FCC Chairman Ajit Pai responded to letters from Sen. Joni Ernst, R-Iowa, and more than 100 House members earlier this month in response to their concerns about the USF’s stand-alone broadband problem, which prevents rate-of-return (RoR) carriers from receiving USF support for broadband customers using other providers for voice service. Pai noted ongoing FCC efforts to address a “punch list of lingering issues” with the commission’s 2016 order revamping the RoR USF support mechanisms (see 1603300065). Pai also plans to continue his push on rural broadband deployment at the FCC’s Aug. 3 meeting (see 1707130059). Despite the 2016 order, “I still hear from small carriers that offering stand-alone broadband would put them underwater; that the rates they have to charge exceed the rates for bundled services because of the different regulatory treatment,” Pai said in letters to Ernst and the House members (see here, here, here and here). “This is unfortunate but unsurprising. As I said at the time, the Order needlessly complicated our rate-of-return system and in many ways made it harder, not easier, for small providers to serve rural America.” Pai said he hopes the changes will help, but the lawmakers “may be right that something more fundamental is needed. After all, if the Order is not carrying out its stated purpose of advancing broadband deployment in rural America, we cannot ignore that problem -- for time is not on the side of rural Americans.”
The FCC set a pleading cycle on the planned transfer of prepaid wireline customers in 10 southern states from Global Connection to Tele Circuit Network. Comments are due July 27, replies Aug. 3, said a Wireline Bureau public notice in docket 17-170 in Friday's Daily Digest. Global Connection provides prepaid local and long-distance services in 26 states, and is a Lifeline USF eligible telecom carrier (ETC) in the 10 southern states plus two others. Tele Circuit is a Lifeline ETC in five of the southern states.
Rural telco groups urged the FCC to eliminate or change a rate floor that requires rate-of-return carriers to charge customers a certain monthly amount for basic voice service to avoid losing USF support. NTCA (here), WTA (here) and the Pennsylvania Public Utility Commission (here) were among those seeking to scrap the rate floor in comments posted in docket 10-90 Monday and Tuesday, with the RLEC groups suggesting modifications if the rule is retained. USTelecom said the commission "should take a serious look" at making changes or eliminating the rate floor, while ITTA said it backed "an exploration of whether to disaggregate the current single national rate floor." NCTA said "some form of the rate floor" should be maintained.
DirecTV and Dish Network objections to a proposed hike in direct broadcast satellite regulatory fees lack merit since consumers won't be harmed, the American Cable Association said in an FCC docket 17-134 filing posted Monday. ACA said the Media Bureau's MVPD activities involve DBS providers and cable and IPTV providers equally, and all see equivalent benefits. That justifies the proposed hike and supports full parity among MVPD payers, it said. Dish and DirecTV didn't comment Monday. CTIA, meanwhile, said non-high cost USF full-time equivalent employees who get reallocated should be reallocated as indirect FTEs, and there's no reason for reclassifying FTEs from the Wireline Bureau who work on high-cost USF or other agency-wide issues. It urged rejection of combining commercial mobile radio service and interstate telecommunications service provider regulatory fee categories and of a flat per-license fee on Communications Act international Section 214 authorizations. Level 3 backed AT&T's call for regulatory fees on both common carrier and non-common carrier terrestrial international bearer circuits, saying the FCC should seek further comment on eliminating the IBC fee category in favor of an assessment on each international 214 authorization or each holder of an international 214 authorization.
The FCC simplified annual reporting duties of recipients of high-cost USF support by eliminating rules that it said are duplicative or no longer necessary. The commission, acting on a 2016 Further NPRM targeting rate-of-return telcos, found it could end certain reporting requirements eligible telecom carriers face for network outages, unfulfilled service requests, complaints, pricing information, service quality certification and duplicative Form 481 filings (contingent on Universal Service Administrative Co. implementation of an online portal), said an order in docket 10-90 in Monday's Daily Digest.
A request the FCC consider business data service (BDS) relief for some rural telcos got support from two RLEC trade groups and seven rural carriers, while AT&T said it wouldn't object but raised some issues with proposed continuation of certain rate-of-return regulations. The parties' comments were posted Thursday in docket 17-144. Sprint's opposition and supportive comments from TDS and a smaller RLEC were posted earlier (see 1707060051). NTCA and WTA said they backed an ITTA/USTelecom petition to open a rulemaking to consider allowing RLECs receiving model-based USF support to opt into relaxed BDS rules for price-cap carriers. Both the FCC and individual carriers would "benefit from the efficiency of a clearly defined and carefully constructed path" enabling model-based carriers to convert to price-cap BDS regulation, commented NTCA/WTA. They said, however, the FCC must ensure there aren't "unintended consequences or adverse impacts" on consumers or RLECs not participating in the conversions, with details to be sorted out. Blackfoot Telephone Cooperative and six other "Big Sky" RLECs supported the petition and its substantive proposals. AT&T questioned two aspects of petitioners' proposals to retain other rate-of-return regulations: a waiver of an "all-or-nothing" rule that otherwise requires rural carriers electing price-cap regulation to move both switched access and special access (BDS) to price caps at the same time; and a "one-time unfreeze" of separations factors in setting initial rates. AT&T said the FCC shouldn't waive the all-or-nothing rule and said any one-time unfreeze of separations factors must be subject to public comment.
Utah delayed a shift to connections-based USF contribution until Jan. 1, the Utah Public Service Commission said in a Wednesday notice in docket 17-R360-01. The effective date was Aug. 1, but wireless carriers sought an extension, in comments this week (see 1707050016). “The PSC is in the process of reviewing comments regarding this issue and will alert interested persons as to any further proceedings,” it said. Utah could be the first state to move from revenue-based contribution; other states are also mulling contribution reform (see 1706300049).
A telco bid for rural carrier business data service relief at the FCC drew opposition from Sprint, support from TDS Telecommunications and proposals for changes from Smithville Telephone of Mississippi. Sprint said the commission should deny the ITTA and USTelecom rulemaking petition (see 1705250065) to permit rate-of-return telcos receiving model-based USF support to opt into new, relaxed price-cap BDS rules. The rural telcos "would be allowed to raise the going-in BDS rates, to thereafter provide BDS on a largely deregulated basis, and to retain the guaranteed support provided under rate of return regulation of switched access service," said Sprint comments posted Thursday in docket 17-144. Sprint said the proposals are "remarkably one-sided in favor of the rate-of-return ILECs," allowing them "to pick the best of both worlds: freedom to offer BDS on whatever terms they choose, including at increased prices, with minimal or no regulatory oversight, while retaining the revenue assurances" from "more generous" rate-of-return USF and intercarrier compensation (ICC) transition mechanisms. TDS said the rate-of-return BDS burdens for model-based carriers often outweigh the benefits. Updating the regulations would allow "carriers like TDS Telecom the flexibility to compete in the BDS marketplace with other entities that are not subject to cumbersome, legacy regulations," said its comments. Removing burdens would serve "rural broadband goals by providing greater flexibility to invest in new infrastructure," said TDS, which also agreed with the proposal to keep certain USF-ICC transition mechanisms. Smithville Telephone, with seven employees, said it's subject to BDS competition of the sort identified in the price-cap rulemaking, but wouldn't get relief under the petition as written. Its comments "suggest ways to recognize this actual existing competitive situation for Smithville, and likely for other small carriers, so that full deregulated status can be obtained."
AT&T said a recent GAO report on Lifeline highlights the need to improve the efficiency and performance of the FCC's USF subsidy program for low-income consumers. The findings of the report (see 1706290037) "are both expected and surprising -- expected in that the report highlights areas of weakness in the program of which we have long been aware; surprising in that the investigation suggests that the waste and abuse could be much worse than we ever imagined," said Joan Marsh, senior vice president, in a Thursday blog post. "For example, in Michigan a whopping 67.5% of subscribers who enrolled for Lifeline relying on asserted SNAP participation could not be verified by the GAO investigators," she said, referring to the Supplemental Nutrition Assistance Program. The FCC's new national verifier should help, but it won't be fully implemented until 2019, she said, raising questions about whether new enrollments should be restricted in the meantime. "Equally troubling were the report’s observations about the effectiveness of the Lifeline program," she said. "Lifeline participation rates are low compared to the percentage of low income households that pay for phone service. According to the FCC, the participation rate shows that millions of Lifeline-eligible households are obtaining voice service without the Lifeline discount. This is not surprising given how affordable and accessible many market-based services have become." The GAO report points to the difficulties the FCC has in extending "a Reagan-era telephone subsidy to cover broadband access," said Daniel Lyons, an American Enterprise Institute visiting scholar, in another blog post. "Unquestionably, the government should offer assistance to low-income consumers at risk of falling on the wrong end of the digital divide. But that assistance should be designed from the ground up, tailored to the needs of the population it seeks to serve, with controls to protect against fraud and abuse. ... Lifeline needs revolutionary, not evolutionary, change."
Wireless carriers asked the Utah Public Service Commission to not use connections-based contributions to the state USF. Utah is preparing to shift to a connections-based mechanism Aug. 1, which would make it the first state to change to that USF contribution method. But in separate comments filed this week, AT&T and CTIA said the PSC should retain its revenue-based method, or at least provide more time for working out final rules and implementing the change. The proposed rule change “is unnecessary and would create a myriad of legal and logistical problems,” CTIA said in docket 17-R360-01. "The existing contribution mechanism … remains legally sound and demonstrably successful.” The proposed rule may violate state and federal law because it could be read to include broadband lines, CTIA said. Requiring a state USF surcharge on bills could harm less wealthy consumers by making it difficult for carriers to sell "all-in, single-rate service plans that are popular among these consumers," CTIA said. The flat fee would impose "far higher relative costs on low-volume users," it said. In other comments, AT&T said USF contribution reform should be addressed at the national level. The Utah USF has a surplus, so “the haste to make Utah the first state to experiment with switching to a per line contribution base is unwarranted,” the carrier said. Many open questions about the proposed rules make shifting to connections-based contributions by Aug. 1 “unreasonable and impracticable,” it said. The commission should clarify the definition of access lines and providers to include prepaid wireless and exempt non-interconnected VoIP services like Skype and FaceTime, AT&T said. Also, the PSC should ensure the rule doesn’t assess Utah USF fees to wireless consumers who don’t live in Utah, it said. “For example, an out of state college student who is included on her parents’ family wireless plan with a Utah billing address will result in the student’s line being subject to the surcharge, even though that student uses her wireless phone mostly in another state where she is likely already subject to another state USF surcharge.” The Utah Rural Telecom Association supported the change to connections-based contribution, but suggested some tweaks to language, in its comments. Comcast didn’t support or oppose the revamp, but commented that clarifying procedures for counting access lines would ensure contribution is competitively neutral and nondiscriminatory. Other states are also mulling contribution reform (see 1706300049).