USTelecom Framework Would Block USF Distribution in Areas Where ISPs Already Operate
The FCC wouldn’t distribute Universal Service Fund cash for broadband in areas where any ISP already sells Internet service, under a USTelecom-brokered industry agreement that could be made public as early Friday (CD July 22 p3), industry and FCC officials told us. Talks are still going on, they said Monday. Under the agreement, which USTelecom has been calling a “framework,” VoIP wouldn’t be classified either as telecom or information service, and VoIP carriers would be required to pay interstate access rates for all non-local calls, the officials said. Comcast and other major cable operators continue to evaluate the USTelecom proposal, and it’s possible they'll join it, industry officials said.
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USTelecom continues to talk with rural carriers, FCC and industry officials said. One proposal floated by USTelecom would have the parties to the talks file the framework publicly, have the rural companies file their own reform proposals separately, and then make a third filing pointing out where the USTelecom parties and rural carriers agree, the officials said. The parties to the USTelecom framework are Verizon, AT&T, Windstream, Frontier and CenturyLink (CD July 6 p6). The parties are hoping to file the framework by Friday.
The proposals to eliminate USF support in places where there’s already competition and to have VoIP pay interstate rates are being pitched to many cable operators, industry and commission officials said. Cable companies are spending considerable time trying to figure out whether they'll join with the USTelecom plan, file their own plans or take other action, cable, telco and FCC officials said. An NCTA spokesman declined to comment.
Under USTelecom’s framework, intercarrier compensation rates would transition to $0.0007 -- the so-called “triple zero” option -- within five years, industry and commission officials said. Big carriers would pay into what AT&T has dubbed an “access recovery mechanism,” and eligible smaller carriers would be able to draw down from it to replace lost intercarrier revenue, the officials said. The mechanism would last for seven years, they said.
Verizon appears to be the big winner in obtaining a triple zero agreement, industry officials said. But the telco also is making a big concession on VoIP. The company has long argued that VoIP is an information service and that it shouldn’t be subject to intercarrier compensation rates.
For cable operators like Comcast, Cox and Time Warner Cable, part of the consideration of the USF talks is the extent to which any plan backed by USTelecom members would ensure federal money isn’t spent to overbuild ISPs, industry officials said. They noted that making sure that money from government stimulus awards, USF or other public dollars isn’t spent on overbuilding existing broadband operations has been a priority for large and small cable operators. Major operators hadn’t decided by Monday whether they'd back the USF framework, and it’s possible they will decide not to back all of it, may back some elements or may take some other action, industry officials said. Time Warner Cable is “still considering our position” on the coming USF filing, a spokesman said. Spokespeople for Comcast and Cox had no comment.
Rural telcos still have problems with USTelecom’s proposal for the overall size of USF, but USTelecom officials are optimistic they can reach an agreement by the fall, FCC and industry officials said. USTelecom spokesman Karn Dhingra confirmed that his group is hoping to release the framework on Friday. He declined to discuss the ongoing rural-USTelecom talks, except to say they're “progressing.”
NTCA Vice President Mike Romano said “everybody is working hard, in good faith,” but he isn’t sure a deal’s within reach. “We would love to see an industry plan to come forward with a plan that’s right for the consumers in our areas … but we're not putting all our eggs in one basket,” Romano said. He said his member companies have concerns about the five-year “triple zero” option. “We're trying to figure out whether we can go that low with intercarrier compensation,” Romano said. “And if you're going to go that low, you're going to have to seriously restructure the recovery and that’s going to put pressure on the fund.”
The most disturbing part of the proposal is VoIP, Commissioner James Cawley of the Pennsylvania Public Utility Commission told us. Cawley, chairman of the USF Federal/State Board, said he hasn’t received any information suggesting that Comcast may sign on. The VoIP proposal is a form of state preemption, he said. No matter which layer of government has legal authority, consumers would continue to be concerned if universal service goals aren’t met and states would continue to be the first to hear about such problems, he said. At the end of the day, there will always be disputes and consumer complaints, he said. “Is the FCC going to deal with them if states are preempted?” Depending on each individual state, there’s a strong probability that states would bring the FCC to courts if preemption is part of the final package, he said.
State members of the Joint Board also don’t agree that a nationally uniform rate would be desirable, and they particularly doubt that an eventual zero uniform rate would be good, Cawley said. The benefits of low intercarrier compensation rates must be balanced against other objectives, he said, citing the potential large financial demand that ICC revamp could place on USF. Mandating a rate of zero would be contrary to subsections 252(a) and (b) of the Communications Act, which creates a system of negotiation and arbitration to establish rates for interconnection, he said. A rate can’t both be negotiated by the carrier and prescribed by a regulator, he said.