T-Mobile Seeks Low-Income Fund at States, Protests USF Order
T-Mobile USA might be ready to re-emerge as a competitor now that the deal with AT&T is over: The carrier is seeking low income-only eligible telecommunications carrier status in five states. Even as the deal with AT&T was moving forward, T-Mobile was quietly seeking certification as an ETC in four states. Meanwhile, it’s protesting the FCC’s 2011 Universal Service Fund order’s treatment of carriers designated as ETCs. Its petition for reconsideration or clarification (http://xrl.us/bmnmv4) of the FCC’s USF revamp order was the first major filing by T-Mobile since AT&T’s proposed buy of the company was officially terminated Dec. 19.
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During November and December, T-Mobile filed Lifeline-only ETC applications in Indiana, Ohio, Massachusetts, Pennsylvania and Missouri. Additionally, the carrier has full ETC (both high-cost and low-income funds) applications pending in Oregon, Georgia, Mississippi and Arizona. It was seeking full ETC status even before the deal with AT&T was announced. T-Mobile has full ETC status in nine jurisdictions: Florida, Hawaii, Idaho, Kentucky, Louisiana, Minnesota, North Carolina, Puerto Rico and Washington
The Lifeline ETC filings could have been a backup plan, devised when T-Mobile figured the deal might be dead, a state regulatory analyst said. The carrier wants to become an aggressive competitor again and this may be part of the plan, she said. With Europe in financial trouble, the U.S. may be a better place to focus T-Mobile’s efforts, she said. T-Mobile declined to comment.
The termination of the AT&T deal makes new revenue streams more attractive, said Harold Feld, Public Knowledge legal director. Pursuing Lifeline opportunities is consistent with T-Mobile’s general strategy of targeting lower income, cost-conscious consumers, Feld said. T-Mobile would be a very different ETC for low-income consumers because it’s not a MVNO like Tracfone, he said. Additionally, offering subsidized voice contracts under Lifeline would make T-Mobile’s data packages accessible to low-income subscribers even though the data package wouldn’t be subsidized, he said.
Meanwhile, T-Mobile asked the FCC to make changes to its November USF/intercarrier compensation order protecting its interest as an ETC wireless carrier. Some of T-Mobile’s competitors, including AT&T, receive USF, Feld noted. This suggests T-Mobile is preparing to build out in rural areas where high cost support is needed to be profitable, he said. He also noted T-Mobile may qualify for general funding from the Connect America Fund and not merely for funding from the Mobility Fund because the carrier’s HSPA+ network can probably meet the minimum upload and download speeds to qualify for the general fund.
Offering Lifeline service is a smart strategy in a saturated wireless market, said Paul Gallant, analyst at Guggenheim Securities. “It gets T-Mobile in the door with a lot of potential full-freight customers,” he said. But this move probably needed to wait until the merger was dead because AT&T is mostly about the higher end of the market, he said. It would be speculation to suggest a connection between the timing of T-Mobile’s filing of Lifeline ETC applications and the collapse of the deal, said Jeff Silva with Medley Global Advisors. Merging companies undergoing regulatory review must be careful to avoid “running afoul of the law.” They must continue to compete and not strategically change corporate behavior before closing in such a way so as to arouse suspicions of antitrust authorities, he said.
In its petition for reconsideration/clarification, T-Mobile took issue with the FCC’s plan for phasing down high-cost USF support received by competitive ETCs, which it said would “undermine” its “commitments to build out its network in rural areas in several states.” The “reduction or elimination of T-Mobile’s federal high-cost USF support ... would threaten the planned build-out of rural cell sites and undermine the expectations of rural consumers for new affordable mobile services,” T-Mobile said.
Under the order, the FCC requires CETCs to calculate their “monthly baseline support amount” by dividing their total high-cost support for 2011 “by twelve,” T-Mobile noted. That works against states that only received funding for part of the year, that would have to divide that funding by 12 rather than the amount they would have received for the entire year, the filing said. “Such an abrupt, random reduction in support cannot satisfy the principle set forth in Section 254(b)(5) of the Communications Act that support should be ’specific, predictable and sufficient,'” T-Mobile said.
"This is not a theoretical concern to T-Mobile,” the filing said. It was designated as a CETC in Hawaii in March of this year, Idaho in July, Minnesota in September and Louisiana in October. Dividing the partial year support for those service areas by 12 will result in monthly baseline amounts for those areas significantly below the level intended” by the USF/ICC reform order, it said.
T-Mobile also argued that the FCC shouldn’t cut off support for CETCs in cases where applications were pending last year. “The only distinction between those ETC applicants and a CETC that was designated in 2011 is a processing delay,” T-Mobile said. T-Mobile said changing the rules wouldn’t add to the amount of support CETCs receive, just change how it is allocated. “A carrier that is ultimately designated as an ETC ... has the same demonstrated need for high-cost support as any CETC receiving support in 2011,” the filing said.