FCC to Be Flooded with Petitions for Reconsideration on USF

Most of the rules from the order take effect Thursday and any reconsideration petitions are due then. At least 13 federal court cases have already been filed to challenge the order (CD Dec 16 p4), with AT&T litigating for and against the commission on different issues in the case. The Voice on the Net Coalition will join the challenge in the 10th Circuit, perhaps as early as Friday, a telecom official said.

Meanwhile, rural carriers, many of whom have already challenged in court, are also apparently preparing a massive petition for reconsideration. In a joint motion filed earlier this week, the National Exchange Carrier Association, NTCA, OPASTCO and the Western Telecom Alliance asked the FCC for permission to exceed the page limits on petitions.

USTelecom will file a petition to reconsider, group Vice President Glenn Reynolds said. “Given the size, scope and complexity of the USF-ICC reform order, it is common practice for entities to seek reconsideration of particular issues,” he said. “Based on input from our members, USTelecom plans to file a petition seeking action on a handful of discrete issues. While we seek clarity on some issues, we continue to support the core principles of reform included in the commission’s order."

What may be most surprising is who won’t challenge the order: an American Cable Association spokesman confirmed Thursday that his group won’t file a petition to reconsider. Cable companies had been among the most vocal critics of the rights of first refusal given to incumbents (CD Nov 19 Bulletin). It’s not clear if NCTA will file a petition or join the litigation: a spokesman there declined comment Thursday.

The Vermont Public Service Board plans to file a petition for reconsideration to make sure there’s reasonable comparability of intrastate rates, board member John Burke told us. The state commission had already filed a petition for review of the order. Some state regulators said the order lacks clarity and recently expressed their concerns with the FCC, a state official said. A petition for reconsideration or clarification would help answer their questions and move things forward, he said. Meanwhile, state commissioners created a task force to help states implement the order, said Brad Ramsay, NARUC general counsel.

Some telecom officials have raised concerns that a single successful challenge in court or at the FCC could unravel the entire reform package. If a significant number of reconsideration petitions is filed, it increases the chances that the 10th Circuit may hold the challenges in abeyance, said Harold Feld, legal director with Public Knowledge. Due to the complexity of the issue, the 10th Circuit may be eager to see if the FCC eliminates any issues via reconsideration, he said. On the other hand, if the FCC doesn’t stay operation of the new rules, then the litigation is more likely to go ahead, Feld said. There are potentially millions of dollars in revenue that will be impacted by the changes in ICC rules, even before the FCC determines how to implement the rules for disbursement of the new fund, he said.

As to whether litigation threatens the reform, many questions will be folded into a further notice, Feld said. He said he expects parties to raise “fundamental questions which go to the underlying theory of the new ICC and USF policies, so much so that if these were granted it would radically alter the nature of the Further Notice,” he said. At the same time, the FCC staff have a certain “regulatory momentum” from completing the USF overhaul, he said. Rather than losing that momentum by considering the reconsideration petitions and then trying to determine how that impacts the FNPRM, the staff might consider the reconsideration petitions and the further notice all together, he said.

The 10th Circuit has a recent history of reviewing significant and complex FCC decisions like Qwest forbearance, said Bingham, McCutchen telecom lawyer Andrew Lipman. He expects a consolidated proceeding. Unless there’s a stay, the USF order would take effect, but judicial review means there’s a “meaningful likelihood” that the FCC’s decision could be reversed, he said. Meanwhile, some carriers have already filed tariffs in many of the states to set the rate for VoIP traffic (intrastate access), a state regulatory analyst said.

The appeals and potential petitions for reconsideration make USF/ICC reform more of a work in progress because there are “so many moving parts” that involve “so much potential revenue,” said Medley Global Advisors analyst Jeff Silva. The lack of clarity could be a challenge for incumbents and federal regulators as they attempt next year to build on reforms without “having complete control of policy levers,” he said. The FCC “roadmap for USF/ICC reform will not be altogether scrambled when the dust settles,” he said.

A lot of energy has been spent on the question of how to handle local traffic between wireless and wireline carriers, the record at docket 10-90 showed. Rural and price cap carriers started the debate when they asked the commission to postpone the new rules (CD Dec 16 p12).

The incumbents have been joined by Integra and tw telecom (http://xrl.us/bmmonk) as well as Alaska Communications Systems Group (http://xrl.us/bmmobd). Wireless companies and competitors have standing contracts for exchanges, Integra and tw telecom said. “Immediate elimination of those rates will have a substantial adverse financial impact on CLECs without yielding any countervailing policy benefit,” the companies said in their joint ex parte notice.

But CTIA and MetroPCS have pushed back. MetroPCS is worried that granting the incumbents’ request “will undermine the significant and long overdue strides the Commission has taken to curb traffic pumping in the local reciprocal compensation market,” the company said in an ex parte notice (http://xrl.us/bmmn6n). “The High Priced LECs fail to sustain their claim that the Commission’s adoption of an immediate transition to a bill-and-keep regime for the exchange of … traffic was based on miscalculations, and as a result, the effective date for such a transition should be extended.”

CTIA said the default bill-and-keep was “an important element of the Order’s careful balancing of interests, which greatly benefits price cap LECs” (http://xrl.us/bmmn6i). Among other so-called gifts from the FCC, incumbents were allowed to assess intercarrier rates to VoIP traffic, “to collect access charges over the life of the plan” and additional USF support, CTIA said. “Areas served by price cap LECs, in particular, more than double their total USF receipts under the new regime, including an immediate boost of $300 million in 2012 that is not available to other types of providers under any circumstances,” CTIA said. The $300 million proviso was among the most irksome to price cap carriers because they weren’t allowed to reject it.

"In light of these substantial benefits,” CTIA added, “it is particularly ironic that the ILECs noted above have raised a concern about one of the few elements of the Order that has a potential negative impact on them in the near term.” FCC officials have told telecom lobbyists that they are considering issuing some kind of further rulemaking or public notice that could defuse the controversy over local traffic, a telecom official said. An FCC official declined comment.