FCC IN 4-1 VOTE GRANTS VIRGINIA CELLULAR ETC STATUS

Equal access requires nondiscriminatory access for long distance companies, for example by not requiring the dialing of extra digits to reach some IXCs but not others. Virginia Cellular asked the FCC to redefine the service areas of 3 rural telcos because it wasn’t permitted under its current wireless license to provide facilities-based service to the entire study area of each of those wireline companies. The company had contended that it was not “cream-skimming” the lowest cost exchanges of the affected rural telcos but was basing its requested ETC designation only on its licensed service area. The FCC sided with Virginia Cellular arguments that it would provide supported services using its cellular network infrastructure.

“While we await a recommended decision from the Joint Board, we acknowledge the need for a more stringent public interest analysis for ETC designations in rural telephone company service areas,” the Commission said. Its action came as the Federal-State Joint Board on Universal Service, which is examining rules related to high-cost universal service support in competitive areas, is expected to release its recommendations to the FCC next month. “This order is not intended to prejudge the outcome of that proceeding,” the agency said. ETC status is needed before a carrier can receive universal service funding. The Virginia Cellular decision has been watched as setting precedent for how the FCC would handle similar pending applications and how it might affect the Joint Board’s consideration of the ETC designation process in the portability proceeding.

The Commission rejected arguments by rural phone companies that Virginia Cellular should be denied ETC designation because its customers wouldn’t have equal access to IXCs. The FCC disagreed, saying its rules stipulated that one of the supported services was access to interexchange services, “not equal access to those services. Accordingly, we find sufficient Virginia Cellular’s showing that it will offer access to interexchange services.” It also rejected arguments by rural telcos that Virginia Cellular’s wireless signals were sporadic in some areas. “We find that the existence of so-called ‘dead spots’ in Virginia Cellular’s network does not preclude us from designating Virginia Cellular as an ETC,” the FCC said, noting that the company had pledged network improvements.

The order, which was approved Dec. 31, said that the value of increased competition alone wasn’t adequate to satisfy the public interest test in rural areas for ETC designation. Instead, the agency said it had weighed factors such as: (1) Benefits of increased competitive choice. (2) Impact of multiple designations on the Universal Service Fund. (3) The unique pros and cons of a competitor’s service offering. (4) Commitments on quality of the phone service provided by competing providers. (5) The ability of a competitive ETC to provide the supported services throughout the designated service area “within a reasonable time frame.” It also imposed as “ongoing conditions” some voluntary commitments Virginia Cellular had made. The company agreed, for example, to spend high-cost funds to upgrade facilities and reach underserved areas. The FCC conferred ETC status to the wireless carrier in areas served by 5 rural telcos and 2 nonrural phone companies in Va.

In his dissent, Martin took exception to the order’s finding that the designation of Virginia Cellular as an ETC would further the goals of universal service by providing greater mobility and a choice of providers in high-cost and rural areas in the state. He objected to the finding that those were goals of universal service in the first place. “Rather, I believe the main goals of the universal service program are to ensure that all consumers -- including those in high-cost areas -- have access at affordable rates,” he said.

Martin reiterated concerns about the FCC policy of using universal service support to create competition in high-cost areas. “I am troubled by today’s decision because the Commission fails to require ETCs to provide the same type and quality of services throughout the same geographic service area as a condition of receiving universal service support,” he wrote. “ETCs seeking universal service support should have the same ‘carrier of last resort’ obligations as incumbent service providers in order to receive universal service support.” Martin said the decision: (1) Failed to require CETCs to provide equal access. (2) Redefined several rural telephone company service areas where Virginia Cellular’s proposed service area didn’t cover the entire service area of the incumbent rural telco. “Given the potential for cream-skimming, I do not support this redefining of the service areas of incumbent rural telephone companies,” he said. (3) Could prejudge the work of the Joint Board on a framework for high-cost universal service support. He said the order could push the Joint Board to take “more aggressive steps to slow the growth of the Universal Service Fund such as primary line restrictions and caps on the amount of universal service support available for service providers in rural America.”

FCC Chmn. Powell said the order recognized “the unique value that mobile services provide to rural consumers by giving added substance to the public interest standard by which we evaluate wireless eligible telecommunications carriers. At the same time, we reinforce the requirement that wireless networks be ready, willing and able to serve as carriers of last resort to support our universal service goals.”

In a separate statement, FCC Comr. Adelstein said the order created a “better template for the ETC designation process that is a significant improvement from past Commission decisions and that more fully embraces the statutory public interest mandate.” Adelstein said he expected state PUCs also would find the blueprint in the order helpful on ETC requests. He praised the Commission’s willingness to strengthen the public interest test, pending a Joint Board recommendation. “The template established in this order provides a much more stringent examination of the public interest in making our ETC determination. Among other factors, Virginia Cellular has made significant investment and service quality commitments through its proposed service areas.” Adelstein said the order also provided a thorough analysis of rural telephone company service areas under Sec. 214(e) of the Communications Act. “Indeed, we ultimately decided not to designate Virginia Cellular as an ETC in certain portions of its licensed service area,” he said. As for the rural study area of carrier NTelos, the agency said ETC designation for Virginia Cellular wouldn’t be in the public interest.

Comr. Abernathy said the order took an important, “albeit incremental,” step toward a more rigorous framework for evaluating ETC applications. “When the Commission initially exercised its authority to grant ETC status in areas where state commissions lack jurisdiction, it appeared to regard entry by any new competitor as per se consistent with the public interest,” she said. “While promoting competition is undoubtedly a core goal under the Telecommunications Act of 1996, the use of universal service funding to engender competition where market forces alone cannot support it presents a more complex question.” In rural study areas, where the cost of providing service far exceeds retail rates, she said regulators must weigh carefully whether subsidizing another ETC would advance the public interest. Comr. Copps said that while he voted for the order, the ETC process needed improvement. “We must give serious consideration to the consequences that flow from using the fund to support multiple competitors in truly rural areas,” he said. Copps said he hoped the upcoming Joint Board recommendations would lay the groundwork for a better approach.

Virginia Cellular said it was in the process of upgrading its network with CDMA technology. Virginia Cellular Vp Rick Morrow said: “High-cost support will enable us to add cell sites and increase capacity so that rural consumers in high-cost areas will see improved network performance. We are committed to reach out to these communities and provide them with the highest quality service.” The company said it planned “immediately” to begin site acquisition, construction and operation of new cell sites in Va.