Rural Carriers Resist Mechanism to Reassess High-Cost Support

The cable association plan is still on the table at the FCC, but nothing has been finalized, said a commission official. The broadband task force’s level of interest in the plan has not increased or diminished since the team identified it as one possible place to cut USF costs, the official said. As proposed by NCTA, the mechanism would reduce incumbent local exchange carriers’ high-cost support in areas where a facilities-based competitor serves 75 percent of the market with voice service, or where the state has substantially deregulated the ILEC’s retail rates.

“The petition, if adopted, would halt deployment of broadband facilities in many high-cost rural areas, increase retail broadband prices in these areas significantly, and harm the affordability and comparability of broadband services to many consumers living in these areas indefinitely,” said the National Telecommunications Cooperative Association. The cable petition is “backwards looking” because it focuses “solely on the support needed to provide voice service to customers that lack a competitive alternative,” said the Organization for the Promotion and Advancement of Small Telecommunications Companies. Many rural ILECs can’t serve broadband to 100 percent of their customers with existing high-cost support levels, OPASTCO said. “A reduction in those revenues … would completely destroy their ability to accomplish this goal going forward.”

NCTA “has substantially overstated” competition by unsubsidized wireline facilities-based carriers in rural areas, said the National Exchange Carrier Association. The proposal doesn’t address “the real cause of either contribution factor or overall Fund growth,” said the Independent Telephone & Telecommunications Alliance. “Rather, it targets USF beneficiaries that have not only played a vital role in building the Nation’s communications networks, but whose funding has remained flat or decreased for nearly a decade.” ITTA said requiring the FCC to review petitions to reduce support in specific areas “would generate costly and burdensome administrative adjudications that would create risk and uncertainty.”

Rural wireless carriers that also could lose support in areas determined to be sufficiently competitive also protested. “Unmoored from the requirements of the Act and the goals of universal service, NCTA’s proposal eliminates consideration of the consumer’s perspective in an effort to ensure that no provider receives support anywhere NCTA’s members are not [eligible telecommunications carriers], regardless of whether consumers benefit from the change,” said the USA Coalition. The Rural Cellular Association disputed NCTA’s proposed 75-percent competition trigger for reducing support. “The fact that unsupported wireline competitors are operating in some portions of a study area does not guarantee that competition will play a role in ensuring the sufficient provision of service in other portions of the study area that have the highest costs,” RCA said.

But Sprint Nextel agreed with cable that high-cost support to ILECs “should cease in areas where facilities- based competitors are present.” At least 97 percent of U.S. consumers, and 85 percent of rural consumers, have a choice of facilities-based voice competitors, the wireless carrier said.

Time Warner Cable said the NCTA plan would help to reduced the “bloated” size of USF, ensure funds are efficiently distributed, and “facilitate the transition to potential broadband support mechanisms.” Comcast said the plan is “an inventive proposal to help control the size of the high cost fund,” but urged the FCC to adopt its ideas as tentative conclusions in a new rulemaking to comprehensively revamp USF. Similarly, Charter urged the FCC to “quickly issue a notice of proposed rulemaking adopting a tentative conclusion that high-cost support will not be provided in areas served by an unsubsidized competitor.”

While backing USF distribution reform, AT&T cited flaws in the NCTA petition. If adopted, an ILEC could lose funding regardless of whether it has carrier-of-last-resort obligations or received complete retail pricing deregulation, the carrier warned. “The ILEC would continue to be obliged to serve any and all customers in those areas at regulated rates, and thus would have to bear the full costs and burdens of serving those areas, but without any support or ability to increase its rates to recover those costs.”

Qwest said it didn’t back NCTA’s proposal, but endorsed a rulemaking “to further consider a process for eliminating high-cost support in areas where a facilities-based, wireline carrier is offering comparable services without universal service high-cost support.” USTelecom agreed with NCTA’s observation that USF high-cost distribution is broken, but said the FCC should do a comprehensive USF overhaul instead.

The American Cable Association endorsed the “premise” of NCTA’s plan, but wants an exemption for small carriers with 100,000 lines or less. “The ACA believes it is necessary to strike a balance between the need to improve the efficiency of the fund with the objective of ensuring a fair opportunity for smaller, potentially more vulnerable players.”

ILECs with fewer than 100,000 lines said a small-carrier exemption wouldn’t sweeten the NCTA plan. Most of OPASTCO’s members would meet the proposed cutoff, but “even if the ACA’s proposal was included, it wouldn’t change our position,” an OPASTCO spokeswoman said. Only a handful of NTCA members have more than 100,000 lines, and the rural telephone association would like it if the proposed mechanism didn’t cover its members, said NTCA Legal Vice President Dan Mitchell. However, no revision would change NTCA’s belief that the cable plan is “fundamentally flawed” and should be rejected, he said.

The cable plan exempts tribal lands and Alaska. Alaska Communications Systems praised the carveout, saying tribal lands including Alaska “present a unique profile that must be addressed outside the scope of more typical national policy making determinations.”