FCC Officials Still Expect Oct. 27 Vote on USF, Intercarrier Comp Reform

Genachowski raised some questions last week when he declined to commit to an October vote in the post-FCC meeting press conference (CD Sept 23 p1). But FCC officials said a vote still seems more likely than not. “I think we're pretty optimistic,” one official said Monday. “I wouldn’t want to assign odds.” An official in the chairman’s office said the order is moving forward as planned. “The Chairman’s office rescheduled the meeting on its own initiative, a decision supported by all the other Commissioners,” the official said. “At this point we're expecting a USF/ICC order to circulate for the October meeting."

Despite the flurry of activity, Wireline Bureau staff are still focused on the principles behind the reform and have yet to drill down into the details of reform, industry and commission officials said. The extra week before the open meeting means a prospective order wouldn’t have to circulate until early October.

The NARUC USF Task Force that recently surveyed state intrastate access revamp efforts (CD Sept 2 p2) won’t have any further proposals before the Oct. 27 meeting, Commissioner James Cawley, chairman of the state members of the USF Federal/State Joint Board, told us. With limited resources, the state members of the Joint Board don’t expect to extend their efforts beyond what’s already been said and done, said Cawley, a Pennsylvania commissioner.

State commissioners, during recent meetings at the FCC, have argued that the FCC should rely on federal/state partnership, not preemption, saying many states are in the process of intrastate intercarrier compensation reform. State commissioners also argue that the FCC should have classified VoIP as a telecom service, that federal preemption of the intrastate intercarrier compensation regime will place additional burdens on a redirected federal USF mechanism and will lessen the money available for federal USF support to broadband deployment, and that the uniform nationwide $0.0007 intercarrier compensation rate is not cost-based and thus non-compensatory, according to Cawley.

If a strong preemption proposal is adopted by the FCC, the states are likely to seek judicial review, Cawley said. The Pennsylvania commission is examining its own options at this point, he said. If the ABC Plan is substantially adopted, there are questions about how individual state-specific USF mechanisms will interact with the FCC’s intercarrier compensation and federal USF policies, he said. Another issue is whether states that haven’t done their own intrastate access revamps would have any incentives to implement such revamps, and to keep or implement their own state-specific USF mechanisms, if the FCC adopts sweeping federal preemption, he said.

About 35 states were surveyed, according to a NARUC ex parte filing (http://goo.gl/mFxh7). Ten of the 35 states have open proceedings to revamp access charges. Five of those 10 states are on the industry-suggested recalcitrant “18” list. Arizona, Nebraska and North Carolina have open and active dockets. New York was in final settlement discussions when the release of the NPRM resulted in the proceedings being held in abeyance pending FCC action. However, the docket remains open.

The Georgia commission has an open docket but most of the policy decisions related to access have been largely decided and the focus of the proceeding has changed. Two other states on the industry “18” list have also taken recent actions. South Dakota completed a docket in the spring requiring CLEC to mirror regional bell operating company intrastate rates. The Washington commission has a proceeding to examine small ILEC earnings reviews, which many see as paving the way for reductions to their access charges. Additionally, it appears that another six states believe that additional state proceedings are likely in the next six months. Of those six, two were on the “18” list.

The task force wasn’t created to focus on or respond to the ABC Plan, said Brad Ramsey, NARUC’s general counsel. It was focused on internal and external responses to allegations that states had not taken actions on intrastate access revamp, which the industry has touted as a basis for preemption, he said. Ongoing NARUC advocacy, generally supporting the State Plan and opposing preemption as illegal, anti-consumer and counter-productive, will continue and be managed by NARUC, he said.

"Obviously, there are important battles going on, but with some January implementation dates, a vote can’t slip too far past October and still have it all work as planned,” said MF Global analyst Paul Gallant. Medley Global Advisors analyst Jeff Silva said getting to a vote won’t be easy. “My sense is the process of USF/ICC overhaul has entered a very difficult stage of translating conceptual reform into actual rules, with all the complexities that go with it,” he said. “The USF/ICC order the FCC ultimately considers will likely be imperfect in various respects and the target of criticism by non-telco incumbents. But it may be the best the commission can muster realistically, given the many moving parts and political sensitivities associated with USF/ICC. All told, reform is a delicate balancing act involving a somewhat messy mix of policy and political trade-offs."

"Behind the scenes I see an FCC that is being asked to do an incredibly large task in an incredibly short time,” said a wireless industry lawyer, concerned about the proposed order. “The introduction of proposals from one segment of industry is complicating things because if they are adopted without full understanding of how it works, then it is potentially a significant setback when problems arise.”

With time closing in, industry officials are redoubling their lobbying efforts. Charter Communications, which has been a vocal critic of the incumbent-backed ABC plan (CD Sept 22 p2), met with commission staff last week and urged them to subject VoIP and tandem traffic to the same rates during the reform transition, according to an ex parte notice (http://xrl.us/bmei2q).

The incumbents behind the ABC plan are working on proposed rules and are hoping to present them to FCC staff in meetings this week, two telecom officials told us. Executives from the incumbents met with FCC staff last week to discuss their proposal, according to an ex parte notice (http://xrl.us/bmeizi). “Specifically, we discussed potential changes to Part 54 and other provisions of the Commission’s rules that may be necessary to implement the universal service reforms described in the ABC Plan and appropriate timelines for the various USF transitions in the Plan,” the notice said. “We also discussed, generally, new applications for competitive ETC designations and potential broadband deployment and service reporting by funded providers."

Some wireless carrier officials remain concerned that the FCC not rush to complete an order. “There is always a fear that there could be a rush to declare victory when the facts speak otherwise,” said Steve Berry, president of the Rural Cellular Association. “I do think the Chairman’s office is trying to deal with real concerns from wireless -- the problem has been a very biased view from the Wireline Competition Bureau -- and lack of forward looking solutions. I am hopeful that the FCC will address some of our main policy concerns."

"It does appear that the FCC is taking wireless, and other, objections seriously and is trying to find a way forward that addresses the concerns that have been raised,” said a small carrier representative. “The commission does appear to be rushing forward with its reform effort for no legitimate reason. The commission needs to take much more time to get these reforms right and to deal with what appears to be increasing congressional interest in the effort.”