Wheeler Says Rate-of-Return USF Overhaul Near, but Could Still Fall Apart
FCC Chairman Tom Wheeler said a rate-of-return USF overhaul remains doable this year but could still be pulled apart by conflicting interests and overly complex solutions. He also warned against "half-measures." Wheeler Monday noted he had told Senate Commerce Committee Chairman John Thune, R-S.D., that the commission would adopt rural telco reforms by year-end (see 1506260024). “I think we are close,” he said at the NTCA’s fall conference in Boston, according to prepared remarks. “Where we will fall apart is if we become bogged down trying to address each and every special circumstance, rather than pursuit of the general public good." Wheeler said he understands different carriers have different interests, but added that "our goal must be broad reform, with a phase-in to allow for an evolutionary process.”
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Wheeler said he is committed to upholding the FCC’s twin rural USF mandate of ensuring that service and rates in high-cost areas are “reasonably comparable” to those in urban and suburban areas. The FCC’s 10/1 Mbps requirement for broadband-oriented high-cost USF support is a minimum level of service, he stressed, as the agency hopes to spur rural networks “capable of world-class speeds,” with growing consumer demand and falling network costs “rapidly making that minimum obsolete.” Wheeler also said he had circulated a public notice with commissioners to take steps to ensure the USF support is used only for deploying networks to rural America, “given recent news of bad apples who abuse the fund for their own personal gain.”
Wheeler cited lessons to be learned from the FCC's “quantile regression analysis” of rate-of-return rural telcos, which he had called off. “Sometimes the perfect can be the enemy of the good,” he said. “Even a very good solution will not work if it’s too complicated and does not have sufficient stakeholder support. And it makes little sense to just graft a ‘silver bullet’ on to outdated mechanisms.” He noted the FCC believes two rate-of-return USF mechanisms -- high-cost loop support (HCLS) and interstate common line support (ICLS) -- are no longer viable. “It’s silly -- or as a certain presidential candidate might say, ‘stupid!’ -- to tie support for broadband networks to complex mechanisms designed for narrowband,” he said. “We need to fix this, and we need to do it in a way that is meaningful, sustainable ... and understandable to those on the front lines without having to hire a team of lawyers and consultants.”
With that in mind, Wheeler outlined four main elements of rate-of-return USF reform: give carriers a voluntary option to receive support based on a revised cost model; for those not switching to a model, replace HCLS and ICLS with a new mechanism that provides incentives and support to continue investing in broadband networks; create a “reasonable” transition to the new mechanism as a “buffer”; and establish a budget that includes specific funding for capital and operating expenditures and other steps to ensure funding is effectively and efficiently targeted. He understands "the devil is in the details" but said the FCC and industry shouldn't miss a great opportunity to put rate-of-return USF on solid ground. He cautioned parties not to “settle for half-measures or a seemingly simple silver bullet.”
NTCA responded that it was encouraged by the attention Wheeler and colleagues are giving to USF and rural issues. “The keys are now to make sure any reforms that are made build upon and sustain the successes realized thus far, while also positioning community-based providers to continue investing and delivering high-quality, affordable services in rural areas going forward,” CEO Shirley Bloomfield said. “As an industry that has lived through prior changes that hindered rather than fostered investment, we know firsthand the importance to consumers and communities of both getting reform done and getting reform right.”
Commissioner Ajit Pai has voiced growing concern about the FCC effort to revise the current mechanisms, which prevent rate-of-return carriers from receiving broadband USF support when customers don’t also take their voice service. “I am worried that the Commission might not be on track to solve the stand-alone broadband problem by 2016,” he said in a Sept. 15 statement. “Nor can we simply announce a solution on New Year’s Eve; we need to give the public time to offer input, we need to deliberate, and then we need to deliver. This is especially important given the complexity and importance of this issue. And missing our year-end deadline should not be an option.” Pai elaborated on his concerns and his proposed stand-alone broadband remedy to us recently (see 1509150061). Pai's office had no comment Monday.