NARUC Panelists Debate State Role in Broadband, USF Impact

ST. LOUIS -- While some panelists at NARUC’s annual meeting see a continuing state role in a broadband world, others urged regulators to be mindful of market changes that have resulted in loss of revenue. And while some said they can live with the FCC’s Universal Service Fund order, others find it unacceptable.

While it makes sense to set national principles through the FCC, states are best suited to implement policies, protect consumers and resolve disputes, said Keith Oliver, senior vice president with Home Telephone Co., a South Carolina service provider. “You need to allow states to step in to do their jobs,” he said. One of the reasons to regulate is to prevent the abuse of market power, he said. Moving into a broadband world, regulators need to make sure large carriers are playing within the rules, he said. State regulators also play a role in ensuring accountability in public funding, he said. The market isn’t necessarily good at resolving disputes, so there’s a continuing role for states, said Indiana Utility Regulatory Commissioner Larry Landis. As voice lines decline, state regulators need to be mindful of who they regulate and how they regulate, said AT&T Vice President Joel Lubin.

As voice revenue declines, federal and state regulators should ease the burden on voice providers, said communications attorney Thomas Navin of Wiley Rein, former Wireline Bureau chief. The system of carrier-of-last-resort (COLR) will have to evolve as competition from different services intensifies, he said. It’s difficult to maintain COLR obligation on a service provider that regulators aren’t willing to fully compensate, he said. That means some flexibility is needed for providers to achieve return on investment, he said. Modifying COLR policies is necessary in a broadband world, said Rick Cimerman, NCTA vice president.

The NCTA had some concerns about the issue of right of first refusal in the USF order, said Cimerman. But overall the intercarrier compensation part of the order appears to be generally reasonable, he said. The USF order is only the start of the discussion, said Navin. Several rulemakings are expected to follow the order, he said. With intercarrier compensation funding going away, rural providers need to look at alternatives to grow revenue, Landis said. One way is through providing new content, he said. But rural companies have been having trouble purchasing video programming at reasonable price, he said.

It’s difficult to see how the USF order would help broadband expansion in rural rate-of-return areas, Oliver said. Quite the contrary, there would be reduction in broadband services post-order, he said. Though not everyone likes the order, it’s necessary to have the order done sooner than later, said Lubin. Everyone finds deficiencies in the order, Landis said. As long as the order “isn’t cast in stone, we can be cautiously optimistic,” he said. Hopefully the FCC can work on issues including broadening the contribution base, USF distribution and improving Lifeline for broadband, Lubin said.