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FCC Fees for Smart Grid

U.S. Capitol Building

AS IF IMPLEMENTING smart grid technology didn't have enough obstacles, the Federal Communications Commission recently raised another potential hurdle when it posed the question of whether it should charge a fee - say $1 a month per smart meter - for smart grid use of the broadband spectrum.

The question came as part of the FCC's effort to revamp the method of determining contributions to its Universal Service Fund (USF), set up by the Telecommunications Act of 1996 so that the agency can ensure that essential telecom services are available nationwide.

Electrical utilities, not surprisingly, immediately rejected the notion.

"Targeting smart grids with a new contribution obligation would run contrary to the public interest by unnecessarily increasing associated costs and delaying their deployment, which could lead some utilities to refrain from deploying them altogether," lawyers for Edison Electric Institute, the industry lobby, wrote in a filing on the proposal.

In addition to this practical objection, the Edison Electric Institute marshaled a range of legal and jurisdictional arguments against the measure.

For starters, the group said, the machine-to-machine transmissions of smart meters in a smart grid do not fit the definition of telecommunications or telecommunication services.

Moreover, smart grid technologies do not transmit any information to customers as "end users," the criterion used by the Commission in its proposed rules for determining being assessable.

Likewise, because utilities do not charge consumers a fee specifically for use of smart grid technologies, the transmissions don't qualify as telecommunications services. To the extent utilities use third-party carriers for the transmissions, it is those carriers that would be the appropriate targets for a USF fee.

For these reasons, the industry group argues, the FCC has no jurisdiction over such machine-to-machine transmissions. In any case, most smart grid technologies don't involve interstate transmissions and so would come under the jurisdiction of state regulators rather than the federal agency.

On top of everything else, the EEI argues, the imposition of such a fee on utilities, which would have to be passed on to consumers in one form or another, "would create a regulatory and administrative morass," triggering hundreds or even thousands of new rate-making proceedings around the country.

The National Rural Electric Cooperative Association also weighed in with objections similar to those from the EEI. "The administrative burden that would be placed on rural electric cooperatives ... far outweighs the minimal potential contribution benefits to the system," NRECA says in its filing.

The problem for the FCC arises from the rapid evolution in the number of players in telecommunications and the variety of services they offer. The agency's universal service contribution system has not kept pace with these changes in "the communications ecosystem," the FCC wrote in its notice of proposed rulemaking.

This means that some providers subject to the levy are competing in the same markets as other providers that currently don't pay, creating a competitive disadvantage. It also means the base for contributions to the USF is shrinking as consumers migrate to these other providers and services.

In the notice, the agency is exploring the possibility of extending the number of services and companies subject to the contributions and the modalities for making the contributions.

Currently, it is primarily the big telecom carriers that contribute and their contributions are a flat percentage of revenue. The question is which other service providers should contribute and whether contributions should be made on a per-device or per-connection basis instead of revenue.

And that's how we get around to the possibility of charging $1 a month per smart meter, following the FCC's tentative suggestion for a monthly charge for residential and mobile wireless connections.

The FCC must now digest the various comments and decide whether to issue an order. The telecom companies directly affected generally prefer an improved revenue model rather than a per-connection fee, which might make the whole smart meter issue moot.

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