President George W. Bush announced his Fiscal Year budget intentions last week and surprised many with unanticipated proposals at the Department of Agriculture's Rural Utilities Service.

Darren Pittman of NTCA reports that, "On the heals of U.S. Department of Agriculture Secretary Anne Veneman's roll- out of $1.4 billion in funds for the Rural Broadband Access Loan and Loan Guarantee Program [Reported Below], the Bush administration's FY ‘04 budget proposes funding the program through discretionary spending rather than mandatory spending, as required under the Farm Bill."

Also, the President's budget still advocates spending $495 million as in year's past, but changes the line items to include an increase to $145 million from $75 million for hardship loans, while at the same time decreasing cost-of-money loans from $300 million to $250 million. Guaranteed loan (Federal Financing Bank) funding would be cut from $120 million to $100 million.

Congress is still working on the U.S. Department of Agriculture's Fiscal Year 2003 budget, which began on October 1, 2002.

President Bush also proposes zeroing out funding for the Rural Telephone Bank, as the Administration has done in years' past. Mr. Pittman notes that it costs "just over $3 million to operate, yet provides more than $175 million in loans" to telephone borrowers annually.

The Administration has also proposed rescinding telephone and electric loans that are more than 10 years old that have been obligated, but the borrowers have not drawn down. Currently law prohibits the government from rescinding most of those loans, but the Administration has indicated that it will seek legislation to give it the authority.

A number of measures to encourage broadband deployment have been introduced in the United States Senate, while many more bills are expected to be introduced as the new 108th Congress resumes its work.

Montana Senators Conrad Burns (Republican) and Max Baucus (Democrat) have introduced the "Broadband Expensing Act of 2003", which will allow service providers to immediately expense investments in broadband technology, rather than depreciate the investment over time for tax purposes.

The proposed bill would allow 50 percent expensing for current-generation broadband investments in rural and underserved areas, and 100 percent expensing for next- generation broadband investments. Current-generation is defined as at least 1 Mbps downstream, and at least 125 Kbps upstream, while next-generation is defined as at least 22 Mbps downstream, and at least 5 Mbps upstream.

Also, Senators George Allen (R.-Vir.) and Barbra Boxer (D.- Calif.) have introduced the "Jumpstart Broadband Act" which would require the Federal Communications Commission to allocate not less than 255 megahertz of spectrum in the 5 Ghz band for unlicensed use by wireless broadband devices, such as wireless fidelity or Wi-Fi. The legislation, according to the BloostonLaw Telecom Update, would also direct the FCC to establish minimum rules for interference protection and to ensure that incumbent Department of Defense systems operating at 5 Ghz are not compromised.

Qwest Communications, the fourth largest local telephone company in the United States, revised its earnings for 2000 and 2001 once again this week by $357 million. Their total restatements for incorrect bookkeeping are now $2.21 billion.

The company is trying to resolve an investigation by the U.S. Securities and Exchange Commission that is examining the way Qwest booked revenue in 2000 and 2001. Most of the investigation focuses on transactions in which Qwest swapped fiber optic network capacity with rivals such as Global Crossing and other carriers.

Shares of Qwest fell 7 cents to $4.17 on the news. They are down from a high of $66 in March 2000.

The Nebraska court said that Section 253 of the Act, which states that no State or local statute or regulation may prohibit the ability of "any entity" to provide interstate or intrastate telecom service. Nebraska jurists agreed with a recent decision issued by the U.S. Court of Appeals for the Eighth Circuit, which concluded that individual municipalities are encompassed within the term "any entity."

The case arose because the Nebraska Public Service Commission had dismissed the city of Lincoln's application for authority to provide telecommunications services. The city owns and maintains fiber optic facilities throughout the city and uses the network for its own telecom needs.

In late 2000, the city asked for the authority to use its existing facilities to provide telecommunications services to business customers and governmental entities. The Public Service Commission concluded that the city did not have the State authority and nothing in Lincoln's home rule charter gave them the authority to offer the services. In the meantime, the Nebraska legislature passed legislation prohibiting municipalities from providing telecommunications services.

The city of Lincoln appealed and prevailed on the question of whether the PSC had the authority to grant the certificate. However, the Court concurred that the residents of Lincoln must amend their city charter to allow the city to offer the services.

QWEST SPONSORED BILL IN IOWA WOULD DEREGULATE RETAIL RATES

A Qwest spokesman said the bill will even the playing field, noting that the three companies are regulated differently than the other 200 telecom providers operating in Iowa, according to Telecommunications Reports. Under the Legislation, SSB 1002, all providers would be regulated in the same manner.

The Utilities Board is opposing the bill and said that competition has not reached a point where retail rates don't need to be regulated. Under current Iowa law, when competition has reached a certain level, a company can apply to have their rates deregulated. The board said that if Qwest believes its territory has reached the necessary level of competition, then it should go through the process already established.

The legislation also mandates that the access rates charged by local carriers to long distance carriers should not exceed the rate charged as of December 31, 2002. After that date, the charges would decrease by half of a cent every six months until the charge is no more than 4.5 cents per minute. Although the legislation would give the Utilities Board jurisdiction for all access rates, a Utilities Board representative said the bill would stipulate what the access rates would be.

The proposal, which was included in the Farm Bill President Bush signed last May, will allow successful applicants to use loans and loan guarantees to fund construction, improvement or acquisition of facilities to provide broadband, including voice, data, graphics and video. The new guidelines were announced by Agriculture Secretary Ann Veneman, Undersecretary for Rural Development Thomas Dorr and RUS Administrator Hilda Gay Legg.

The program will offer three types of loans: direct cost-of- money loans, 4 percent loans and a private lender guaranteed loan. USDA officials said that for 2003, $1.3 billion will be available for cost-of-money; $80 million for 4 percent direct loans; and, $80 million for loan guarantees.

Significantly, RUS continued its policy of non-competitive lending, but said that a community should not be denied the opportunity to subscribe to a broadband service if the incumbent carrier is not providing that service. According to NTCA, a incumbent not providing broadband service has 90 days from January 30, 2003, the date of publication in the Federal Register, to submit a letter of intent to provide or begin to construct residential broadband service to its service territory.

Once the carrier submits the letter, it has until October 1, 2004, to provide either a submitted loan application or proof that construction of broadband facilities has started.

USDA regulation and application guides can be found at www.usda.gov/rus/telecom/broadband.htm.

Legislation introduced in the Montana legislature seeks to establish criteria for the State's Utilities Commission to use when designating "eligible telecommunications carrier" (ETC) status for the purposes of making a carrier eligible for Universal Service Funding. Under current Federal Communications Commission rules, a ETC designation by a State commission is necessary prior to receiving Federal universal service funds.

Under the proposal, a determination of public interest by the Commission would be required to establish that the public benefits of designating a second ETC for an area exceed the public costs of supporting multiple ETC's.

The carrier seeking ETC status would have to demonstrate that it provides (or will provide): equal access to long- distance providers, service coverage comparable to that of the incumbent telco for the entire service area for which designation is sought, and sufficient network capacity.

Under the proposal, if the Commission gives the ETC designation to a carrier unable to meet the requirements, the Commission would be required to hold a proceeding within one year of the ETC designation to determine whether the carrier had met the minimum requirements. If the carrier had not, the Commission would be required to withdraw the ETC designation.

The action, filed in Federal court in Oklahoma City, alleges that the FTC's rules would abridge telemarketers' freedom of speech rights. The telemarketers said the FTC is discriminating against an industry that provides millions of jobs.

Conversely, consumers have sent more than 50,000 letters, according to BloostonLaw, to the FTC in support of the "Do Not Call" registry, under which telemarketers who call consumers who sign up for the list could be fined up to $11,000 for each call.

The FTC's program exempts callers for charities and political groups.

The group delivers messages for approximately 250,000 customers, according to TR's State Newswire.

The group's new executive director, Trevor Hughes, said, "These e-mail service providers know that a stronger voice representing legitimate e-mail senders is needed as policies, technologies, and practices are created that will impact what consumers do and don't get in their inboxes."

Ann Zornosa, president of a commercial e-mail provider said, "Over the next year, State legislatures will consider laws that will impact e-mail, Congress will design and consider bills, and Internet Service Providers will implement new policies and filter technologies to limit spam. E-mail service providers need to be part of these considerations to make sure that the desires of their customers and their customers' subscribers are represented."

The page may be reached by "clicking" on the "File Comments" logo on the FCC homepage www.fcc.gov.

Senator Corzine introduced similar legislation last year. The legislation faced heavy opposition in the 107th Congress from many of the wireless carriers and from the States.

The Corzine bill (S. 179) includes exemptions for drivers making calls during emergencies and gives States the latitude to permit some calls using hands-free devices.

A new study released late last month by a London-based study group, Informa Media Group, said that authors' collection societies collected $71 million in royalties from ring-tone sales in 2002, up 58 percent from the previous year. Informa further said the royalties figure--which is typically 10 to 15 percent of the total sales from ring tones-- would suggest that the overall market is over $700 million annually, and quite possibly as high as $1 billion, according to a Reuters article.

The proceeds are divided between operators, record labels and musical artists.

The industry has waged a high-profile war against what they refer to as "online piracy" by consumers downloading songs without permission. Recorded music sales have fallen for two straight years and experts believe there will be another drop this year.

While critics blame the music industry for failing to meet consumer demand for downloading songs onto portable devices or a PC's hard drive, ring-tones have been an entirely different story, according to the Reuters article. The ring-
tones started off as a promotional gimmick, with record labels offering up decidedly low-fidelity renditions of new singles to web sites and mobile phone operators as a way to keep new music in front of fans. The popularity has skyrocketed.

Informa said download costs vary widely by country. For example, Russia's largest mobile phone operator, MTS, charges 30 cents per download, while Vodafone in Australia charges $1.83 per download.

February 1st brought 11 digit dialing for the residents of New York City, regardless of the length of the call. Now, telephone calls across the street or the apartment next door will require a caller to dial the "1" and the area code before the call can be completed.

If callers do not dial the area code, they will hear a recorded message asking them to hang up and dial again, using the area code.

Verizon, the local telephone company, has taken out advertisements in newspapers, put up billboards and sent notices to customers in the hopes of helping people avoid the chaos everyone expected as the new rules are implemented. A Verizon spokesman noted the magnitude of the task for consumers who must reprogram speed dialing lists, FAX lists, dial-up modems and call forwarding numbers.

The 11 digit dialing format was required by the Federal Communications Commission (FCC) in order to facilitate competition in the local market, according to the New York Times. The FCC required cities with overlaid area codes to use the area code when dialing local numbers. Although the New York Public Service Commission and the Consumer Federation of America both asked the agency for a waiver of the rule it was denied. Both organizations appealed, but the FCC prevailed in a 2001 ruling.

Millions of short text messages sent between mobile phones in the United States are lost every month and the chance of two parties connecting depends on which networks they use, a recent study shows.

Internet performance measurement company Keynote Systems, Inc. said that 7.5 percent of all short text messages sent between wireless telephone companies are lost.

The popular service known as SMS (Short Message Service) allows mobile phone users to send brief messages instantaneously to other users. It typically costs 10 cents to send a message and pennies to nothing to receive one, according to Reuters News.

The wireless trade association, Cellular Telecommunications & Internet Association estimates that nearly one billion messages were exchanged during the month of June 2002, the latest month in which usage was available. A lost- message rate of 7.5 percent would indicate that tens of millions of messages never reached their destinations.

Keynote, the author of the study, said that AT&T Wireless had the highest success rate in sending and receiving messages. It was the top performer in terms of messages sent to users on other networks as well as messages sent within its network at 95.5 percent and 97.8 percent, respectively. T- Mobile USA, the sixth-largest wireless operator, was one of the worst performers, according to Reuters. Only 86 percent of messages sent from a T-Mobile phone to a user on another network and 87 percent of messages sent to another T- Mobile phone were successfully received.

Keynote said it test-sent nearly 26,000 messages in cities around the country over a period of two weeks in December as part of the study.

AT&T had earlier said that it would be cutting the jobs, but had not revealed the number, which represents nearly 5 percent of the company's workforce. Slightly more than half of the employees affected are in management, the company said, and most of the cuts will happen in the first half of this year through a combination of layoffs and voluntary measures.

The proposal, House Bill 506, reads that "whenever a landowner in the State of Mississippi enters into an agreement with another party granting that a party a lease upon the landowner's real property for the purpose of constructing a communications tower, the landowner shall be entitled to an amount equal to 10 percent of the value of any subleases on the subject property subsequently entered into by the leaseholder."

The Association said the rural USF principals are: 1)Rural consumers should have affordable telecommunications services, comparable in quality and price to urban areas; 2)Funding should be sufficient to provide for critical infrastructure in rural areas; 3)The Universal Service Fund is a scarce national resource. Therefore, supporting multiple carriers is in the public interest only when benefits exceed costs; 4)The Universal Service Fund should not be used to create uneconomic competition; 5)All carriers receiving Universal Service Fund support should be held to the same service obligations and regulatory standards; and 6)Funding should come from the broadest base of providers and services.

OPASTCO reports that the Federal Universal Service Fund (USF) has nearly quadrupled in size since 1996, with funding for all programs estimated at $6.3 billion this year. In addition, the high-cost support going to wireless competitive Eligible Telecommunications Carriers (ETC) has grown from less than $500,000 in 1999, to a projected $100 million in 2003. The white paper estimates that if all wireless providers nationwide were granted ETC status that the annual funding level of the USF would grow by approximately $2 billion

The White Paper can be downloaded at www.opastco.org.

Industry analysts said investors were buoyed by Chief Executive John Stanton's belief that the company was qualified to receive about $32 million a year in universal service funding. The universal service money is designed to offset the cost of service for rural telephone providers, which operate in high-cost areas, according to Reuters news service.

Western Wireless suffered last year as it struggled to recover from a subscriber loss, declining average revenue per user and a rise in acquisition costs in the first quarter. The Bellevue, Washington-based company's stock has recovered more than five-fold since reaching a low of $1.23 in August of 2002.

The South Dakota Telecommunications Association (SDTA) has asked the Universal Service Administrative Company (USAC) to investigate the numbers that Western Wireless has submitted for Universal Service Fund reimbursement on the Pine Ridge Indian Reservation.

Western Wireless, which does business in South Dakota, North Dakota and 17 other western States, has certified that it is serving 30,108 "working loops" in the Pine Ridge study area. The South Dakota independent telephone industry has cited the 2000 U.S. Census in its complaint, which reports that there is only a population of 14,068 individuals living within the study area and 3,922 housing units.

In South Dakota, the Public Utilities Commission declined to certify that Western Wireless would use USF monies for its intended purposes and refused to provide "eligible telecommunications carrier" (ETC) status for the company. The Federal Communications Commission (FCC) intervened and assumed jurisdiction for the Indian Reservation, but not for the remainder of the State.

AT&T said it will begin charging its interLATA customers an extra $1.95 per month beginning in March to cover what the company says are unreasonable access rates charged by incumbent carriers.

AT&T said that, on average, it is paying 6 cents a minute in access charges for toll calls made instate, but it is only paying about 1.5 cents a minute for interstate calls. Although AT&T admitted that it did not know what it cost Verizon, the local telephone company, to carry the calls, but it is sure that it is too much.

The long distance carrier currently has a case pending before the Pennsylvania Public Utility Commission seeking to lower the access fees charged by Verizon.

Wireless subscribers pay 37 cents per month to fund the Federally-mandated upgrades to emergency public safety answering points (PSAP). The Arizona fund raises $19.5 million a year.

In a special session last fall legislators swept $5 million from the fund during a special session and have recommended taking an additional $10 million over the next two years.

Touch America, the former Montana electric company which remade itself into a nationwide telecommunications provider, announced that it will sell its 70,000 long distance voice customers to Buyers United, a Salt Lake City telecom company. The agreement requires an initial payment of $3 million and additional payments over time of approximately $3.75 million.

Touch America said in the announcement that it would notify regulators and its remaining switched long distance voice customers that it intends to withdraw from the switched long distance business. The company will remain in the dedicated long distance voice business and continue to offer bundled data, video and voice transport and Internet services.

MASSACHUSETTS PROPOSAL WOULD REQUIRE WIRELESS TO REGISTER

Under the proposal, wireless companies would be subject to a rating from the State that describes how consistently customers will be able to place calls in certain areas. Carriers that fail to provide coverage information could be subject to a fine of up to $1,000 per violation, and they would be required to note their violations in any advertising campaign within the State.

JOE LAMB PASSES AWAY

Mr. Lamb will be missed by his many friends and colleagues in the telephone industry. He leaves behind five children.

The funeral will be held at 10:30 a.m. on July 5, 2003 at St. Lawrence O'Toole Catholic Church in Michigan.

CONDOLENCES

Harold and his family lived in Faulkton, South Dakota, where they owned and operated the Western Telephone Company. Harold grew up in Enderlin and graduated from the University of North Dakota.

Ray Brown's family owns and operates Moore and Liberty Telephone Company in Enderlin and the Griggs County Telephone Company in Cooperstown, North Dakota.

CONDOLENCES

Jim had served as manager of Halstad Telephone Company in Minnesota from 1978 to 1993 and at Sully Buttes Telephone company in Highmore, S. Dak. for 15 years.

Jeff, a longtime employee of Red River Rural Telephone Company in Abercrombie, North Dakota, was appointed General Manager of the company effective January 1, 2003.

DATES TO REMEMBER

Feb. 24-27:
Telephone AT&S Conference
RamkotaHotel
Bismarck, ND

Mar. 2-4:
NTCA Manager's Forum
Santa Monica, CA

March 10: NDATC Board Meeting
Statewide Boardroom
Mandan, N.D.

Mar. 23-26:
Minnesota Telephone Assoc.
Annual Meeting
Minneapolis, Minn.

Mar. 26-28:
NTCA Legislative Conference
Washington, DC

April 1-2:
NDTA Annual Meeting
Ramkota Hotel
Bismarck, N.D.

April 16:
NDATC Board Meeting
Statewide Boardroom
Mandan, N.D.

May 12-15:
TOC
Holiday Inn
Fargo, N.D.