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Before theFEDERAL COMMUNICATIONS COMMISSION
Washington, DC 20554
In the Matter of
Universal Service Contribution Methodology
A National Broadband Plan For Our Future
)))))
WC Docket No. 06-122
GN Docket No. 09-51
COMMENTS OF ONSTAR, LLC
Teresa HoldererGeneral Counsel
Harry M. Lightsey IIIDirector – Public Policy
Thomas JeffersSenior Manager – Public Policy
OnStar Corporation400 Renaissance CenterDetroit, MI 48265
July 6, 2012
Ari Q. FitzgeraldChristopher J. Termini
Hogan Lovells US LLP555 Thirteenth Street, NWWashington, DC 20004Tel: (202) 637-5423Fax: (202) 637-5910
Counsel to OnStar, LLC
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TABLE OF CONTENTS
I. INTRODUCTION .................................................................................................................... 1
II. BACKGROUND ...................................................................................................................... 2
III. THE FCC SHOULD NOT ADOPT AN INEQUITABLE USF CONTRIBUTIONSYSTEM THAT ASSESSES PROVIDERS BASED ON ASSIGNED TELEPHONENUMBERS OR NETWORK CONNECTIONS....................................................................... 6
A. A Per-Number or Per-Connection USF Contribution Methodology WouldBe Inequitably Harmful to Providers of In-Vehicle Connectivity Services. .......... 7
B. A Per-Number or Per-Connection USF Assessment Methodology WouldStifle the Growth of In-Vehicle Connectivity Services and UnderminePublic Safety By Discouraging Consumer Adoption.............................................. 8
1. Telematics is a Developing Connectivity Product That PromotesPublic Safety in Unprecedented Ways...........................................................8
2. Consumers Are Highly Sensitive to the Cost of In-VehicleConnectivity Services...................................................................................13
C. A Per-Number or Per-Connection USF Assessment Methodology WouldCreate Logistical Difficulties for OnStar’s In-Vehicle ConnectivityServices. ................................................................................................................ 14
D. A USF Contribution Method that Requires Telematics and Hands-FreeCalling Providers to Pay More in USF Contributions Than the ServicesGenerate in Interstate Telecommunications Revenues Would ViolateSection 254(d). ...................................................................................................... 16
E. A Revised USF Contribution Method That Unduly Harms In-VehicleConnectivity Providers Is Especially Problematic Because TelematicsService is Not Responsible for the Strain on the Current USF ContributionSystem. .................................................................................................................. 18
IV. THE COMMISSION SHOULD REFORM THE USF CONTRIBUTION REGIME INA MANNER THAT PROMOTES THE PUBLIC SAFETY NATURE OFTELEMATICS SERVICE. ..................................................................................................... 19
A. The FCC Should Exempt Wireless Carriers From USF ContributionsRelating to Telematics Services Because of the Important Public SafetyFunction They Provide.......................................................................................... 20
B. The FCC Should Exclude Machine-to-Machine Connectivity Services FromAny USF Contribution Regime............................................................................. 20
C. Absent Exclusions, the FCC Should Retain the Revenue-BasedContribution Regime or Adopt Equitable Treatment Exceptions forAssessing USF Contributions for Telematics and Hands-Free CallingServices. ................................................................................................................ 23
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D. The FCC Should Not Modify the Existing USF Contribution MethodologyIn Any Way That Would Require Providers of Telematics Service toContribute Directly to the USF. ............................................................................ 26
1. The FCC Should Not Assess Revenues on a “Value-Added” Basis............26
2. The Commission Should Not Adopt a Broader DefinitionalApproach to Determine Who Must Contribute to the USF. ........................27
V. CONCLUSION....................................................................................................................... 28
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EXECUTIVE SUMMARY
OnStar is the nation’s leading telematics provider and has provided its life-saving
technologies in motor vehicles for over 16 years. While OnStar agrees with the Commission’s
stated goals for Universal Service Fund (“USF”) contribution reform, the Commission should not
replace the current revenue-based USF contribution regime with a system based on assigned
phone numbers or network connections because such approaches would disproportionately harm
the telematics industry and consumers. They would be particularly harmful to in-vehicle
connectivity providers such as OnStar because of their extremely low telecommunications usage
compared to traditional telecommunication providers. A per-number or per-connection model
would also stifle the growth of the telematics industry and curtail significantly its important public
safety benefits. Indeed, in-vehicle connectivity is a developing product that promotes public
safety in unprecedented ways, and should not be unduly burdened by an inappropriate and
prejudicial USF contribution system.
A per-number or per-connection USF assessment methodology would additionally create
logistical difficulties for OnStar because in many cases OnStar would have no practical way to
recoup monthly USF fees from its users. Additionally, a per-number or per-connection approach
would violate Section 254(d) of the Communications Act because it would require telematics and
hands-free calling providers to pay more in USF contributions than the services generate in
interstate telecommunications revenues. Finally, imposing such a methodology upon in-vehicle
connectivity providers would be particularly unfair and misguided because such providers are not
responsible for the strain on the current USF contribution system.
Rather than stifling the development of telematics services by adopting a more onerous
USF contribution regime, the Commission should exempt telematics services from any USF
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contribution obligations because of the essential public safety function they serve. The fact that
telematics providers design their service primarily for public safety purposes distinguishes them
from almost all other contributors to the USF. At a minimum, machine-to-machine connections,
which are part and parcel of in-vehicle connectivity services, should be excluded from any USF
contribution regime for at least two reasons. First, there is no legal basis under the
Communications Act to assess machine-to-machine connections. Second, by excluding machine-
to-machine connections, the Commission can further promote the transformative societal benefits
afforded by machine-to-machine connections employed in telematics systems. Absent exclusions,
the FCC should at least retain the revenue-based contribution regime or adopt equitable treatment
exceptions for assessing USF contributions on telematics and hands-free calling services, such as
those offered by OnStar. Moreover, the FCC should refrain from modifying the existing USF
contribution methodology in any way that would require providers of telematics to contribute
directly to the USF. Finally, the Commission should not assess revenues on a “value-added”
basis, or adopt a broader definitional approach to determine who must contribute to the USF, as
both approaches would unfairly penalize telematics providers such as OnStar.
OnStar urges the Commission to take the foregoing considerations into account in this
proceeding, and to take adequate measures to ensure that any USF reform will also encourage the
development and proliferation of telematics and other in-vehicle connectivity services. Doing so
will not only promote public safety, but also facilitate the development of new and innovative
technologies that enhance the utility of the nation’s limited spectrum supply.
Before theFEDERAL COMMUNICATIONS COMMISSION
Washington, DC 20554
In the Matter of
Universal Service Contribution Methodology
A National Broadband Plan For Our Future
)))))
WC Docket No. 06-122
GN Docket No. 09-51
COMMENTS OF ONSTAR, LLC
I. INTRODUCTION
OnStar, LLC (“OnStar”), by and through its attorneys, submits these comments in response
to the Further Notice of Proposed Rulemaking (“Further Notice”) issued by the Federal
Communications Commission (“FCC” or “Commission”) in the above captioned proceeding.1
The Commission has sought comment on a number of proposed reforms to the Universal Service
Fund (“USF”) relating to how contributions should be assessed and recovered. OnStar supports
the Commission’s efforts to update the USF regime to more effectively capitalize on the
emergence of modern broadband networks and “the economic growth, jobs and opportunities they
provide, to all Americans.”2 However, the Commission should not replace the current revenue-
based USF contribution regime with a system based on assigned phone numbers or network
connections. Doing so would not only thwart the natural development of telematics and in-vehicle
connectivity services, but would be inconsistent with previously espoused Commission policies
1Universal Service Contribution Methodology, WC Docket No. 06-122; A National Broadband Plan for
Our Future, GN Docket No. 09051, Further Notice of Proposed Rulemaking, FCC 12-46 (rel. Apr. 30,2012) (“Further Notice”). The FCC’s Wireline Competition Bureau issued a public notice announcing thedeadlines for comments and reply comments in this proceeding on June 7, 2012. See Wireline CompetitionBureau Announces Deadlines for Comments on Universal Service Contribution Methodology FurtherNotice of Proposed Rulemaking, WC Docket No. 06-122, GN Docket No. 09-51, Public Notice, DA 12-905 (rel. June 7, 2012).2 Further Notice ¶ 1.
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and contrary to existing law. Instead, the Commission should exempt in-vehicle connectivity
services and machine-to-machine connections from USF contribution requirements, or adopt an
equitable compensation method applicable to such services. If the Commission does not do so, it
should at least retain the telecommunications revenue-based contribution approach for such
services, or adopt other exceptions to ensure that the USF contribution regime adequately takes
into account the minimal amount of network capacity that in-vehicle connectivity services actually
use. Finally, the Commission should avoid modifications to the USF contributions regime that
require telematics providers to make direct USF contributions to USAC. In this regard, OnStar
urges the Commission to refrain from assessing revenues on a “value added” basis or through a
broader definitional approach that fails to identify the specific interstate telecommunications
services that are subject to assessment.
II. BACKGROUND
OnStar, a wholly owned subsidiary of General Motors Company (“GM”), is the world’s
largest telematics provider, serving approximately 6 million subscribers in the U.S., Canada, and
China.3 OnStar’s connectivity services are available in all of GM’s U.S. 2012 model year
vehicles, as well as for installation in many other vehicles through the OnStar “For My Vehicle”
product.4 These services fall into two general categories: (1) core non-telecommunications safety
and security services, which include automatic crash response (“ACR”), stolen vehicle assistance,
3As noted in the Further Notice, telematics “is a service that is provided through a transceiver, which is
usually built into a vehicle . . . that provides public safety information to public safety answering points(PSAPs) using global positioning satellite data to provide location information regarding accidents, airbagdeployments, and other emergencies in real time. Further Notice ¶ 315 n.510 (citing Letter from David L.Sieradzki, Counsel for OnStar, to Marlene H. Dortch, Secretary, FCC, CC Docket No. 96-45, Attachmentat 1 (filed Mar. 2, 2006); Revision of the Commission’s Rules to Ensure Compatibility with Enhanced 911Emergency Systems, CC Docket No. 94-102, Order, 18 FCC Rcd 21531, 21531-33 ¶¶ 2, 8 (2003)).4 See Navigation System | Auto Security | Emergency Services | OnStar FMV, athttps://www.onstar.com/web/fmv/home.
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remote door unlock, remote vehicle diagnostics, and turn-by-turn navigation, among other services
(herein referred to as “Telematics Services”); and (2) optional prepaid hands-free wireless calling
that is accomplished through the use of voice recognition software (“Hands-Free Calling
Service”).5 As the FCC has recognized, these two service categories are wholly distinct.6 They
are not bundled, and subscribers do not need to purchase pre-paid Hands-Free Calling minutes to
utilize the core OnStar non-telecommunications services. The majority of OnStar’s service
revenues—approximately 90 percent—are derived from the provision of Telematics Services,
while the balance—approximately 10 percent—are derived from the Hands-Free Calling Service.
As noted, OnStar currently offers its Telematics Service subscribers optional prepaid
Hands-Free Calling Service minutes. OnStar’s subscribers pay in advance for the service,
generally in packages of minutes. OnStar does not use a centralized system to track these minutes;
rather, the vehicle’s telematics unit automatically deducts the minutes when used by the
subscriber. Once the minutes are fully used, the telematics unit does not allow the subscriber to
send or receive additional calls using the Hands-Free Calling Service until the subscriber
purchases additional pre-paid minutes. As a practical matter, this means that OnStar has no real
time method to account for the minutes used by its subscribers. In any event, most subscribers use
very little or no minutes in a given month, since the Hands-Free Calling Service is primarily used
when a normal cell phone cannot receive a wireless signal, but where the OnStar unit can because
of its externally mounted power antenna.
5 Ex Parte Letter from Thomas Jeffers, Vice President for Public Policy, OnStar, to Marlene Dortch,Secretary, FCC, WC Docket No. 06-122, CC Docket No. 96-45 (Nov. 18, 2010) (“Nov. 2010 OnStarLetter”). Telematics Service subscribers can only interface with the OnStar call centers, and cannotdirectly access the Public Switched Telephone Network (“PSTN”). Hands-Free Calling Service subscriberscan directly access the PSTN.6 See Revision of the Commission’s Rules to Ensure Compatibility with Enhanced 911 Emergency CallingSystems, Order, 18 FCC Rcd 21531 ¶¶ 17-18 (2003).
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OnStar’s core-Telematics Services are focused primarily upon public safety and security.
These services, unlike the Hands-Free Calling Service, cannot be used by the subscriber to
originate or receive calls over the PSTN. Rather, OnStar’s Telematics Services automatically
detect vehicle crashes, airbag deployments, and emergency calls sent by its users, and provide
hands-free directions and navigation. OnStar then uses GPS location technology to communicate
specific information regarding the vehicle’s location and, if necessary, the nature of the emergency
to an OnStar call center. The call center, which is available 24 hours a day, 365 days a year, then
provides the specific information to the public safety answering point, if appropriate, or to the
vehicle (e.g., directions). The call center’s advisors are specially trained to handle emergency
situations. Telematics service is the only available technology that electronically and verbally
transmits precise emergency location data and detailed crash information to public safety
answering points throughout the United States.7
Passenger and public safety are central to OnStar’s connectivity products.8 Indeed, over
the past 16 years, OnStar has provided vital safety-related assistance in more than 191,000 crash
incidents.9 OnStar also has facilitated delivery of emergency services to over 1 million customers
and provided over 2.9 million roadside assistance responses.10
To provide its in-vehicle connectivity services, OnStar purchases mobile wireless airtime
from facilities-based wireless providers. However, telecommunications service only constitutes a
7OnStar has also recently developed Injury Severity Prediction (“ISP”) services for its subscribers. In the
event of an accident, ISP-equipped vehicles will be able to predict whether the vehicle occupants have ahigh probability of injury. Armed with this information, first responders can then decide whether torespond to the accident with red lights and sirens when traveling to the accident scene, transport the injuredparty to a Level-One Trauma Center, or place an emergency medical helicopter on standby.8
See infra Section III.B.1.9
See Press Release, OnStar, OnStar Makes 439 Million Connections . . . and Counting (Apr. 18, 2012), athttp://media.gm.com/media/us/en/onstar/news.detail.html/content/Pages/news/us/en/2012/Apr/0418_onstar.html10
Id.
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small portion of the total value that OnStar customers receive from the connectivity services.
Most of the value is derived from the services and data that the Telematics Service can provide to
the OnStar call centers (in many cases through machine-to-machine connections), the location-
based information and detailed crash information made available to first responders, and the peace
of mind that consumers gain in knowing that remote assistance will be available quickly and easily
in the event of an emergency or roadside incident. For the Telematics Services, the principle
“telecommunications” transaction that occurs is between the OnStar call center and the vehicle.
Although each vehicle equipped with OnStar service is assigned a phone number and can establish
a network connection, the actual usage of network capacity and airtime in the provision of
OnStar’s connectivity services is extremely low, compared to traditional post-paid wireless and
landline services. This is the case for both Telematics Services, in which the average subscriber
actually uses approximately 5.5 minutes of airtime per month per phone number, and the Hands-
Free Calling Service, in which less than 8 minutes of airtime are used each month by an OnStar
subscriber on average.11 In both cases, telecommunications is used only episodically and not on a
consistent, regular basis. By way of comparison, subscribers of standard wireless service use an
average of approximately 824 minutes per month, according to the FCC’s most recent figures.12
11OnStar has extensively documented the insubstantial usage of telecommunications service in connection
with its core safety and security services, which are used only in emergencies and other non-routineinstances. See Ex Parte Letter from Ari Q. Fitzgerald, Counsel to OnStar, to Marlene Dortch, Secretary,FCC, CC Docket Nos. 96-45, 98-171, 90-571, 92-237, 99-200, 95-116, and 98-170 (June 14, 2006) (“June14 OnStar Letter”).12
See In the Matter of Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of1993Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless,Including Commercial Mobile Services, WT Docket No. 10-133, Fifteenth Report, FCC 11-103, 23 (rel.June 27, 2011) (“Fifteenth Report”).
6
OnStar has long employed machine-to-machine (“M2M”) technologies and capabilities to
provide its Telematics Services.13 Most of OnStar’s telematics-related data transmissions—such
as those made in connection with monitoring and measuring vehicle-related information to assist
subscribers in maintaining their vehicle’s key operating systems (including the engine, air bags,
emissions system, antilock brake system, and tire pressure, among other systems)—require an
M2M connection, and are not sent or received with any human interaction. Although M2M
connections do not support all telematics capabilities, they comprise an integral part of OnStar’s
Telematics Services. Without the efficiencies afforded by M2M connections, OnStar could not
effectively provide many of its Telematics Services.
OnStar currently makes direct contributions to the USF only with respect to its Hands-Free
Calling Service based on its interstate and international telecommunications revenues derived
from such service.
III. THE FCC SHOULD NOT ADOPT AN INEQUITABLE USF CONTRIBUTIONSYSTEM THAT ASSESSES PROVIDERS BASED ON ASSIGNED TELEPHONENUMBERS OR NETWORK CONNECTIONS.
The Commission should not replace its current telecommunications revenue-based USF
contribution approach with a system based on assigned telephone numbers, connections, or any
combination thereof.14 The harm that would befall telematics providers, such as OnStar, under
any such contribution scheme would significantly inhibit the growth of telematics and the vital
public safety function that telematics provides in motor vehicles. Moreover, such a discriminatory
approach would violate the Communications Act and the underlying purpose of the USF.
13See Carl Weinschenk, The Rise of the Machine-to-Machine Sector, IT Business Edge (Mar. 8, 2010),
available at http://www.itbusinessedge.com/cm/community/features/interviews/blog/the-rise-of-the-machine-to-machine-sector/?cs=39847.14
Further Notice ¶¶ 95-97.
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A. A Per-Number or Per-Connection USF Contribution Methodology Would BeInequitably Harmful to Providers of In-Vehicle Connectivity Services.
A USF contribution model based on assigned numbers or network connections would be
grossly unfair and detrimental to providers of in-vehicle connectivity services like OnStar. Such
inequity would stem from, among other things, the fact that the quantity of airtime and network
capacity used, per phone number and per connection, by end users of those services is extremely
small compared to the average monthly usage by post-paid wireless customers.15 Although each
vehicle equipped with OnStar’s in-vehicle connectivity services is assigned a telephone number
and requires a network connection, approximately 5.5 minutes of airtime per month per phone
number is actually used for Telematics Service, and the average Hands-Free Calling Service
subscriber uses less than 8 minutes of airtime per month. Conversely, the average monthly
minutes used by standard wireless subscribers totals 824 – more than one hundred times the
amount of minutes used by subscribers for OnStar’s Telematics Service or its Hands-Free
Services.16 As a result, a numbers- or connections-based contribution system—which fails to take
into account the actual value, utility, or use that a service derives from the telecommunications
network—would dramatically increase the amount of USF fees that OnStar and other in-vehicle
connectivity service providers would be required to pay. For example, if OnStar were paying 10
cents per minute for wireless airtime, a flat per number or per connection USF surcharge of $1.00
per month would yield more than a 3,100 percent increase in the USF obligation assessed to
OnStar (with like results for similarly situated providers).17 The resulting USF payment under
15See OnStar 2004 Comments at 4; Nov. 2010 OnStar Letter at 2.
16See Fifteenth Report at 23.
17 The arithmetic is as follows: 5.5 minutes per month x $0.10 per minute = $0.55 per month of totalsubscriber telecommunications usage. Using the interstate wireless safe harbor of 37.1 percent, $0.55 permonth x 37.1% = $0.20405 of interstate telecommunications per month. $0.20405 x the currentcontribution rate of 15.7 percent = a current USF contribution payment of $0.0320. A flat contribution rate(continued on next page)
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such an approach would be unsustainable, effectively prohibiting OnStar from providing any
telematics or hands-free calling services at all.
The insurmountable obstacles that would emerge under a numbers- or connections-based
contribution assessment would flout the Commission’s objective of fairness in this proceeding.18
As the Commission has noted, the USF regime “is grounded on the principle that the contributions
system should be fair for contributors.”19 Yet the fundamental characteristics of the in-vehicle
connectivity services, typified by minimal network and airtime usage compared to other wireless
and landline telecommunications services, would render the USF contribution approaches
discussed by the Commission in the Further Notice wholly untenable for telematics providers.
B. A Per-Number or Per-Connection USF Assessment Methodology Would Stiflethe Growth of In-Vehicle Connectivity Services and Undermine Public SafetyBy Discouraging Consumer Adoption.
Although the application of a numbers- or connections-based USF assessment would be
objectionable for any service that consumes a relatively small amount of network capacity or
airtime, it is especially problematic for providers of in-vehicle connectivity services because it
would stifle the growth of such services, particularly as next-generation capabilities are rolled out,
and delay the adoption of telematics services among consumers. Such a result would thwart this
budding technology and ultimately make vehicles less safe.
1. Telematics is a Developing Connectivity Product That Promotes PublicSafety in Unprecedented Ways.
Because telematics involves advanced and evolving technology, it is particularly
susceptible to damage from adverse regulatory actions. OnStar expects substantial market growth
of $1.00 per number or connection would therefore result in more than a 3,100 percent increase over the$0.0320 monthly USF contribution payment interstate telecommunications usage per month that is nowassociated with telematics service.18 Further Notice ¶¶ 24-25.19
Id. ¶ 24.
9
in the U.S. for OEM embedded telematics within the next decade, and a connected vehicle allows
for previously unimaginable public safety capabilities. A numbers- or connections-based
methodology would stifle this growth by significantly increasing OnStar’s or its customer’s costs.
The numbers- and connections-based contribution methodologies proposed in the Further Notice
would undermine the Commission’s consistent support for policies and rules that nurture the
development of new connectivity products and services.20 Likewise, they would be contrary to the
Communications Act, which directs the Commission to take measures to ensure the “development
and rapid deployment of new technologies, products, and services for the benefit of the public.”21
The Commission’s support for the development of new connectivity services should be
even stronger in this case because telematics is a transformative service that offers subscribers
unprecedented access to emergency responders and medical providers (such as paramedics),
thereby dramatically improving public safety. Indeed, the defining function of current telematics
offerings is to enhance and protect the safety of vehicle occupants. This fact distinguishes
telematics providers from almost every other contributor to USF. For example, OnStar’s
Telematics Services provides consumers with the following public safety-related services, in many
cases using M2M connections:
20See, e.g., Fixed and Mobile Services in the Mobile Satellite Service Bands at 1525-1559 MHz and
1626.5 MHz, 1610-1626.5 MHz and 2483.5-2500 MHz, and 2000-2020 MHz and 2180-2200 MHz, Reportand Order, 26 FCC Rcd 5710, 5716 ¶ 13 (2011) (noting that promoting flexible use in the 2 GHz bandwould “promote[] investment in the development of new services and additional innovative technologies”);Amendment of Part 22 of the Commission’s Rules to Benefit the Consumers of Air-GroundTelecommunications Services, Biennial Regulatory Review – Amendment of Parts 1, 22, and 90 of theCommission’s Rules, Order on Reconsideration and Report and Order, 20 FCC Rcd 19663, 19667 ¶ 7(2005) (basing its decision on the conclusion that it will “promote the deployment of emerging broadbandservices”); see also Statement of Ajit Pai, Commissioner, Federal Communications Commission, HearingBefore the United States Senate Committee on Commerce, Science, and Transportation: “Oversight of theFederal Communications Commission,” May 16, 2012 (noting his intent to promote policies that will“develop new products and services” and “remove uncertainty that can deter businesses and investors fromtaking risks”).21
47 U.S.C. § 309(j)(3) (concerning use of competitive bidding for spectrum auctions).
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a. Emergency Services
Automatic Crash Response. Immediately after a collision,onboard technology transmits crash data to OnStar, includingdirection, number of impacts, rollover status, and the maximumvelocity at the time of collision. Upon receipt of suchinformation, a specially trained Emergency Advisor from OnStarcan provide the vehicle occupants with real time assistance. Ifan occupant requests help or cannot respond, OnStar directsemergency responders to the vehicle using the vehicle’s preciseGPS location.
Emergency Services. In the event of an emergency, an OnStarcustomer can contact OnStar’s trained advisors, who areprepared to remain in contact with the customer until emergencyresponders arrive. Additionally, OnStar customers can use thisservice to report roadside emergencies in which they are notdirectly involved.
Crisis Assistance. In the event of a disaster, OnStar subscriberscan access turn-by-turn navigation and Hands-Free CallingServices, at no extra charge. Such a service can provide criticalassistance during times of severe weather (e.g., tornado,hurricane, flooding), a natural disaster (e.g., earthquake,wildfire), and man-made disasters (e.g., power outages, terroristactivity), including by providing evacuation routes, locating anearby hotel, and connecting the subscriber with loved ones.
b. Security Services
Vehicle Recovery. OnStar can help its subscribers quicklyrecover their vehicle after an auto theft by locating the vehicle(via GPS), contacting local law enforcement, remotely disablingthe ignition and automatically slowing down the stolen vehicle.This service helps the police recover stolen vehicles, reduces therisk of damage to the vehicles, and helps to avoid high-speedchases that can result in injuries and fatalities. (It has beenestimated that about 35% of all police chases end in crashes,resulting in hundreds of fatalities each year.22)
Roadside Assistance. OnStar subscribers can also use theTelematics Service for roadside assistance. After the subscriber
22See Larry Copeland, Deaths Lead Police to Question High-Speed Chase Policies, USA Today, Apr. 23,
2010, available at http://www.usatoday.com/news/nation/2010-04-22-police-chase-deaths_N.htm (citingdata from NHTSA and Geoffrey Alpert, a professor of criminology at the University of South Carolina).
11
contacts OnStar through the in-vehicle device, an OnStar advisorcan pinpoint the vehicle’s exact location (via GPS), and contacta nearby dealership, towing service, or gas station. Additionally,in such event, OnStar can connect the subscriber to a friend orrelative.
Remote Services. OnStar’s Telematics Service can provide anumber of remote services—such as remote door unlock andremote horn and lights—that facilitate the ability of OnStarsubscribers to access their vehicles.
c. Navigation Services. By using OnStar’s turn-by-turn navigationservice, subscribers communicate with a call center representativewho downloads directions to the vehicle, without the need to interactwith a map, an in-dash navigation system, or a mobile phoneapplication.
d. Diagnostics Service. OnStar’s diagnostics service providescritical vehicle-related information that helps subscribersmaintain their vehicle’s key operating systems. A monthlyemail report provides information regarding the engine, airbags, emissions system, antilock brake system, andrecommended tire pressure, among other diagnostic andmaintenance information. OnStar’s advisors can alsoprovide a real-time check on the vehicle at the subscriber’srequest.
The value of the foregoing Telematics Services in promoting public safety is self-evident.
Additionally, OnStar’s Hands-Free Calling Service, a prepaid wireless telecommunications
service, further advances public safety by allowing drivers to place calls without having to
simultaneously manipulate a handheld device. The dangers of mobile phone use while driving are
well documented. Ten states and Washington D.C. have banned hand-held mobile phone use
while driving.23 OnStar’s voice-operated Hands-Free Calling Service presents a realistic, safe, and
legal alternative to using mobile service in a vehicle. Unduly burdening this safe driver option
would undermine the public interest.
23See Governor Highway Safety Association, State Cell Phone Use and Texting While Driving Laws (July
2012) at http://www.ghsa.org/html/stateinfo/laws/cellphone_laws.html.
12
Likewise, many of OnStar’s Hands-Free Calling Service customers purchase minutes to
supplement, not replace, their primary mobile service, and to ensure that they have the ability to
communicate safely while in transit. Such use of the Hands-Free Calling Service as a type of
mobile wireless “insurance policy” further underscores the safety-related function of OnStar’s
services.
The Commission has already recognized that “telematics systems may offer location
capabilities that are equivalent or superior to [the services required by the Commission’s] E911
rules,”24 and that the public safety benefits of such capabilities are buttressed through the call
centers that telematics providers have established as the initial emergency contact for their
subscribers.25 Moreover, the Commission has noted that consumers can rely on telematics
providers in a wide variety of circumstances, from non-life threatening emergencies to “situations
that require extensive or higher level emergency service response from public safety officials or
medical emergency personnel.”26 As a result, the Commission has concluded that telematics
services constitute an effective alternative to E911-capable commercial wireless services,
consistent with the public safety goals of E911 service, which include “sav[ing] lives and property
by assisting emergency services personnel in doing their jobs more quickly and efficiently.”27
In view of the foregoing, OnStar urges the Commission to carefully consider how any
proposed revision to the USF contribution model would delay or otherwise adversely impact the
introduction of expanded capabilities into in-vehicle connectivity services. Next-generation
24 Revision of the Commission’s Rules to Ensure Compatibility with Enhanced 911 Emergency CallingSystems, Report and Order and Second Further Notice of Proposed Rulemaking, 18 FCC Rcd 25340 ¶ 72(2003) (“Telematics E911 Order”).25
Id. ¶ 73.26 Id. ¶ 75.27
Id. ¶ 76.
13
wireless capabilities will be essential for the current in-vehicle connectivity services to evolve and
keep pace with consumer demand and other wireless technologies. Moreover, by enabling video,
voice, and data, next-generation integration will further enhance the transformative public safety
function of in-vehicle connectivity services by allowing emergency responders and other medical
providers to obtain, receive, and analyze even more information related to an emergency or
roadside incident. A connections-based USF model that could potentially impose on next-
generation connections USF charges that are higher than those placed on today’s slower
connections would undoubtedly stifle such innovation and frustrate the development of services
that could be revolutionary for public safety.
2. Consumers Are Highly Sensitive to the Cost of In-Vehicle ConnectivityServices.
A numbers- or connections-based USF contribution methodology would also inhibit the
growth and adoption of in-vehicle connectivity services because consumers are sensitive to price
increases for those services, and the price increases would be significant. Consequently, providers
of telematics and in-vehicle prepaid wireless services may be forced to absorb the cost increases
that result from a modified USF contribution system, which will make such services less
financially viable.
As the Commission knows, a contributor to USF “may generally recover its universal
service contributions from its customers,” subject to certain limitations.28 Given the inordinate
cost increase that would follow from the implementation of a numbers- or connections-based USF
contribution regime, OnStar would have little choice but to attempt to pass on such increased USF
28Further Notice ¶ 388.
14
costs to its customers.29 However, based on OnStar’s prior research and experience, consumers
are less able or willing to accept significant price increases in telematics service.30 Consequently,
a numbers- or connections-based contribution approach would have either of two consequences
(or a combination thereof), both of which would impact negatively the market for in-vehicle
connectivity services: (i) a significant cost increase borne directly by service providers, which
could reduce the number of providers offering in-vehicle connectivity services in the marketplace;
or (ii) a substantial reduction in telematics subscriptions, which could result in thousands of fewer
potentially life-saving calls being connected to PSAPs. Telematics services on a stand-alone basis
have not been highly profitable.31
C. A Per-Number or Per-Connection USF Assessment Methodology WouldCreate Logistical Difficulties for OnStar’s In-Vehicle Connectivity Services.
OnStar would also face significant logistical difficulties in complying with a numbers-
based or connections-based regime, for several reasons. First, because OnStar offers buyers of
new GM vehicles a six or twelve-month period of Telematics Service without a formal
subscription requiring monthly payments, it would have no way to recover the applicable USF
costs during this period without revamping its business model. Consequently, even if consumers
were willing and able to pay such a cost, OnStar would not be able to pass through the USF charge
to end users during this time. Instead, OnStar would face a certain loss for each new GM
customer during these periods. Given the number of individuals who receive the initial service,
which includes nearly every new purchaser of a GM vehicle, the resulting losses to OnStar would
29The cost of telematics service is not built into the price of a new GM vehicle. Rather, the vehicle owner
must elect to subscribe to OnStar’s telematics services after the initial six or twelve-month period.30
June 14 OnStar Letter at 5.31
For example, Hughes Telematics, a provider of stand-along telematics services, lost $2.16 per share in2011. See http://investing.businessweek.com/research/stocks/earnings/earnings.asp?ticker=HUTC:US.
15
be enormous. Indeed, this could result in an additional cost of $6 per initial service ($1 x 6
months) for each new GM vehicle, and in some cases $12 per initial service ($1 x 12 months).
Considering that GM sold more than 2.5 million vehicles in the U.S. last year, this additional levy
could make offering Telematics Services cost-prohibitive.
A numbers- or connections-based contribution scheme would also be logistically difficult
to implement for OnStar’s Hands-Free Calling Service, which is available only to subscribers who
pay in advance for a specified amount of mobile wireless airtime minutes, which can be used
within 12 months of the date of purchase. As the Commission knows, it is difficult for prepaid
wireless providers to pass through a monthly per number or per connection assessment because
they do not send monthly bills directly to the end users.32 However, the logistical difficulties
associated with prepaid wireless service are magnified for OnStar because it does not use a
centralized system to track the airtime usage for each telematics unit, and therefore cannot
determine when its customers’ prepaid Hands-Free Calling Service minutes are used. Instead, the
decentralized in-vehicle telematics unit monitors and maintains information concerning the
prepaid minutes that remain available for the customer’s use, as well as the expiration date of
those minutes. Consequently, OnStar has no way of identifying the number of telephone numbers
or connections that are in use during any given month, which would prohibit OnStar from
determining with any accuracy the applicable USF charge that should be passed through to the end
user. As OnStar has previously explained to the Commission, under a number- or connections-
based approach, “every customer would pay either too much or not enough,” and OnStar “would
not be able to avoid either under-recovering or over-recovering the associated cost.”33 As a
32See Ex parte presentations of Verizon and Verizon Wireless in CC Docket No. 96-45, attachment at 3
(Mar. 3, 2006, and Mar. 28, 2006); June 14 OnStar Letter at 5.33
June 14 OnStar Letter at 6.
16
practical matter, these difficulties could result in OnStar discontinuing its safety enhancing Hands-
Free Calling service.
An additional complication arises because not all of OnStar’s customers purchase Hands-
Free Calling Service minutes, and in many cases, customers who do purchase Hands-Free Calling
minutes do so in very small increments, compared to post-paid wireless users. A numbers- or
connections-based approach would require OnStar to pay USF fees for Hands-Free Calling
Service for all of its customers—even those that do not actually use that service. As a result, those
alternative flat-rate contribution methods would require OnStar to pay USF fees at a significantly
higher rate of revenues than post-paid service providers offering a similar telecommunications
service.
D. A USF Contribution Method that Requires Telematics and Hands-Free CallingProviders to Pay More in USF Contributions Than the Services Generate inInterstate Telecommunications Revenues Would Violate Section 254(d).
A rule that forces providers of in-vehicle connectivity services to pay more in USF
contributions than is derived in interstate telecommunications revenues from the provision of such
services would violate Section 254(d) of the Communications Act, as amended, which requires
USF contributions to be assessed “on an equitable and nondiscriminatory basis,”34 as well as the
Administrative Procedure Act. The Fifth Circuit Court of Appeals has already found that a USF
contribution methodology that forces a contributing party “to pay more than [it] can generate in
interstate revenues” is “arbitrary and capricious and manifestly contrary to the statute.”35
Moreover, the Fifth Circuit concluded that such a rule would be “discriminatory” if it harms some
3447 U.S.C. § 254(d).
35 Texas Office of Pub. Util. Counsel v. FCC, 183 F.3d 393, 434-35 (5th Cir. 1999) (citing Chevron U.S.A.,Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 844 (1984)) (“Texas Office”).
17
carriers more than it harms others.36 Indeed, a numbers or connections based approach as applied
to OnStar would violate Section 254(d).
The Commission has likewise suggested that, as applied to business services, a numbers-
based USF contribution methodology would be inappropriate because it would result in
“inequitable contribution obligations.”37 In making that suggestion in 2008, the Commission
explained that certain “services that do not utilize numbers, or that utilize them to a lesser extent,
would not be contributing to the universal service fund on an equitable basis,” in contravention of
Section 254(d).38 Similar considerations have caused the Commission to increase the safe harbor
percentages applicable to certain providers, “to ensure that universal service contributions
remained equitable and non-discriminatory.”39 As in its past decisions, when designing a USF
contribution methodology, the Commission is legally required to consider, and avoid, the
possibility of some service providers contributing an inequitable portion of fees to the USF.40 It
cannot simply disregard the “heavy inequity” and “prohibitive costs” that its actions may have on
a class of service providers, such as telematics providers like OnStar.41
36Id.at 435.
37High-Cost Universal Service Support, WC Docket No. 05-337, Order on Remand and Report and Order
and Further Notice of Proposed Rulemaking, 24 FCC Rcd 6475, 6552 ¶ 130 (2008) (“High-Cost Order onRemand”).38 Id., 24 FCC Rcd at 6552 ¶ 130.39
See Universal Service Contribution Methodology, WC Docket No. 06-122, Report and Order and Noticeof Proposed Rulemaking, 21 FCC Rcd 7518, 7523-24 ¶ 10 (2006).40
See Petroleum Communications, Inc. v. FCC, 22 F.3d 1164, 1172 (D.C. Cir. 1994) (explaining that theFCC cannot ignore “circumstances that appear to warrant different treatment for different parties”).41
Texas Office, 183 F.3d at 434.
18
E. A Revised USF Contribution Method That Unduly Harms In-VehicleConnectivity Providers Is Especially Problematic Because Telematics Serviceis Not Responsible for the Strain on the Current USF Contribution System.
The inequity that would undoubtedly follow from a revised USF contribution method that
places an undue burden on providers of in-vehicle connectivity services would be even more
problematic and objectionable because the current deficiencies in the USF system have not been
caused or exacerbated by the provision of those services. Although consumers are increasingly
using telematics service for a variety of safety-related purposes, the growth in such use is not
responsible for the current “stresses on the [USF] contribution system.”42 As the Further Notice
explains, the complications in the USF contribution methodology have been driven largely by the
dramatic increase in mobile devices, interconnected VoIP service, and the increased bundling of
services.43 Each of these drivers relate to services that are principally used by end users on a daily
basis to meet their normal or routine telecommunications needs. But as noted above, the in-
vehicle connectivity services offered by OnStar are not used by consumers on a daily basis.
Rather, they principally serve customers at isolated times, including in emergencies. The primary
purpose for these products is safety, security, and peace of mind. Accordingly, in this proceeding,
the Commission should not adopt rules that penalize or unjustifiably burden providers or operators
whose services are not materially disrupting the current USF contribution system, but should focus
on implementing reforms to the USF system that effectively address those marketplace
developments that have contributed to the deficiencies of the current regime.
42 Further Notice ¶ 4.43
Id. ¶ 18.
19
IV. THE COMMISSION SHOULD REFORM THE USF CONTRIBUTION REGIMEIN A MANNER THAT PROMOTES THE PUBLIC SAFETY NATURE OFTELEMATICS SERVICE.
In view of the foregoing, OnStar urges the Commission to adopt USF contribution reforms
that recognize the fundamental, and increasing, value that telematics services provide by
enhancing public safety. The most effective means for the Commission to do so would be to
exclude wireless carriers from the obligation to contribute to the USF based on revenues derived
from the provision of telematics service. At the very least, the Commission should not include
M2M technology services within the USF assessment base. However, if the Commission chooses
not to institute such exclusions and adopts a numbers- or connections-based contribution
approach, it should at least continue assessing USF contributions for Hands-Free Calling Service
and Telematics Services based upon a method (e.g., post-paid equivalency ratio assessment, as
discussed below) that accurately reflects the minimal amount of telecommunications used in
providing these services. Moreover, the Commission should refrain from adopting any rules that
would require providers of telematics service to contribute directly to the USF.
As OnStar has previously explained to the Commission, in-vehicle connectivity service is
not a substitute for conventional wireless or wireline service. The Commission has already agreed
that “the standard telematics model does not provide competition to” “traditional CMRS or
wireline local exchange service.”44 This finding has two important implications: First, it is
inappropriate to assess USF contributions on telematics service in the same manner that they are
assessed on conventional wireless and wireline telecommunications services. Second, modifying
the USF contribution methodology applicable to telematics, in a manner proposed by OnStar,
would have no adverse impact on competition among telecommunications providers.
44Telematics E911 Order ¶ 79.
20
A. The FCC Should Exempt Wireless Carriers From USF Contributions Relatingto Telematics Services Because of the Important Public Safety Function TheyProvide.
In light of the substantial public safety benefits that are integral to in-vehicle connectivity
services, the Commission should not require wireless carriers to make USF contributions based on
the connectivity provided for such services. This exclusion should apply regardless of the
contribution methodology adopted by the Commission in this proceeding, whether based on
revenues, assigned numbers, network connections, or otherwise. As noted in the Further Notice,
the Commission has already exercised its permissive authority to exempt certain “providers of
interstate telecommunications that generally do not compete directly with common carriers,”
including those that serve important public safety functions.45 For example, the Commission
exempts from USF contribution requirements entities that “exclusively provide[] interstate
telecommunications to public safety or government entities” “because of the important public
safety and welfare functions for which these services are used.”46 Because of the profound and
transformative public safety benefits offered by in-vehicle connectivity services, the Commission
should extend the existing USF contribution exemptions to all wireless carriers to the extent they
offer connectivity, either directly or indirectly, to telematics providers. Such a rule would promote
one of the Commission’s most important public policy objectives by furthering public safety.
B. The FCC Should Exclude Machine-to-Machine Connectivity Services FromAny USF Contribution Regime.
If the Commission declines to adopt a broad USF contribution exclusion for in-vehicle
connectivity services, it should at least exclude M2M connectivity services, which are integral to
45 Further Notice ¶ 9 & n.20.46
Federal-State Joint Board on Universal Service, First Report and Order, 12 FCC Rcd 8776 ¶ 800 (1997).
21
telematics services, from any contribution regime. Not including M2M within the USF
contribution base would be consistent with applicable law and policy.
Because M2M connections are not “telecommunications” within the meaning of the
Communications Act, there is no legal basis for assessing USF fees on M2M connectivity
services. As noted in the Further Notice, “telecommunications” is defined as “the transmission,
between or among points specified by the user, of information of the user’s choosing, without
change in the form or content of the information as sent and received.”47 As an M2M connectivity
service does not require a “user” to specify where the transmitted information should be directed,
it does not constitute a “telecommunications service” subject to USF contribution.48 The
Commission has previously explained that “[u]nlike person-to-person or person-to-machine
interactions, machine-to-machine interactions are processes where the communications occur
solely between two or more machines, and “[n]o human intervention is involved as these systems
operate automatically.”49
The Commission should also exclude M2M connectivity services as a matter of public
policy. M2M connections will play a vital role in the future, and imposing yet another tax on
these services will undoubtedly stunt their growth. As the Further Notice explains, M2M
connections have grown rapidly in recent years and are capable of performing essential societal
functions in a variety of industries, including energy, health care, and home security.50 Experts
47Further Notice ¶ 87 (citing 47 U.S.C. § 153(50)); see also 47 C.F.R. § 54.5).
48 See 47 C.F.R. § 54.706(a).49
Implementation of Sections 716 and 717 of the Communications Act of 1934, As Enacted by theTwenty-First Century Communications and Video Accessibility Act of 2010, Notice of ProposedRulemaking, 26 FCC Rcd 3133, 3146-47 ¶ 34 n.91 (2011); see also FCC Chairman Julius GenachowskiPrepared Remarks to International CTIA Wireless 2012, New Orleans, LA (May 8, 2012) (recognizing that“[d]evices connected to devices, machines to machines, transmit[] information automatically”).50
Further Notice ¶ 87.
22
now predict that M2M technologies will produce “50 billion connected things by 2020.”51
However, as Chairman Genachowski has noted, this country is only “at the dawn of a takeoff in
machine-to-machine mobile communications,” and regulatory missteps may stunt the growth of
M2M connectivity.52 Imposing an additional USF charge on M2M providers unfairly penalizes a
budding technology that provides significant public benefits.
The profound expansion in M2M connections will be no more apparent than in the
automotive industry. OnStar, which has long employed M2M technologies in its Telematics
Services, expects most of the future innovation in telematics to occur in the M2M arena.
Unnecessarily taxing M2M services, however, would likely obstruct OnStar’s ability to introduce
more advanced M2M capabilities in its Telematics Services that further improve road safety.
Chairman Genachowski has recognized the need for policies and regulatory actions
designed to facilitate the growth of M2M connectivity. For example, last year, he urged Congress
to revise incentive spectrum auction legislation passed by the House of Representatives to provide
the Commission with more flexibility “to accommodate new technologies, including . . . machine-
to-machine Internet connected devices,”53 which are likely to “creat[e] jobs and opportunity”
“with huge potential for the future.”54 He has also acknowledged the critical role that M2M
connections will play in enhancing automotive safety by, for example, enabling cars to
51FCC Chairman Julius Genachowski Remarks as Prepared for Deliver, GSMA Mobile World Congress,
Barcelona, Spain (Feb. 27, 2012).52
Prepared Remarks of Chairman Julius Genachowski, Federal Communications Commission,Telecommunications Industry Association 2011 Summit, Dallas, TX (May 19, 2011).53
Statement from FCC Chairman Julius Genachowski on House Passage of Voluntary Incentive AuctionLegislation (Dec. 13, 2011).54 Remarks of FCC Chairman Julius Genachowski, U.S. Chamber of Commerce, Washington D.C. (Oct.14, 2011).
23
“automatically take evasive action to avoid accidents.”55 Accordingly, as a matter of law and
policy, the Commission should exclude M2M connectivity services from USF contribution
requirements.
C. Absent Exclusions, the FCC Should Retain the Revenue-Based ContributionRegime or Adopt Equitable Treatment Exceptions for Assessing USFContributions for Telematics and Hands-Free Calling Services.
If the Commission chooses not to expressly exclude in-vehicle connectivity services (or
M2M services) from the USF contribution regime, and adopts a numbers- or connections-based
contribution model, it should establish equitable treatment exceptions for Hands-Free Calling
Services and Telematics Services that allow providers of these services to continue contributing to
the USF in a manner that accurately reflects the minimal amount of telecommunications actually
used by subscribers.56 This could include a percentage cap or other mechanism to ensure that
these providers are contributing equitably. The Commission has previously found that
establishing different contribution methodologies for varying services is “equitable and
nondiscriminatory” under Section 254(d).57 Moreover, adopting exceptions or special
considerations for these services would align with the Commission’s goal of promoting fairness in
the administration of the USF program, and preserve the sustainability of the USF fund, both
principles endorsed by the Commission in this proceeding.58
Retaining the current revenue-based USF contribution approach would be the most fair and
equitable manner of generating USF support from providers of in-vehicle connectivity services,
55FCC Chairman Julius Genachowski, Jobs and the Broadband Economy, LivingSocial, Washington D.C
(Sept. 27, 2011).56
Further Notice ¶¶ 251, 315. As OnStar has previously explained, similar exceptions could also apply toother services that carriers provide to entities, such as universities, with low telecommunications usage.See June 14 OnStar Letter at 7.57 See, e.g., High Cost Order on Remand, 24 FCC Rcd at 6553 ¶ 132.58
Further Notice ¶¶ 24-25.
24
for several reasons. First, a revenue-based approach is the most evenhanded and just method for
imposing USF contribution obligations because it is based on the actual value that a provider
derives from the telecommunications infrastructure. As a result, it avoids the unfair penalties that
a flat contribution framework (such as a numbers- or connections-based approach) would impose
upon providers of services that do not use a substantial amount of network capacity or airtime.
Even if a numbers- or connections-based approach would be easier to administer or measure in
theory, the resulting costs would not only be “unfair,” they would be wholly unmanageable for
many service providers, including OnStar. Moreover, given the logistical complications described
above, an alternative flat-rate methodology may not be easy to administer in many cases.59 In
sum, any perceived administrative benefits derived from a numbers- or connections-based
approach would be far outweighed by the discriminatory burdens imposed upon in-vehicle
connectivity providers such as OnStar.
Second, the revenue-based USF contribution regime has, and will continue to, promote
public safety and facilitate the wider adoption of in-vehicle connectivity services among the
consuming public. Although in-vehicle connectivity services already offer exceptional public-
safety related capabilities, they are likely to have even more far-reaching and transformative
features in the future, especially as next generation capabilities are widely implemented. A
revenue-based USF contribution methodology will foster such development, while the imposition
of a numbers- or connections-based contribution approach would have the deleterious effect of
stifling such advancement and adoption by consumers. The current revenue-based USF
contribution model would also preserve the equity and fairness required by Section 254(d), and
not conflict with existing law or Commission precedent.
59See supra Section III.C.
25
If the Commission does not retain the revenue-based contribution methodology for in-
vehicle connectivity services, it should, at a minimum, adopt alternative number or connection-
based assessment rates that reflect the relatively small amount of network capacity and airtime
used by Telematics and Hands-Free Calling Service customers. The Commission appropriately
seeks comment on this issue in apparent recognition that telematics subscribers use connectivity
services differently than traditional wireless and landline users.60 Indeed, for the reasons
described above, in-vehicle connectivity services are fundamentally different from conventional
telecommunications services, and therefore warrant a different, and more equitable, treatment
under the USF contribution rules. For example, the Commission could establish USF
contributions for in-vehicle connectivity services based on an “equivalency ratio” that is
comparable to the rates paid by carriers for providing traditional post-paid wireless service, but
which accounts for the lower telecommunications usage of in-vehicle services.61
However, adopting separate contribution rates may not be easy. Rather than engage in the
costly and time-consuming process of determining the contribution rates that should appropriately
apply to in-vehicle connectivity services, the Commission should simply preserve the current
revenue-based contribution scheme for those services. This would also avoid the logistical
obstacles imposed upon telematics providers such as OnStar in recouping the USF charges under
any regime that imposed monthly charges. Not only would such an approach be more efficient, it
would give providers of in-vehicle connectivity services the certainty needed to plan and roll-out
60 Further Notice ¶ 315.61
See June 14 OnStar Letter.
26
new services in a prompt and economical manner. The need for such certainty is paramount for
developing wireless services, such as telematics.62
D. The FCC Should Not Modify the Existing USF Contribution Methodology InAny Way That Would Require Providers of Telematics Service to ContributeDirectly to the USF.
Regardless of the USF assessment methodology that the Commission adopts in this
proceeding, it should not adopt rules that require providers of telematics services to make USF
contributions directly to USAC.
1. The FCC Should Not Assess Revenues on a “Value-Added” Basis.
OnStar urges the Commission to refrain from assessing services subject to USF charges on
a “value-added” basis, as described in the Further Notice, in which each provider in a service
value chain would contribute to the USF “based on the value the provider adds to the service.”63
First, there is simply no evidence that such a methodology would simplify the administration or
oversight of the contribution system, or result in more accurate USF assessments. Second, and
more importantly, given the uncertainties regarding how the Commission might devise a value-
added approach, there is a reasonable possibility that such a regime would incorrectly categorize
some end users (such as telematics providers) as telecommunications providers, and therefore
require them to contribute to the USF directly based on an ill-defined concept of “value added.”
This would be unfair to telematics providers such as OnStar and would yield unnecessary
complications and costs that may be materially disruptive to the current universal service
ecosystem. Such a value-added approach should be avoided as it would give rise to substantial
uncertainty in the marketplace, and would unfairly penalize telematics providers.
62 See supra Section III.B.1.63
Further Notice ¶ 149.
27
2. The Commission Should Not Adopt a Broader Definitional Approach toDetermine Who Must Contribute to the USF.
The Commission also should not adopt a broader definitional approach to determine which
interstate service providers must contribute to the USF, without enumerating the specific services
subject to assessment.64 A rule that would make assessable “any interstate information service or
interstate telecommunications” that “provides a transmission (wired or wireless), directly or
indirectly through an affiliate, to end users” would have the same adverse consequences that
would follow from the “value-added” methodology criticized above.65 Because that proposed rule
is intended to include “entities that provide transmission capability to their users,” it would likely
require providers of telematics services to contribute directly the USF.66 As noted above,
telematics services and prepaid wireless services are fundamentally distinct from traditional post-
paid wireless and wireline services, vital to promoting public safety, and have not materially
contributed to the stresses that have been placed on the USF.67 Consequently, adopting a rule that
penalizes such services would not satisfy the recommendations of the National Broadband Plan,68
but rather frustrate the Commission’s goals of “improving efficiency, fairness, and the
sustainability of the Fund.”69
Moreover, by offering carriers virtually no guidance to predict the magnitude of their
USF-related obligations, a broad definitional approach would give rise to substantial marketplace
uncertainty and frustrate the development of emerging wireless services that are poised to bring
tremendous benefits to U.S. consumers. Providers of innovative wireless technologies, such as
64 See Further Notice ¶ 74.65
Id. ¶ 75.66
Id. ¶ 76.67
See supra Section III.E.68 See National Broadband Plan at 149.69
Further Notice ¶ 77.
28
telematics, rely heavily upon regulatory certainty to effectively plan and deploy their services.70
In addition, such a broad definition would invariably lead to differing interpretations and
ultimately litigation as to what is actually encompassed under the rule. Finally, a broad
definitional approach to assessing USF contributions would require many service providers—even
those that have historically contributed to the USF indirectly as end users—to incur substantial
costs to comply with the new USF regime. If the Commission nevertheless adopts the broad
definitional approach, it should at least exclude telematics and M2M services from such a rule, for
the reasons described above.71
V. CONCLUSION
For the reasons discussed herein, OnStar urges the Commission to refrain from replacing
the current revenue-based USF contribution approach with a system based on numbers,
connections, or any combination thereof. Adopting such an alternative system would be contrary
to important public policy objectives and existing law, and would be logistically difficult to
implement in many cases. Instead, the Commission should use this proceeding to exempt wireless
carriers from any USF contribution obligations relating to the provision of telematics services. At
a minimum, the Commission should refrain from imposing USF contribution obligations on M2M
services. Absent such exclusions, the Commission should adopt equitable treatment exceptions
for Telematics and Hands-Free Calling Services or retain the current revenue-based approach,
which continues to be the most equitable means of assessing USF contributions by taking into
account the actual use and value of telecommunications service. Additionally, the Commission
should not modify the existing contribution regime in any way that requires telematics service
providers to contribute directly to the USF. By taking this course of action, the Commission
70 See supra Section III.B.1.71
Further Notice ¶ 87; see supra Section IV.B.
29
would encourage the proliferation of telematics and in-vehicle connectivity services and preserve
the substantial public safety benefits generated by such services.
Respectfully submitted,
/s/ Ari Q. Fitzgerald
Teresa HoldererGeneral Counsel
Harry M. Lightsey IIIDirector - Public Policy
Thomas JeffersSenior Manager – Public Policy
OnStar Corporation400 Renaissance CenterDetroit, MI 48265
July 6, 2012
Ari Q. FitzgeraldChristopher J. Termini
Hogan Lovells US LLP555 Thirteenth Street, NWWashington, DC 20004Tel: (202) 637-5423Fax: (202) 637-5910
Counsel to OnStar Corporation
