State Regulators Pan Industry-Backed USF Reform Plan

State regulators took aim at the industry-endorsed proposals for universal service and intercarrier compensation regime reforms, in reply comments on docket 10-90. Drawing the heaviest fire was the incumbent-backed America’s Broadband Connectivity plan. Regulators from Maine to Alaska blasted the proposals. State regulators have formed themselves into a task force hoping to convince the FCC that it’s too early to create uniform compensation rates (CD Sept 2 p7).

The ABC Plan doesn’t offer concrete benefits for end-user consumers, said the Pennsylvania Public Utility Commission, urging the FCC to reject the ABC Plan and adopt the proposal by state members of the USF Joint Board. The Kansas Corporation Commission said it was “greatly concerned” that the ABC Plan will penalize states like Kansas that already have state USF, particularly where the state fund operates as a backstop to cover ILECs’ access restructuring revenue losses not compensated by the federal USF. Naturally, the broad federal preemption of the states inherent in the ABC Plan won’t help individual states to manage intrastate ICC revamp, Pennsylvania regulators said.

States like Maine and Vermont that have supported broadband expansion through local rates would receive much less funding in order to extend broadband service in their highest-cost areas because the ABC Plan “totally eliminates funding of service where the cost is over $256 a month,” Maine and Vermont regulators said in a joint filing.

Alaska regulators, who proposed their own reform package, said few elements of any other proposal under review would ensure deployment of broadband services in their state. Alaska regulators urged the FCC to consider a separate plan for the state. The Alaska Plan calls for a cap on high cost funding at 2010 levels. Though reductions to support would be necessary if future support levels exceed the cap, a procedure for applying such reductions hasn’t been developed. The Alaska regulators urged the FCC to allow more time for determination of the details of how an Alaska Plan would be administered.

Some rural carriers from Wyoming have endorsed the ABC Plan and its rate-of-return proposals, the Wyoming Public Service Commission said. But those carriers have affirmed to the Wyoming commission that $0.0007 doesn’t cover their costs, consistent with their position when the Wyoming legislature set the $0.03 limit, the Wyoming PSC said. These carriers were willing to accept the ABC Plan as “a settlement,” the state commission said. As long as state policy favors a cost-based ceiling of $0.03 on access charges, there’s no reason why such charge shouldn’t be available to rural wireline carriers, it said.

The American Cable Association said it hadn’t seen anything in initial comments that had eased their concerns that reform proposals were merely the incumbents dividing up the money among themselves. “On the one hand, the Price Cap incumbents argue that any Commission decision should reflect the reality that the telecommunications landscape is now dominated by competitive forces. On the other hand, they propose in the ABC Plan a series of blatantly pro-incumbent, anti-competitive policies,” the association said. “These backwards-looking policies are even more troubling because the incumbents lock in their advantages for the rest of the decade and beyond, a time when competition and new technological developments are certain to increase. Further, by favoring themselves at the expense of competitors and consumers, the Price Cap LECs waste valuable government support and set-back the expansion of universal broadband deployment."

Cox Communications said the ABC Plan would “create a new competitive imbalance between incumbent LECs and competitive LECs by allowing incumbent LECs to receive support from the mechanism for revenues lost as a result of differential compensation rates for IP-based traffic.” Cable companies would suffer the most under the plan, Cox said (http://xrl.us/bmcq6e): “There is no way to understand this proposal except as a punitive measure imposed on competitors for using IP-based technologies. There is no doubt that the differential rates under the ABC Proposal would have their greatest impact on cable operators that offer voice services."

In joint comments (http://xrl.us/bmcq6i), Cbeyond, Integra Telecom and tw telecom said the incumbent-backed reform plans are “anything but a ‘consensus’ proposal.” The ABC Plan was “obviously designed to benefit the Price Cap ILECs’ interests at the expense of competitive LECs, wireless carriers and even consumers,” the CLECs said.

Incumbent carriers appear to have dug in on their plans. In a joint filing, the three biggest rural associations said tweaking the reform plans would “destroy” any chance at meaningful reforms. The associations, which filed a “complimentary” proposal to the ABC Plan, said reform “hangs on a delicate balance and upon multiple and intertwined accommodations and concessions.” There may be room for some “refinements designed to assure accomplishment of the Consensus Framework’s key objectives” but further changes “may very well render it unworkable,” the rural associations said.

The six companies behind the ABC Plan said “it would be impossible to satisfy every industry participant or interest group” that their plan is the best one offered. “The Plan represents the Commission’s best chance to achieve meaningful, but to date, elusive universal service and intercarrier compensation reform,” the companies said. “The Commission should adopt it.”