The FCC should include an Alaska Plan in a looming rate-of-return USF overhaul, General Communications Inc. (GCI) and other Alaska telecom interests are telling commission officials. The plan is aimed at supporting broadband deployment in rural Alaska, and time is of the essence, given the state's construction season, they say. Native American groups are separately pushing for including a Tribal Broadband Factor, citing a projected reduction of almost $33 million in support for carriers serving tribal lands under a draft FCC order. Alaska Communications Systems (ACS) also has asked the FCC to adopt its price-cap USF proposal for Alaska.
Federal Universal Service Fund
The FCC's Universal Service Fund (USF) was created by the Telecommunications Act of 1996 to fund programs designed to provide universal telecommunications access to all U.S. citizens. All telecommunications providers are required to contribute a percentage of their end-user revenues to the Fund, which the FCC allocates for four core programs: 1. Connect America Fund, which subsidizes telecom providers for the increased costs of offering services to customers in rural and remote areas 2. Lifeline, which directly subsidizes low-income households to help pay for the cost of phone and internet service 3. Rural Health Care, which subsidizes health care providers to offer broadband telehealth services that can connect rural patients and providers with specialists located farther away 4. E-Rate, which subsidizes rural and low-income schools and libraries for internet and telecommunications costs The Universal Service Administrative Company (USAC) administers the USF on behalf of the FCC, but requires Congressional approval for its actions. Many states also operate their own universal service funds, which operate independently from the federal program.
State and federal regulators need to be focused on making broadband work, experts said during a National Regulatory Research Institute webinar Wednesday. The NRRI event expanded on a panel -- with the same participants -- held at a NARUC meeting in Washington last week (see 1602160004).
The FCC would reduce rural telcos’ rate of return from 11.25 percent to 9.75 percent over six years under a USTelecom and NTCA proposal to revamp USF mechanisms for broadband coverage. The groups also proposed broadband buildout obligations requiring RLECs to reach up to 80 percent of unserved locations over five years and a screen for phasing out USF support in high-cost areas where unsubsidized competitors reach 85 percent of locations, said a filing posted Monday in docket 10-90. It summarized a meeting last week with senior FCC officials, including Chairman Tom Wheeler. NTCA, WTA and individual RLECs made separate filings citing concerns and offering proposals. Wheeler is said to be interested in circulating a draft order soon (see 1602040055).
Large telcos are seeking renewed USF voice support in remote areas where funding was cut off but their obligations to provide phone service continue under a transition to broadband-oriented mechanisms. Representatives of AT&T, CenturyLink, Frontier Communications, Verizon, Windstream and USTelecom jointly discussed the issue with FCC officials in a series of recent meetings, and Frontier sought relief in separate meetings with two commissioners, according to filings in docket 14-192. “It will happen, with some sort of path to broadband,” USTelecom Senior Vice President Jon Banks told us.
The Supreme Court could eventually review USF False Claim Act (FCA) litigation, a lawyer in one of the cases said at an FCBA seminar Wednesday. Vinson & Elkins attorney Jeremy Marwell said fraud allegations against recipients of USF support don’t qualify under the FCA, but he acknowledged it’s a “close question,” particularly in light of mixed court rulings to date. While Marwell was on the winning side of a July 2014 E-rate decision by the 5th U.S. Circuit Court of Appeals, which ruled the FCA doesn’t apply to USF programs (United States ex rel. Shupe v. Cisco, No. 13-40807), other cases are pending in the 7th Circuit and D.C. Circuit, which could create a circuit split. Marwell said he “wouldn’t be surprised” if the cases go to the high court.
AT&T compared FCC partial relief for telcos to a kid shoveling only half a sidewalk after a snowstorm. In a blog post Wednesday, Vice President-Federal Regulatory Hank Hultquist noted the FCC in December partially denied a USTelecom petition that the agency forbear from applying various regulations, including a request that price-cap ILECs be relieved of universal service obligations where they no longer receive USF support (see 1512170052). “In explaining this denial, the FCC sounds an awful lot like a kid explaining why he shoveled only part of the sidewalk,” he said. “Of course, the FCC knows that it has not provided sufficient universal service support for these high-cost and extremely high-cost areas. But it hopes to escape its responsibility by invoking the farcical claim that price cap ILECs continue to be 'eligible' for other universal service support (e.g., Lifeline) in these areas.” Hultquist termed “ridiculous” FCC arguments that USTelecom didn't make the case for USF relief and that AT&T data was lacking because the agency didn’t adopt a related cost model. "If the FCC doesn’t want to fund universal service obligations in these areas, it should just get rid of them, as USTelecom asked it to do,” he said. “Unfortunately, the FCC appears determined to try to maintain the obligations without taking responsibility for them. I think it’s time for someone -- like an appellate court or Congress -- to tell them to pick up the shovel and do the job right.” AT&T has challenged the order and a related previous order in court (see 1601110036). The FCC had no comment Wednesday. Chairman Tom Wheeler had proposed some extra USF voice support for carriers, but Commissioner Ajit Pai said it was inadequate and an agency majority didn't vote for it.
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.
The FCC appears to be nearing a vote on a key AT&T spectrum buy -- the carrier’s planned acquisition of lower 700 MHz B-block licenses in California from Club 42, industry officials said. Competitive carriers view the order as a key test of the 2014 mobile spectrum holdings order (see 1405160030). It committed the agency to give extra scrutiny to deals where a company already owns more than one-third of the low-band spectrum in a market.
The first days under House Speaker Paul Ryan, R-Wis., should encourage telecom industry stakeholders, Washington veterans told us. The 45-year-old Ryan, a 2012 vice presidential candidate and most recently Ways and Means Committee chairman, kept a low profile on telecom issues since election to the House in 1998. But his focus on tax and regulation has often led to backing certain telecom measures over the years, with focuses ranging from E-rate to USF to the fairness doctrine. He assumed the speakership after the retirement of Rep. John Boehner, R-Ohio, at October’s end, following weeks of GOP leadership uncertainty, and a crucial hire in Ryan’s leadership office showcases strong ties to industry.
WTA members voiced doubts about a broadband cost model and some other aspects of a potential FCC overhaul of high-cost USF mechanisms for rural rate-of-return telcos. Arvig Enterprises, 3 Rivers Communications and the Range family of telecom companies said they have yet to determine the likely impact of possible future USF support on their operations “due to the number of significant details that remain unresolved” in two-track proposals to give rural telcos the option of receiving support based on a broadband cost model or based on updated USF mechanisms. The companies “expressed concerns regarding the general accuracy of the price cap-based model for rural companies, as well as their present inability to determine the amount of Model-based support they might receive and their associated build-out obligations,” said a WTA filing posted Monday in docket 10-90 on their meeting with an FCC staffer. They said their ability to serve remote, high-cost customers would be undercut if the FCC reduces a cap on model-based support per location. “They also noted that many state universal service funds are tied to the existing federal mechanisms, such that shifts to Model-based support could mean loss of state support by some rural carriers,” the filing said. “The companies also expressed concern that the proposed bifurcated rate-of-return path was being developed in a rapid and untested manner, and could well entail a number of unforeseen consequences. They pointed particularly to the increased recordkeeping and accounting complexities and costs and the difficulties of accurately and equitably allocating investments and associated operating expenses.” In addition, they suggested the FCC’s current 10/1 Mbps broadband USF definition won't be “reasonably comparable to urban broadband speeds and applications for very long” (such reasonable comparability is a statutory USF standard). Whatever high-cost support changes the FCC makes, the companies stressed the need for “stability, predictability and sufficiency." WTA made similar filings (here and here) on behalf of Range and Volcano Communications after meetings with other FCC staffers.