Cable Operators Differ on USF Changes to be Sought by USTelecom
Phone companies aren’t the only industry group divided by potential Universal Service Fund change proposals. With a group convened by USTelecom poised to give the FCC on Friday a plan to make USF pay for broadband (CD July 26 p1), large and small cable operators also have different views on that framework. Just as major phone companies like AT&T and Verizon are expected to back the plan, with some mid-size telcos also joining in, the biggest U.S. cable operators also may support many if not all parts of the plan. As with small telcos that are net recipients of USF money and intercarrier compensation funds, cable operators that get such money also may back few if any aspects of the framework. That’s according to interviews with cable executives Tuesday.
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Cable operators that get little or no money from USF or ICC have more incentive to back the USTelecom-led proposal, because the plan is likely to reduce the amount of such funds some phone companies and multiple system operators get, MSO executives said in interviews. They said there also are some differences within the cable industry over how to treat VoIP for purposes of USF. Because of differences among NCTA members, that association likely won’t support the entire USTelecom-backed plan and may not even make any FCC filing when the proposal is made later this week, cable executives said. An association spokesman declined to comment.
Large cable operators have little to lose by backing the plan to be filed at the commission by the USTelecom-led group, because its provisions won’t hurt them and may help them somewhat, industry executives said. They said smaller operators more reliant on USF and ICC money, with more to lose, appear to be continuing to talk to USTelecom and its major members AT&T and Verizon about making changes to the framework. Such operators could be companies like Bright House Networks and Charter Communications, as well as mid-sized operators, executives of other cable companies said. “Charter is closely monitoring the discussions and continuing to assess the situation,” said a spokeswoman for Charter. Bright House representatives had no comment.
"You have one side of large cable MSOs saying ‘let’s do it, let’s just sign on, this is not the worst thing in the world, but this is better than nothing” so that USF can be changed, a cable executive said. “You have the other side saying ‘no, no, no,’ let’s not get on board yet. So you have an NCTA split.” Another executive agreed it’s unlikely NCTA will back the plan. AT&T “is doing a good job -- this thing is gaining momentum,” said a cable executive. “The question is how will the rural telcos come out on this,” and AT&T “is looking to see how can we further build our base,” the executive said. A USTelecom representative had no comment.
Smaller cable operators want to make sure the size of USF doesn’t expand too much and want to limit the fund from being used to overbuild existing ISPs, executives said. The American Cable Association’s “main concerns with USF is making sure the fund doesn’t continue to grow” and “being concerned about making sure that funding is not continuing to go to entities that are competing against unsubsidized entities,” said Vice President Ross Lieberman. “We'll see what’s in the details of the plan, when it comes out.” The group has been speaking with AT&T and other principal stakeholders, “and we think they understand what our interests are in the outcome of USF reform,” Lieberman said. “We are, like many people, waiting to see what’s submitted to the commission. And once we see the details, we'll know further where we stand on this precisely."
Stifel Nicolaus is “skeptical” that rural carriers will sign off on the USTelecom-brokered reform package, its analysts said Tuesday. Nonetheless, “even a high-level agreement on principles would be helpful,” Stifel said. “Our sense is there could be varying degrees of support and concern expressed by others, with smaller wireless carriers such as U.S. Cellular the most threatened by a proposed phase-out of most wireless USF.” The plan has won endorsements from mid-sized carriers CenturyLink, Frontier, Windstream and FairPoint (CD July 6 p6). “We believe the Bells are playing offense and the fact that the price-cap midsize carriers have joined them is helpful to the former and a hopeful sign for the latter,” Stifel said. “There are many remaining uncertainties, but the midsize telcos are seeking greater revenue stability over time by accepting deeper cuts in already-eroding access charges, in exchange for more-sustainable offsets while they can still be justified -- certain short-term pain for potential long-term gain, or at least certainty."
USF is “a difficult issue with a lot of moving parts,” and there’s always a risk of letting major players take the lead in proposing something to a regulator, said Vice President Levi Maaia of Full Channel. “We'd like to see the fund capped. We don’t want to see it increase and put an increased burden on our customers.” The cable operator with about 7,000 video subscribers in three Rhode Island communities doesn’t get any USF money, and wants to ensure that it can’t be overbuilt with USF funds, Maaia said.