RLECs Urge FCC to Extend Separations Freeze at Least 18 Months; NASUCA Cites Costs
Rural telcos endorsed the FCC's proposed 18-month extension of a freeze on jurisdictional separations of rate-of-return telco cost calculations while the commission works with state regulators on overhauling the current rules. Some RLEC groups urged a longer extension to account for the time needed for regulatory decision-making and implementation. But a consumer group voiced concern about an indefinite extension, and a new group calling itself the "Irregulators" opposed the proposal, as parties filed comments posted Monday and Tuesday in docket 80-286.
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A federal-state joint board is expected to make recommendations to the FCC for "comprehensive separations reform by April 2018, said an FCC NPRM that proposed extending an existing freeze by 18 months beyond June 30 (see 1703200061). Part 36 rules and related allocation factors, which separate regulated telco costs between the intrastate and interstate jurisdictions, were frozen for both price-cap carriers and rate-of-return carriers in 2001 on an interim basis for five years. Since then, the freeze has been repeatedly extended, though price-cap carriers received "conditional forbearance from the rules," the NPRM said.
Three groups representing rural telcos backed the proposed extension in some form. "[I]t is difficult to conceive of any compelling argument against extending the existing separations freeze," said NTCA comments. "The policy changes referenced by the Further Notice represent, for RLECs in particular, perhaps the most fundamental policy changes to cost recovery mechanisms since the Commission’s early efforts to effectuate the Telecommunications Act of 1996." The extension should be at least 18 months, but the agency needs time "to consider any Joint Board recommendation once issued and should therefore adopt an extension of the freeze tied specifically to and triggered by the issuance of such a recommendation," NTCA said. "Further, the length of that extension should also take into account the need to grant affected carriers sufficient time to conform to any new Commission rules ultimately adopted."
The National Exchange Carriers Association "strongly supports" an extension of at least 18 months, and suggested a further six-month extension after revised rules become final, it commented. USTelecom said it supports "in part" the proposed extension "with the narrow exception that rate-of-return companies that have elected Alternative Connect America Cost Model (A-CAM) receive a one-time opportunity to unfreeze their category relationships immediately." Terral Telephone asked the FCC "not to extend the freeze of the separations category relationships as it applies to Terral and to grant its pending petition for waiver of the frozen separations categories, as necessary," it said. "Simply put, the frozen separation categories no longer resemble the broadband network that Terral operates and prevent Terral from recovering its existing costs from those customers benefiting from Terral's broadband services."
The National Association of State Utility Consumer Advocates said the freeze costs consumers billions of dollars a year, because separations help ensure consumers aren't paying more than they should for interstate or intrastate service. "[I]t is clear that the frozen rules are outdated, 'given the significant changes in technologies and investment decisions, as well as changes in regulatory approaches at both the state and federal levels' since 2001," NASUCA commented, quoting the NPRM. "The Commission notes that reinstating the separations rules 'would require substantial training and investment.' Part of this is, of course, the result of the length of the freeze. NASUCA sincerely hopes that the result, after the further eighteen-month extension, will not be to allow the freeze to continue indefinitely, ignoring the continuing costs to consumers."
The Irregulators opposed the latest freeze proposal. "We object to the extension on the grounds that it is being done as a cover-up so that actual financial data is excluded from the FCC rulemaking process," the group said, citing the need to examine the state rules applied to AT&T, Verizon and CenturyLink revenue and expenses. "The FCC must audit the financial accounting books of the incumbent state utilities immediately and stop all proceedings until it actually does the proper analysis of Business Data Services, (formerly called 'Special Access' services), revenues and profits, as well as the treatment of the copper utility networks, or the financial impacts of the IP Transition." The group, which includes New Networks Institute Executive Director Bruce Kushnick and nine others, said it was formed in April and comprised "of retired and semi-retired telecom experts, analysts, policy wonks, forensic auditors, and lawyers who are former senior staffers from the FCC, state advocate and Attorneys General Office experts and lawyers, as well as former telco staff and consultants."