Most Wireless Carriers Push for Changes to ABC Reform Plan
Wireless carriers other than AT&T and Verizon Wireless, which signed the ABC Plan for Universal Service Fund and intercarrier compensation reform, hope to win concessions as proposed changes to the program move forward at the FCC. With the wireless industry presenting a divided front, it’s unclear how much leverage smaller wireless carriers will have and what changes they will be able to push through at the commission.
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"ABC is a good starting point,” said one FCC official. “The challenge will be to figure out how far from that can the commission venture without some of these coalitions falling apart.” The wireless industry is divided, the official said: “I do think that’s a big part of the equation -- how much money will wireless get?"
Proposals for USF high cost and Lifeline reform are mostly “unfriendly” to wireless, which is out of synch with the FCC’s wireless focus in many other areas, said a telecom lawyer and former FCC official. “In some ways they're kind of retrograde,” the lawyer said of various reform proposals. “They look back to a world where wireless wasn’t as central as it appears to be in peoples’ lives and as important to things like public safety as it appears to be in peoples’ lives.”
Wireless likely will get some concessions on USF beyond the ABC Plan, depending on how strong of a fight rural wireless carriers make, said a wireless lawyer. “The issue has been the fact that when the wireless carriers started coming in and [program] grew and grew and grew there was a sense at the FCC and among the rural LECS ... that it was the entry of the wireless carriers that caused the costs to spiral and caused the problem,” the lawyer said. “They were only doing what was allowed in taking advantage of the fact that more customers have been switching over to wireless and that’s true in rural areas as well as in urban areas. To better serve all these new rural wireless customers universal support has been very, very helpful and it’s helped remove some of the impediments.” The lawyer said rural wireless carriers “certainly are not going away and I think they have an important message that the FCC is going to have to address somehow."
"It won’t be easy for small wireless operators to dislodge the basic planks of the ABC Plan, but there’s still some time left on the clock and competitive neutrality is an effective argument,” said MF Global analyst Paul Gallant.
FCC commissioners want to get “something done,” but may not be thinking enough about what the ABC Plan could mean as it plays out, said Steve Berry, president of the Rural Cellular Association. “Right now if the wireline guys lose subscriber lines the subsidies per person just gets higher” under the plan, Berry said. “You'll have [rural] LECs that are almost ghost companies,” he said. “They're going to have a few thousand wireline subscribers and huge subsidies because people are making other choices.” The plan will likely face stiff resistance as Congress takes a closer look, Berry predicted. “They're going to say, ‘Why are we spending $4.5 billion of consumers funds ... for legacy systems?'” he said. “I don’t think the solution that [the FCC] is looking at right now is going to be well received, ultimately, by the consumer.”
The FCC is likely to take wireless concerns into account as it moves forward, said Medley Global Advisors analyst Jeff Silva. “It is unclear, however, how much weight the agency will (or can) accord to wireless complaints with respect to the direction reform is taking in view of overarching policy objectives,” Silva said. “The commission is under pressure to at once bring financial discipline to universal service and to realign the focus (and incentives) to support broadband deployment throughout the country.” There are still many moving parts, Silva said. “Given the policy and accompanying political dynamics in play, wireless carriers may have to temper expectations regarding how much they can realistically hope to salvage in high-cost support down the road,” he said.
"As a practical matter, the two biggest wireless carriers, AT&T and Verizon, have signed off, and Sprint and T-Mobile are not playing heavily as far as I can tell,” said Public Knowledge Legal Director Harold Feld. “That leaves the rural wireless carriers trying to develop leverage by going to friends in Congress. But the usual defenders of rural interests will be hearing from rural wireline carriers (as well as AT&T and Verizon) in support of the deal.” Free State Foundation President Randolph May said the ABC Plan is “a good starting part for reform,” but doesn’t do enough to reduce subsidies. “I expect that there will be some concessions to the views of wireless and cable operators in an effort to strike a compromise that is less incumbent-focused,” he said. “What worries me is that the commission won’t definitively cap and then embark on a certain plan for reducing high-cost fund support. In a macro-sense, I'd like for the Commission to focus much more on Lifeline support as the principal means of fostering ubiquitous access.”
Wireless carriers, in a series of filings at the FCC, have been sharply critical of the ABC Plan, which they see as neglecting their interests while offering provisions that have won support from wireline carriers large and small. Many again stated their concerns in reply comments that were due at the FCC Tuesday. (See separate report in this issue).
Only ILECs like the ABC Plan, based on initial comments filed at the commission, said the Rural Cellular Association (http://xrl.us/bmcqwn). “Wireless carriers, satellite operators, cable providers, and competitive local exchange carriers -- that is, all major technological alternatives except wireline incumbents -- agree that any support mechanism should elevate the interests of consumers over those of any particular set of providers, operate in a technologically and competitively neutral manner, and avoid automatic preferences for inefficient ILEC networks.” There is no real consensus in favor of the ABC Plan, RCA said. “The supposed ‘consensus’ that ILECs claim for their wireline-centric ABC Plan appears to consist almost entirely of ILECs -- which is no surprise, given that the plan would lavish on ILECs a host of unjustifiable preferences designed to insulate them from competition.” RCA repeated objections to the ABC proposal setting aside just $300 million a year in support for wireless and other competitors to ILECs. “A more appropriate funding target for a wireless-specific mechanism would be $1.5 billion, or half of what the wireless industry contributes,” the group said.
Comments show there’s no “grand consensus” on USF and intercarrier compensation reform, said SouthernLINC Wireless (http://xrl.us/bmcqvy). Reforms must be competitively neutral, the carrier said. “Tilting the playing field in favor of a given class of carriers either by guaranteeing revenue replacement to ILECs or providing support to only a single USF-support recipient is neither competitively neutral, as required, nor is it the best means by which to ensure that USF funds are deployed efficiently over time.” SouthernLINC said the FCC must not rush forward to adopt any changes to the USF program that disadvantage wireless. “Rather than rushing to take one step forward and two steps back, the Commission should invest its time and energy into implementing truly comprehensive reform that is based squarely upon the [Communications] Act,” the carrier said.
US Cellular said the ABC and other plans offer “a potentially catastrophic misallocation of scarce resources to yesterday’s technology.” The various plans push real reform down the road 10 years, while “spending over $75 billion in explicit support to wireline technology compared to less than $10 billion on mobile wireless,” the carrier said (http://xrl.us/bmcqu9). Cellular South said the various reform proposals are “substantially at odds with the Commission’s policy objectives or the public interest, and therefore should be rejected.” Cellular South said the ABC Plan would increase price cap carriers’ share of universal service support from 12 percent today to about 50 percent if implemented (http://xrl.us/bmcqxy). “There is substantial objection to these proposals in the record, with numerous commenters criticizing the incumbent LECs’ efforts to advance their own interests at the expense of consumers, small wireless carriers, and the Commission’s principles promoting competitive and technological neutrality,” the carrier said.