Washington, D.C., June 17, 2003 -- Low-volume, poor, older and rural consumers who depend on "lifeline" phone services will have the most to lose if the Federal Communications Commission (FCC) adopts a connections-based fee on telephone subscribers for universal service, according to six experts, including representatives of the Consumer Federation of America and AARP.

The consumer advocates and other experts presented their views in a new report released today by the New Millennium Research Council (NMRC). The report Consumer Perspectives on Universal Service: Do Americans Lose Under a Connection-Based Approach? supports the notion that the current revenue-based contribution methodology for the Universal Service Fund (USF) is the fairest approach for both carriers and on consumers.

The new report investigates whether three proposals now under consideration at the FCC for flat fee connections-based assessment models to finance universal service are a workable solution to maintain and sustain the federal Universal Service Fund created by the Telecommunications Act of 1996.

During a related news event today, three authors contributing to the report spoke about the unintended consequences and problems with adopting a connections-based USF funding mechanism. These include the harm to low-volume, poor, older and rural American consumers, the shifting of costs from one group of carriers to other groups of carriers, and the difficulty of basing contributions on connections.

"Under some of the proposed funding mechanisms, these low-volume long distance service callers would be required to pay the bulk of the funding for Universal Service," said Jeffrey Kramer, Senior Legislative Representative for AARP. "A per-line charge would be harmful to the very population the fund seeks to help and should not be adopted."

"Counting each dial-up connection, wireless connection, and high speed Internet connection, as well as larger trunk lines for businesses is not as simple as it sounds," said Mark Cooper, research director for the Consumer Federation of America (CFA). "Since the distinction between local and long distance has been blurred by technology and business practices, consumer advocates argue that all services should be included in the USF pool."

NMRC Advisory Board Member Allen Hepner said: "This study comes at an important time in the debate. The FCC is wrestling right now with a number of difficult issues, including how to sustain USF while trying to implement competitive policies."

"The FCC's reasons for seeking to replace the current scheme are not compelling and appear to have little merit," says Larry Darby, president of Larry Darby Associates. "It is possible to 'mend' current deficiencies in the revenue-based scheme well short of simply abandoning it in favor of another scheme - connections - which may be even more fundamentally flawed."

ABOUT THE REPORT AUTHORS

James A. Bachtell is staff attorney with the Institute for Public Representation, a public interest law firm and clinical education program founded by Georgetown University Law Center in 1971. He received his J.D. in December 2001 from the University of Iowa College of Law, graduating with distinction. Mr. Bachtell also holds an M.S. and a B.S. in Journalism and Mass Communication from Iowa State University. While a law student, he was a student intern in the Legal Clinic and a member of the Law Review. He clerked during the summer of 2001 for Foulston & Siefkin, L.L.P. in Wichita, Kansas. After graduation, Mr. Bachtell worked at the Law, Health Policy and Disability Center in Iowa City, Iowa. Prior to attending law school, he was a Reporter and then Managing Editor for the Boone News-Republican, in Boone, Iowa.

Matthew D. Bennett is policy director of the Alliance for Public Technology (APT), a non-profit membership organization concerned with fostering access to affordable and useable information services and technologies to all people. He educates and advocates for policies that expedite the deployment of advanced telecommunications services to all sectors of society, working with and establishing coalitions to spur involvement in telecommunications issues. Before joining APT, Mr. Bennett served as Senior Associate for Communications and Government Relations at the Alliance for Community Media.

Mark Cooper is director of research at the Consumer Federation of America where he has responsibility for energy, telecommunications, and economic policy analysis. Dr. Cooper has published numerous articles on telecommunications and the media in trade and scholarly journals including recent law review articles on digital society issues. Dr. Cooper is also Director of the Digital Society Project, a Ford Foundation-funded effort to analyze and explain the impact of ongoing technological changes in American society to consumer, low income, and civil rights activists and organizations. He holds a Ph.D. from Yale University and is a former Yale University and Fulbright Fellow. During 2002-2003, Dr. Cooper is a Fellow at the Stanford Law School Center for Internet and Society and an Associated Fellow at the Columbia University Institute on Tele-Information.

Larry F. Darby is president of Darby Associates, a research firm based in Washington, D.C. He focuses on issues of information technology, telecommunications, and industrial organization. Dr. Darby concentrates on policy implications of developments in broadcasting, cable TV, telephony, trade and technology, and common carrier regulation. He has also served as senior economist in the White House Office of Telecommunications Policy and as chief economist and chief of the FCC's Common Carrier Bureau. Dr. Darby received a Ph.D. in economics from Indiana University.

Jeffrey Kramer is senior legislative representative in the Federal Affairs Department of AARP. He represents AARP on utility, telecommunications, death care, and consumer fraud issues. Prior to joining AARP in 1997, Mr. Kramer was the Manager of Political Affairs at the Edison Electric Institute for nine years. At EEI he represented the electric utility industry on Capitol Hill and within the Executive Branch. A native of Brooklyn, New York, Mr. Kramer received his B.A. in American Government from the University of Virginia and his J.D. from George Mason University. He is a member of the Federal Communications Bar Association and was recently reappointed to a second term on the Consumer Advisory Committee at the FCC.

Leroy Watson is director of legislative affairs for the National Grange. His primary areas of government relations expertise are in rural healthcare, rural public safety, rural education, rural telecommunications issues, environmental policies affecting agriculture, and state-level grassroots education and information initiatives. Mr. Watson received a law degree from George Mason University School of Law and a B.A. in Political Science from the University of Vermont in Burlington.

ABOUT NMRC

The New Millennium Research Council (http://www.newmillenniumresearch.org) was created in 1999 to develop workable, real-world solutions to the issues and challenges confronting policy makers, primarily in the fields of telecommunications and high tech. During the last 12 months, the Council has investigated a range of issues related to competition in the telecommunications industry. The NMRC has also sponsored a number of roundtable events in Washington, D.C., and legislative briefings on the subject.

CONTACT: Christine Kraly, for NMRC, (703) 276-3258 (direct line) or ckraly@hastingsgroup.com.

Editor's Note: A streaming audio replay of the news event will be available on the Web as of 7 p.m. EDT on June 17, 2003 at www.newmillenniumresearch.org.