States Eager To Spur Mobile/Broadband, Should Scrap Barriers, Say Panelists
State officials want to promote mobile coverage and broadband deployment, said Lukas, Nace attorney David LaFuria at an FCBA panel Friday on state universal service issues. “They all have a desire to do something,” said LaFuria, who represents wireless carriers in FCC and state proceedings. He said some state regulators face statutory limitations but states could “regulate” broadband USF by following an FCC approach that combined “voluntary” industry acceptance of support with broadband conditions. States can help by removing regulatory barriers to broadband deployment, said Micah Caldwell, ITTA vice president-regulatory affairs. Jennifer Schneider, vice president-legislative affairs for Frontier Communications, said more states should reduce ILEC voice regulations, including carrier-of-last-resort (COLR) obligations.
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Forty-five states have some form of state USF and 22 have high-cost mechanisms, including six that support broadband, said LaFuria, citing a National Regulatory Research Institute report. The state USF systems provide almost $1.5 billion in annual support, more than $500 million of which is for high-cost support, he said. State officials want to solve “very practical problems,” LaFuria said, and are always asking him about “dead zones” along major highways. They understand the need for greater mobile coverage and broadband deployment, he said.
The question of what state regulators can do depends on state statutes, some of which restrict their authority, LaFuria said. New Mexico created a USF-like mechanism to help incumbent telcos as their intrastate access charges were reduced, he said, but a 2014 order to lower ILEC support as traditional voice minutes dropped, which was to be followed by a proposed shift to broadband USF, is being challenged in the state Supreme Court. He also said states interested in tapping broadband industry revenue to support their USF efforts were pre-empted from doing so by the FCC net neutrality order for the time being.
LaFuria said there nevertheless is growing “impetus” for the states to do more to encourage mobile/broadband deployment. He said even when the FCC holds its next reverse auction for mobile USF support, many state officials believe it won’t be enough to make a serious dent in coverage issues. The “gut” feeling of many state officials is “if there’s a need, we ought to get on with it,” he said.
LaFuria said he believed all states can, in effect, “regulate” broadband for USF purposes despite certain restrictions, including that broadband is considered an "interstate" service. He said states should follow the approach the FCC took in its 2011 USF transformation order in which it didn’t make rural broadband deployment mandatory, but conditioned “voluntary” industry acceptance of new USF support on meeting broadband duties. That approach was upheld by the 10th U.S. Circuit Court of Appeals, “and I don’t see why the states can’t run with that precedent,” he said.
Caldwell said states can ease broadband deployment by eliminating regulatory barriers, including in processes to obtain rights of way. She said price-cap telcos have more regulatory certainty now that they know how much Connect America Fund (CAF) Phase II broadband-oriented support they'll receive. But rate-of-return carriers face much uncertainty over FCC efforts to update high-cost USF support through a “bifurcated approach” to legacy mechanisms -- which would continue to fund old investments for some time but be replaced by new mechanisms for new investments -- and a voluntary option of receiving support based on a broadband cost model. Different carriers will do better under one approach than the other, she said, but some may choose the model-based approach even if they get somewhat less support if it provides more long-term certainty. The prospect of change creates much discomfort for some carriers, she said.
Caldwell noted state interest in the FCC efforts to modernize Lifeline USF support for low-income consumers, including by covering broadband service. ITTA is urging the FCC to streamline the eligible telecom carrier (ETC) process, and “de-link” it from the Lifeline program, a prospect she acknowledged raises state concerns. ITTA also wants the FCC to move verification of consumer Lifeline eligibility from carriers to a national entity; ITTA believes states could continue to do their own verification, but it would help if they coordinate with the national entity, she said.
Caldwell said ITTA wants the FCC to tackle USF contribution reform, which is “directly relevant” to Lifeline broadband coverage. Commissioner Jessica Rosenworcel, who's on the USF Federal-State Joint Board, has indicated the panel has paused to see what happens with the net neutrality litigation before proceeding to make recommendations on contribution reform, Caldwell said. But the pressures for change are growing as industry long-distance voice revenue declines and the USF contribution rate climbs, possibly above 18 percent next quarter, Caldwell said.
Schneider said Frontier is a “big supporter” of USF, having accepted all of the CAF II support for which it was eligible. She said the FCC has stringent oversight and reporting requirements attached to funding, backed by major penalties for non-compliance. She praised Commissioner Mike O’Rielly’s recent blog calling for elimination of many voice regulations that are “outdated” due to robust competition (see 1511120041). “We think that’s a fantastic idea and we hope it translates to the states,” she said. Several states had already scaled back incumbent telco COLR duties, and Frontier is hopeful more will follow. The COLR regulations are particularly problematic when Frontier faces competitors without the regulations, she said. The states can further help by encouraging consumer broadband adoption, she added.