Proposed Universal Service Fee Increase Threatens to Shut Off Location-Based, In-Vehicle Telematics Emergency Services

WASHINGTON, D.C., August 5, 2009 –-- Location-based emergency communications services delivered to vehicles could be cut off under proposed changes to how the Federal Communications Commission (FCC) collects universal service fees. That was the prediction of Dallas-based ATX Group, one of the largest providers of connected vehicle (or telematics) services to global automobile manufacturers.

“I am hopeful that the new FCC will take a different direction and pursue a universal service reform approach that would not compromise public safety services such as telematics,” said Steve Millstein, president of ATX.  “The U.S. has been leading in the deployment of this potentially life-saving technology and virtually every major automobile manufacturer is looking to deploy these services within the next three years, some on a global basis. In this specific instance, the tax will be more than the cost of service.”

If the proposed fee is adopted without an exception for telematics providers, vehicle owners who have opted for cars with the added safety of telematics would see their current assessment increase to a point where it exceeds the cost of airtime. The majority of vehicle owners use the telematics service only in emergency situations.

Last year, the FCC first considered the plan, proposed by then FCC Chairman Kevin Martin, which would replace a revenue-based collection system for universal service to a fixed, $1.00 per month telephone- number-based system.  Under the changes, universal service fees that are currently collected on emergency telematics services would jump in several circumstances at least 3000% and impose enormous additional monthly costs on maintaining telematics-equipped vehicles and rolling the service out to an automaker’s entire fleet.  In most cases the fee will exceed the cost of the cellular service. Emergency service providers and automobile manufacturers and their affiliated dealerships fear such an increase would necessitate the end of these emergency services. All of the telematics providers currently pay universal service fees under the revenue-based system and do not oppose paying an amount consistent with the current fee structure.

“While some may think a dollar per month for every vehicle that has emergency telematics services is not significant, they fail to recognize the fact that the majority of these services are only used in the rare instance of an emergency and are priced accordingly,” added Millstein. “We just don’t think it makes sense to assess fees on these services in the same manner the FCC would like to impose fees for traditional telephone or cell phone service.”

“The legislation that enacted Universal Service requires the fee to be equitable and cannot exceed the cost of service.  But this scheme provides no fairness to low-volume users such as vehicle owners who have purchased vehicles based in part on the car’s ability to be located and provide critical information to emergency responders,” said Gary Wallace, ATX vice president, corporate and government relations. “I also find it ironic that the government would consider raising the price of vehicles at a time when the U.S. auto industry is facing perhaps its worst financial crisis in decades."

In July, AT&T petitioned the FCC to take immediate action and substitute the $1.00 monthly fee for the current revenue based structure.  The FCC, where three of the five Commissioners, including its Chairman, are recently appointed, will examine AT&T’s plea that the pending proposal be approved.  “The new Commission should not rush to impose such an enormous change that undermines emergency response,” said Wallace.

In-vehicle emergency communications systems providing automated crash notification, stolen vehicle recovery, in-vehicle SOS buttons, and crash severity data that are designed to assist and accelerate emergency response are referred to as “telematics” services.  Every day telematics services save lives and assist drivers who are injured or under duress in emergency situations. These intelligent vehicle technologies not only accelerate and enhance emergency response to highway emergencies, particularly along rural highways, but are seen as critical advancements toward the deployment of systems that can immediately determine whether severe trauma may be involved as well as quickly re-route traffic, mitigating congestion chokepoints. Systems deployed today on several million passenger vehicles, with dramatic growth expected over the next five years, use the cellular network with communications devices which have individual telephone numbers.  These systems are extremely low volume network users.  Automotive telematics is bringing efficiency to emergency medical response that is saving lives and reducing the severity of injury thereby decreasing long- and short-term health care costs. Bringing this important benefit to all vehicle owners should not be halted by exorbitant and arbitrary fees.

ATX Group urged the FCC to exempt emergency telematics services from the proposed connection-based collection system.