CAF Order Updated to Counter Pai Dissent, Officials Say

More than six weeks after passage, the text of the Connect America Fund order was released Tuesday (http://bit.ly/1pl9HHQ). Many of the changes to the CAF order (CD June 9 p7) were primarily focused on responding to Commissioner Ajit Pai’s dissent, FCC officials told us. An FCC spokesman declined to comment on the internal editing process or whether substantive changes were made, but said the fact sheet given to reporters at the April meeting “accurately reflects the final draft.”

Industry officials told us there were no surprises, and the released draft is about what they expected. Pai’s statement released Tuesday (http://bit.ly/1pl167W) is significantly changed from his original comments delivered from the dais at the April 23 meeting. The additions mostly respond to the new paragraphs added to the CAF order, itself responding to Pai’s dissent.

Pai wrote that he “cannot square” one aspect of the order with the Communications Act. “The Order finds it permissible to impose broadband common-carriage obligations” on LECs, “despite the fact that section 3 states that a ’telecommunications carrier shall be treated as a common carrier under [the Communications Act] only to the extent that it is engaged in providing telecommunications services,'” Pai said, quoting the Communications Act. “It does so without finding that the legacy universal service offered is in fact ’sufficient’ to meet these new obligations as required by section 254. The ‘broadband public interest obligations,’ as the Order styles them, smack of common carriage.”

"We are not persuaded by the argument that the broadband public interest obligations are not a voluntarily assumed condition on the receipt of federal subsidies,” responded the order, citing Pai’s new dissent. “All incumbent LECs are subject to regulatory obligations as incumbents, irrespective of whether they receive high-cost universal service support,” the order said. “We find no distinction between conditions on support distributed under the new funding mechanisms and conditions on legacy high-cost universal service support.” The order’s broadband public interest conditions imposed by the USF/ICC transformation order on the receipt of federal USF subsidies “do not constitute a per se common carrier obligation,” the order said.

Pai also added a paragraph pushing for the commission to reconsider the rate floor later this year with “a more fulsome record -- as a data-driven agency should.” That consideration would give the agency the opportunity to review whether it makes sense for rural rates in some states to “leapfrog the prevailing local telephone rates in the more urban areas of the state,'” Pai said.

NTCA Senior Vice President-Policy Michael Romano said he didn’t see anything in the order “out of the blue” or “unanticipated from what we understood to be in the item.” With the release of the text, NTCA is “very encouraged” that the quantile regression analysis benchmarking rule has been eliminated, he said: “It doesn’t restore certainty,” but “it certainly removes a curtain of uncertainty that hung over everything.” The order -- the seventh on reconsideration -- isn’t so much forward looking as “cleaning up things in the 2011 order that clearly did not work,” Romano said. There’s a lesson to be drawn from that, he said: Undertaking changes to systems as complex as these requires thinking carefully about the boxes one needs to check to get to an end goal, he said. “When I want to win a chess game, I don’t go to checkmate in two moves.”

CenturyLink Vice President-Federal Regulatory Jeff Lanning agreed there were “no surprises” in the released order. The further notice, which contemplates increasing the CAF Phase II broadband buildout requirement from 4 Mbps to 10 Mbps (CD April 8 p10), asks “a lot of the right questions” about “commensurate changes” to other parts of the program to make it work, Lanning said. There’s a lot of unanswered questions, coupled with a desire to really think through potential answers, he said: “It’s very clearly a notice of proposed rulemaking.”