likely to narrow the scope of the order by seeking further review of some thorny disputes, and to soften the impact by diluting at least some targeted industry pain in order to lower the chance of a backlash (with access cuts not to take place before July 1, 2009 or maybe Jan. 1, 2010),” they wrote. “The details, of course, would be key.”

[Update: In a note late today, Stifel Nicolaus analysts said next week’s vote is apparently being postponed to next month by 4 FCC commissioners, but Chairman Martin, who has been pushing the reform package, reportedly has not yet agreed to this move. If the policy overhaul is delayed, it would be a blow to the Bell companies that support it as well as to Martin, and it would give the proposal’s many opponents more time to weigh in on the policy changes suggested.]

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