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.
NTCA said many rural carriers can't estimate their company-specific impact of the FCC’s “potential bifurcated approach” to updating rate-of-return USF mechanisms for broadband coverage. Reform details remain unsettled, the RLEC group said, and “average schedule” carriers have access only to “industrywide aggregate ‘price-outs’ that” are unlikely to reflect their particular results, and to their own spreadsheets consisting of “hundreds, if not thousands, of inputs,” which also remain works in progress. “We encouraged the Commission to remain open to simpler, more straightforward ways of achieving the same goals of reform via 'modules' (e.g., new limits or policy changes) that could be applied to any distributional mechanism rather than creating substantial new complexity by remaking the underlying distribution calculations,” NTCA said in a filing on an FCC meeting it had that was posted Monday in docket 10-90. It backed “sensible transitions” to how the costs of prior investments would be treated -- such as operating expense limits -- under an overhaul, including the proposed bifurcated approach, which would generally treat old investments under old rules and new investments under new rules. It's unclear how new limits or caps on prior investments, most of all sunk costs, would be consistent with the bifurcated approach, the group said, but if they're instituted, carriers would need time to adjust.
Tracfone drew a line in the sand with AT&T and the FCC on Lifeline USF, as the agency considers expanding the low-income support program to broadband and overhauling its administration. Much of AT&T’s view is built on the belief that Lifeline is not a “service” but a “benefit” to be provided to consumers, such as provided by the Supplemental Nutrition Assistance Program (SNAP or food stamps), Tracfone said in a filing posted Monday in docket 11-42, responding to a recent AT&T letter (see 1512220050). But “Lifeline is not a benefit; it is a service provided by eligible telecommunications carriers to qualified low-income households,” the wireless reseller said. It said the service designation was expressly spelled out in sections 54.401(a) and 54.401(c) of the FCC’s rules and Section 254(b)(3) of the Communications Act. "The Lifeline program was conceived by the Commission as a service program; it was codified as such; and any conversion of the program from a service program to what AT&T calls a ‘benefit’ a la SNAP, would require enabling legislation,” Tracfone said. “Nothing in the Communications Act ... provides any authority for the Commission to re-invent Lifeline as a direct government to consumer benefit.” Tracfone also disputed AT&T arguments that switching carriers under Lifeline is complicated. It said AT&T’s “real reason” for proposing to convert Lifeline to a SNAP-type benefits program is stated in its letter: "The information and processes required to achieve this discounting is unique to Lifeline consumers and has no other business purpose. As a result, much is performed through manual methods." AT&T added a footnote saying it was "uneconomic" to automate related systems, said the reseller. "AT&T is candidly stating that investment of the systems needed to provide Lifeline service to consumers is more trouble to it than it is worth," Tracfone said.
Net neutrality dominated the House Communications Subcommittee hearing on four legislative measures Tuesday. Some members wondered about revising bills to achieve bipartisan consensus, but they largely showcased partisan divide in how they interpreted possible burdens from the FCC's order. The two heavily debated measures were the No Rate Regulation of Broadband Internet Access Act (HR-2666) and a discussion draft of the Small Business Broadband Deployment Act, which would codify the temporary exemption small businesses have from the order's enhanced transparency requirements.
AT&T asked a federal court to consolidate and set briefing on its legal challenges to two FCC orders affecting price-cap telco USF obligations. The request came in a petition Monday to the U.S. Court of Appeals for the D.C. Circuit that AT&T said wasn't opposed by the Department of Justice or the FCC. AT&T noted the FCC in December adopted and released an order that partially granted and partially denied a USTelecom forbearance petition seeking price-cap ILEC relief from various obligations (see 1512170052 and 1512280037). The recent order "discussed, but did not resolve in AT&T's favor, the same issues addressed" in a 2014 FCC USF order challenged by the telco earlier in 2015 (AT&T v. FCC, No. 15-1038). In the previous case, AT&T had argued the FCC should have given price-cap ILECs greater relief, including from eligible telecom carrier (ETC) voice USF obligations where they don't elect to receive new broadband-oriented Connect America Fund subsidies. The D.C. Circuit had put the previous case on hold pending commission resolution of the U.S. Telecom forbearance review and related issues in other proceedings (see 1507160032 and 1509030042). AT&T Wednesday filed a petition for review challenging the FCC's December 2015 USTelecom forbearance decision, which again denied price-cap telcos USF ETC voice relief (AT&T v. FCC, No. 16-1002). Given the "overlap of issues" in its two challenges, AT&T asked the D.C. Circuit to consolidate the cases and issue a restarted briefing schedule that would allow DOJ and the FCC at least 45 days to respond to the company's renewed opening brief.
FCC Commissioners Mike O’Rielly and Mignon Clyburn told us they still expect Chairman Tom Wheeler, in light of last year’s net neutrality order, to circulate an NPRM on the agency's oversight of privacy. FTC Commissioner Julie Brill said at CES last week she would welcome FCC oversight. A third official confirmed the NPRM is likely in coming months.
Five Georgia ILECs asked the FCC to include in their "base period revenues" (BPR) $121,774 that they said they had been unable to collect in 2012 from Halo Wireless, which went into Chapter 7 bankruptcy. Brantley Telephone, Pembroke Telephone, Pineland Telephone Cooperative, Public Service Telephone and Waverly Hall Telephone filed an emergency petition Tuesday in docket 10-90 seeking to collect their Halo charges in the BPR effective July 1, 2012. The carriers said the absent cost recovery was harming their ability to make network investments, giving the commission "good cause" to grant the request, which would "meet the objectives" of the agency's 2011 USF and intercarrier compensation transformation order. They said the relief would be similar to that the FCC granted with conditions to other carriers, including TDS Telecom. Windstream is also seeking relief for charges it said were unpaid by Halo (see 1509020059).
Capitol Hill fell short of achieving many of the telecom goals lawmakers touted at 2015’s start. One session into the current GOP-controlled Congress, the scorecard disheartens some industry lobbyists and observers, but not all told us they saw reason for disappointment. Some emphasized what they judged key developments in spectrum and broadband deployment negotiation. Lawmakers said they hoped for 2016 progress on these issues despite likely presidential election distractions.
The FCC is looking to overhaul rate-of-return USF systems fairly early in 2016, rural telco representatives told us. To support and spur broadband deployment, the commission is pursuing a two-track plan that would both modernize legacy subsidy flows and give rural carriers an optional new mechanism based on a cost model, they said Wednesday. The FCC’s “message to industry is ‘let’s keep working and see where we get to,’” said Lynn Follansbee, USTelecom vice president-law and policy. “I have no doubt that we will get to an order sometime early next year.”
Total USF subsidy "requirements" were $8.7 billion for 2015, said the FCC’s Universal Service Monitoring Report listed in Wednesday's Daily Digest and docket 10-90. High-cost support led the way at $4.5 billion in demand and related costs, followed by school and libraries E-Rate discounts at $2.4 billion, Lifeline and Tribal Link-Up low-income support at $1.5 billion and rural health support at $271 million. The report generally used information available as of September (including some projections for the remainder of the year). Actual USF disbursements in 2014 were about $7.9 billion, which continued a downward trend from 2012's $8.7 billion and 2013's $8.3 billion. The states receiving the biggest net USF benefit (payments made to providers minus estimated contributions to the program) in 2014 were Alaska ($293 million), Oklahoma ($234 million) and Mississippi ($174 million), while the biggest net payers were California ($273 million), New York ($258 million) and Florida ($244 million). High-cost support claims by ILECs and competitive eligible telecom carriers were projected to be $3.9 billion in 2015, up from 2014’s $3.75 billion but still under 2013’s $4.2 billion. CenturyLink led carriers in high-cost claims for 2014 with $348 million, followed by AT&T’s $347 million, TDS's $182 million, Windstream's $164 million, Frontier Communications' $162 million, and Verizon's $134 million. Low-income support claims dropped in 2014 to $1.6 billion from 2013’s $1.8 billion and 2012’s $2.2 billion, as the number of Lifeline subscribers was down to 12.9 million from 2012’s peak of 16.4 million. America Movil (TracFone’s parent) received the most estimated low-income support with $437 million, followed by SoftBank's (Virgin Mobile USA and Sprint parent) $272 million, AT&T's $164 million and Budget Prepay's $103 million. The industry USF contribution rate was 16.7 percent of interstate/international telecom revenue in Q4 2015 (it’s expected to rise to 18.2 percent next quarter), up from 8.7 percent in Q1 2004. Over the years, USF demand has risen and the industry long-distance revenue base has dropped. “Total telecom revenue” (which also includes intrastate revenue and USF surcharges) dropped to $229 billion in 2014 from $243 billion in 2013 (the peak was $299 billion in 2007). “Local service and payphone revenue” was $91 billion, “mobile service revenue” was $87 billion, and “toll service revenue” was $42 billion -- all continuing recent declines. However, “non-telecom revenue” in 2014 was $268 billion, up from $252 billion in 2013. Total reported revenue was $497 billion, up from $495 billion in 2013. The FCC reclassified broadband access as a telecom service in 2015.