Industry Divided on Windstream Request for CAF Waiver

USTelecom supported Windstream’s request, calling the Phase I rules too “restrictive,” and saying they were “preventing the Commission from achieving its goals” of expanding broadband availability “as much and as quickly as possible” and to begin “closing the rural-rural divide” (http://xrl.us/bnnd6m). USTelecom also said the FCC’s public notice mischaracterized Windstream’s request: Windstream does not seek an “independent waiver to use CAF Phase I incremental support to deploy second-mile fiber”; rather, Windstream asks that “the reasonableness of the support be evaluated on the basis of the cost to deploy a fiber route mile, rather than the cost to deploy broadband to a single location,” USTelecom said. Windstream’s request “clearly meets the “good cause” standard by enabling tens of thousands of consumers to gain prompt access to robust broadband service."

"Any waiver that would enable a price cap carrier to offer broadband service to locations in high-cost areas that otherwise would remain unserved by any competitor would serve the public interest,” said the Independent Telephone and Telecommunications Alliance (http://xrl.us/bnnd8w). “Windstream’s request goes to the very core of the Commission’s goals of CAF Phase I ’to provide an immediate boost to broadband deployment’ to rural consumers that lack access to such service today,” ITTA said, quoting the USF/intercarrier compensation order. The FCC should not only grant the Windstream petition, it should also make the same relief available to all price cap carriers that were allocated Phase I funding, it said.

Strict adherence to the one-unserved-location-per-$775 requirement will “disserve the public interest by indefinitely delaying broadband to literally tens of thousands of Americans,” the Telecommunications Industry Association said in support of Windstream’s petition (http://xrl.us/bnnd7t). In coming up with the $775 figure, the commission “relied on general models and limited anecdotal evidence,” but Windstream’s extensive modeling of its network deployment costs demonstrate “special circumstances,” TIA said. “Windstream finds itself in this predicament -- of being unable to accept roughly 99% of its eligible CAF Phase 1 funding -- because it has already expended significant resources deploying broadband to its ‘low hanging fruit,’ and quite a bit beyond that. It would be anomalous to punish Windstream’s unserved customers because of its previous efforts. We further note that there is no assurance unused Phase 1 support would ever be used for future alternative broadband investment."

Frontier cited last week’s Section 706 report (CD Aug 22 p1), which said 76 percent of the 19 million Americans without access to fast broadband live in rural areas (http://xrl.us/bnnd59). The commission has committed itself to providing broadband to all Americans, it said, and CAF Phase I provided a “rare opportunity to make an immediate impact by providing broadband to rural areas, such as those served by Windstream and Frontier.” Frontier said it was able to accept all $72 million offered to it in large part because of its 2010 purchase of lines formerly owned by Verizon, which only had a 62 percent broadband penetration rate. “Had Frontier not acquired the Verizon properties, it would have faced the same economic realities as Windstream when doing its CAF Phase I assessments."

Cable and wireless organizations opposed the petition. NCTA said the petition was “yet another attempt” to expand limited Phase I incremental support “beyond its intended purposes” (http://xrl.us/bnnd82). The petition “falls well short of satisfying the stringent standards for obtaining a waiver,” and the commission already rejected the same arguments when Windstream earlier asked the agency to reconsider its Phase I rules (CD April 2 p5). Should the commission change the ground rules for Phase I funding, it should first require Windstream to publicly disclose the locations where it plans to use that money and to identify both the areas where unserved subscribers are located and where the second-mile facilities will be built, NCTA said. “Any other approach would be contrary to the principles of accountability and transparency that have guided the Commission in its efforts to reform the universal service regime."

Windstream is trying to accomplish through the waiver process what it was unable to accomplish during the CAF rulemaking proceeding, Mediacom said (http://xrl.us/bnneb5). “Granting Windstream’s request would unfairly disadvantage those unsubsidized competitors, like Mediacom, that are using private funding to deploy broadband facilities to rural and unserved areas,” Mediacom said. It could also lead to the devaluing of existing facilities investments, as subsidized competitors could deploy government-funded broadband in areas where unsubsidized competitors have already invested facilities “in anticipation of similar deployments,” Mediacom said.

The money could be more effectively spent on wireless buildout, U.S. Cellular said. “The fastest most economical way to accelerate broadband deployment in rural America is to simply shift the funds rejected by all of the Price Cap carriers into the Mobility Phase I auction,” the carrier said (http://xrl.us/bnndsb). “There is no point in funding over $3700 per location served, as proposed by Windstream.” Reallocating the money to wireless “will begin to move overall CAF funding in the proper direction -- toward the broadband services that rural consumers overwhelmingly prefer, and need,” the filing said.

Windstream doesn’t offer adequate evidence to justify spending a “whopping $3,518” per location added, the Wireless Internet Service Providers Association said. The carrier “has not demonstrated ’special circumstances,’ only that, in its limited view, it cannot economically deploy service to more than 843 locations even with a $775 per-location subsidy,” WISPA said (http://xrl.us/bnnech). Windstream’s economic analysis “is based solely on the estimated costs of wireline and fiber technology, and it apparently did not consider the costs of other technologies, such as fixed wireless,” WISPA said. “Had it done so, Windstream would have a lower cost basis and thus would have been able to serve a larger number of unserved locations."

"Because Windstream has redacted all ‘confidential’ data from the public version of its waiver petition, it is impossible for interested parties to evaluate the reasonableness of its claim that it will cost, on average, almost five times the prescribed $775 cap to deploy broadband to various unserved areas,” Sprint Nextel said (http://xrl.us/bnndf2). “The Commission arrived at the $775 cap after careful analysis of multiple costing tools, and it would be irresponsible and arbitrary to throw out this figure and replace it with such a far higher amount without even the semblance of a financial analysis or even cursory check for reasonableness.”