Adoption of ABC Plan Would Destroy Rural Economy, States Say

There would be mass consolidations if the FCC adopts the ABC Plan, said Pennsylvania Public Utility Commissioner James Cawley. The cost model, which is at the core of the ABC plan (CD Aug 26 p2), inaccurately estimates cost, which would leave high-cost areas without services and provide more support in other areas that would be sufficient, he said. One of the biggest problems with the ABC Plan is “it’s heavily based on a cost model that you can’t work with,” said John Burke, member of the Vermont Public Service Board. The revamp would fail if it fails to consider the potential impact on individual states, said Indiana Utility Regulatory Commissioner Larry Landis. He said some of the small rural service providers in his state have turned down broadband loans and grants due to concerns that they couldn’t recover cost if the FCC moves forward with the ABC Plan. State commissioners continued to attack the preemption proposal in the ABC Plan. States would have to deal with the impact of any revamp, Landis said. States’ roles in telecom policy, particularly in intrastate traffic, is clearly defined by the Telecom Act of 1996, he said.

AT&T Vice President Hank Hultquist, one of the architects of the ABC Plan, said the incumbent-backed plans are “carefully balanced” and will meet the goals that the FCC has laid out in moving to a broadband world. “The critical thing here is certainty,” he said. Phil Montgomery, chair of the Wisconsin Public Service Commission, is encouraged by the broad industry support for a single plan, though support isn’t universal. There are a lot of good ideas in the plan, he said. The FCC needs to act now because regulatory certainty is critical, especially in rural areas, he said. The ABC Plan is a rare opportunity for major consensus among significant parts of the telecom industry, he said. “Consensus means compromise.” There would be more call completion issues (CD July 20 p4) and arbitrage if the FCC further delays USF revamp, he said. If the FCC doesn’t act now, it would take another four plus years before anything happens, he said. Unlike most of the states that filed with the FCC on USF/ICC, the Wisconsin commission supports limited preemption of state authority.

Timing is critical, Burke said. “The most outspoken advocate for ubiquitous broadband,” Commissioner Michael Copps, has a short time left (he cannot serve past later this year), he said. Accountability, transparency, accessibility, availability and reliability should be the guiding principles as the FCC works to revamp the system, said California Public Utilities Commissioner Catherine Sandoval. Any USF rules should distribute federal broadband high-cost support to areas where broadband is truly not available and where it’s uneconomic to provide service, she said.

Regarding VoIP issues, Cawley said the FCC should have classified VoIP as a telecom service long time ago. Many states have been dealing with VoIP access charge disputes, he said. The key is “if you use the network, you have to pay for it,” he said. It’s about recovering the cost that service providers impose on the network, he said. Regarding reverse auction proposals, Landis said the process could be easily manipulated. The FCC can’t operate under the assumption that multiple bidders would participate everywhere, nor that the winning bid would reflect the bidder’s true costs, he said. Any rules would have to ensure long-term service quality, Sandoval said.

Sprint Nextel Vice President Charles McKee said he appreciated states’ concerns about being pushed out of universal service and intercarrier comp regulation, but “ultimately, you're going to need to have national rules to govern an IP world.” Sprint has concerns with the ABC plan, but it does appreciate the effort to create a single rate for traffic, McKee said. “There’s a real benefit to that uniformity,” he said. But US Cellular Vice President Grant Spellmeyer disagreed. States have already chosen hundreds of eligible carriers around the country. Proposals that would allow the FCC to choose recipients, or to give incumbents right of first refusal for universal service money, “lay outside the law,” he said. “The FCC can’t unilaterally come along and pick a winner,” Spellmeyer said.

All three reform proposals ignore “the elephant in the room,” Spellmeyer said. “If no one has noticed, there’s a wireless revolution,” he said, holding up his electronic tablet. Incumbents are seeing their business plans collapse because customers are moving to broadband and wireless. Giving incumbents right of first refusal gives them “a veto” over technology in given areas, Spellmeyer said. “The whole thing falls apart,” he said.

Telecom attorney Tom Moorman, who represents several rural Nebraska rate-of-return carriers, said Section 214(e) of the Telecom Act requires officials to consider “public interest” when deciding whether to designate a carrier as an ETC. That might give enough room for the reforms in the ABC or rural plans, Moorman said. NCTA Vice President Jennifer McKee also took issue with the right-of-first-refusal proposals: “It doesn’t seem to make sense to us to not ask whether there’s someone else out there that can do it more efficiently.”