FCC efforts to overhaul Lifeline USF mechanisms could run into trouble in Puerto Rico, said a filing by Connected Nation's chief policy counsel on a meeting the chairman of the Telecommunications Regulatory Board of Puerto Rico, two advisers and the counsel had with FCC officials. Lifeline modernization is important for Puerto Rico, which has a broadband adoption rate of 48 percent that is "far lower than any state," the filing said. Only five metropolitan areas in the U.S. have home broadband adoption rates below 50 percent, and three of those are in Puerto Rico, the filing said: "We emphasized strongly that proposed limitations on the eligibility of low-income consumers use to qualify for the program would be devastating for Puerto Rico and create enormous 'qualification gaps,' due to the fact that federal nutrition assistance, school lunch, and other federal assistance programs operate differently in Puerto Rico. The Commission’s effort to modernize Lifeline will not succeed if it does not succeed in Puerto Rico," said the filing, posted Thursday in docket 10-90.
The USF contribution factor will jump to 18.2 percent in Q1, from this quarter's 16.7 percent, said industry consultant Billy Jack Gregg in an update Thursday. He said the Universal Service Administrative Co. projected industry long-distance telecom revenue for Q1 at $14.93 billion, about $72 million less than in the current quarter. Combined with projected USF demand of $2.277 billion, the revenue decline caused the industry contribution (assessment) factor to spike, he said. "The drop in first quarter 2016 revenues continues the downward trend in the USF contribution base, which places upward pressure on the USF assessment factor." Gregg recently said the contribution factor could top 18 percent for the first time, depending on the projected revenue (see 1511030037).
FCC Wireline Bureau Chief Matt DelNero outlined nine key proceedings his bureau is working on, though he said the list isn't exhaustive. First on his list is a draft order that would partially approve a USTelecom forbearance petition for ILEC relief, which is on the commission's Dec. 17 tentative meeting agenda. Speaking at the Practising Law Institute conference Thursday, DelNero said he is personally involved every day in working on separate efforts to overhaul rural rate-of-return USF mechanisms. Asked about the timetable in light of signals from a key senator that the FCC could go beyond a year-end commitment for solving the "stand-alone broadband problem" for rural carriers, DelNero said the agency is eager to complete the rulemaking but also wants "to get it right." He also invited interested parties to provide input on commission efforts to craft an NPRM on broadband privacy under Title II of the Communications Act. Among the other draft items in proceedings he cited are: a Connect America Fund Phase II reverse auction framework order, which is circulating; an order to reform Part 32 accounting rules; the 2016 broadband progress report; a Lifeline modernization order; special-access reform actions; and orders on industry transactions, including Charter Communications' proposed buys of Bright House Networks and Time Warner Cable, and Altice's proposed buys of Cablevision and Suddenlink. On a subsequent panel at the conference, a Netflix official sparred with officials of CenturyLink and Cox Communications over the net neutrality order. Corie Wright, Netflix director-global policy, said she believes the FCC would be upheld in court, as did Washington Utilities and Transportation Commissioner Phil Jones. Jennifer Hightower, Cox senior vice president-law and policy, said the net neutrality order is discouraging broadband investment and that her company is "more cautious than ever" due to uncertainty from the order. Melissa Newman, CenturyLink senior vice president-federal policy and regulatory affairs, agreed, saying her company doesn't know what is allowed under the Internet conduct rule's prohibitions against broadband ISP practices that create "unreasonable interference" or "unreasonable disadvantage" for other parties. Wright disputed the criticisms, which she said were contradicted by the statements and actions of industry executives and Wall Street investors. Jones also said he hadn't seen any drop in broadband investment in his state.
The FCC said its Oklahoma tribal guidance for Lifeline USF shouldn't be stayed, pending further review. In a June order, the commission announced that effective Feb. 9, it will view an 1870-1890 historical map of Oklahoma, "which is the most accurate available representation" of former tribal boundaries in the state, as the basis for identifying former reservations, while continuing to consult with Oklahoma tribal nations on the map, said the FCC's opposition to the partial stay request of Assist Wireless in the U.S. Court of Appeals for the D.C. Circuit (Assist Wireless v. FCC, No. 15-1324). Petitioners don't "challenge the substance of the FCC’s interpretive guidance or the accuracy of the Oklahoma Historical Map; they instead challenge the Order on procedural grounds only," the FCC said. "But Petitioners’ legal arguments are insubstantial, and they have not shown that they are likely to prevail. Nor have they demonstrated that allowing the FCC’s interpretive rule to go into effect as planned would cause them any irreparable injury. And delaying implementation of this guidance would only harm the public by allowing public funds to subsidize areas that should not be eligible for enhanced Tribal Lifeline benefits." Carriers receive a higher monthly subsidy ($34.25) for serving low-income Lifeline users in tribal areas across the country, including former tribal areas in Oklahoma, than for serving those in other areas ($9.25).
Senate Commerce Committee Chairman John Thune, R-S.D., is willing to give the FCC extra time to make broad changes to rural rate-of-return USF mechanisms, Senate and FCC sources told us Monday. FCC commissioners had committed to Thune earlier this year that they would act by year-end to fix the “stand-alone broadband problem,” which prevents rate-of-return carriers from receiving USF support for broadband customers using other providers for voice service. FCC Chairman Tom Wheeler said recently he intended to circulate in December a draft item to address the rural USF issues more broadly but said he wouldn’t be “held hostage to the calendar” (see 1511190057).
The FCC plans to vote Dec. 17 on a draft order on USTelecom's forbearance petition, as expected (see 1511240070). The meeting's tentative agenda released Wednesday also included a draft order to streamline Part 25 rules for satellite space stations and earth stations. The two items are part of an ongoing effort to reduce "regulatory delay and burdensome red tape," Chairman Tom Wheeler said in a blog post.
The Senate Commerce Committee will likely vote on FCC Commissioner Jessica Rosenworcel’s renomination next month during a markup session, a GOP committee staffer confirmed Monday. Rosenworcel's renomination hearing was Oct. 28. Commerce Committee Chairman John Thune, R-S.D., told us last week he was unsure if Rosenworcel would make it onto the December markup agenda but said she's empowered as commissioner for another year absent congressional action (see 1511190038).
FCC financial statements received generally good marks from an independent auditor’s report in the commission’s FY 2015 Agency Financial Report (AFR) released Thursday. Kearney & Co. found the statements “present fairly, in all material respects” the FCC’s financial position as of Sept. 30 in accordance with generally accepted accounting principles. The accounting firm did find “one repeat material weakness, originally reported in FY 2014, in internal control” regarding Universal Service Administrative Co. budgetary accounting, “one repeat significant deficiency” going back 10 years related to IT controls, and “one repeat instance of noncompliance with laws and regulations related to the requirements of the Debt Collection Improvement Act,” said FCC Inspector General David Hunt in an introductory memorandum. “The independent auditor’s opinion addresses more than $10.1 billion in revenues, more than $460 million in FCC operating expenses and more than $9.2 billion in outlays for the Universal Service Fund and Telecommunications Relay Service Fund,” said FCC Chairman Tom Wheeler in an AFR message. “Despite the positive audit opinion, the independent auditor’s report shows that work remains at the FCC to continue to improve the agency’s operations.” The $10.1 billion revenue includes: some $8.77 billion from USF, $847 million from the TRS Fund, $340 million from appropriations (regulatory fees), $106 million from auction-related appropriations, $6 million from North American Numbering Plan revenue, and $7 million from “other” sources, according to an “FCC management” overview. Wheeler highlighted FCC work on spectrum, net neutrality, transactions, Lifeline and E-rate USF support, robocalls, empowering people with disabilities, process reform, and field and IT modernization. He voiced confidence the FCC is on “sound legal footing” in net neutrality litigation and he noted the agency raised more than $40 billion in AWS-3 auction revenue. He said field activities “presented real challenges and opportunities for improvement,” given technological change since the last Enforcement Bureau field structure review and given a reduction in FCC resources. “The Commission adopted a field modernization plan that will allow our field operations to do more with less,” he said. “The resulting plan reflects the review team’s thorough, data-driven analysis and concentrates field resources where they are needed most -- areas with the greatest spectrum density. … Once implemented, this plan will save millions of dollars annually.” Wheeler also said the FCC's IT team "is on track to modernize our infrastructure, information and communications technologies," replacing costly-to-maintain legacy systems and "leveraging cloud service offerings to the fullest extent possible."
FCC and industry officials continue to seek to devise new rural USF mechanisms. The details have always been difficult, but tensions have surfaced in FCC public statements and industry filings and interviews over the basic scope and timing of the reform effort as a year-end commitment to a key lawmaker nears. Three commissioners are trying to develop a broadband-oriented overhaul, while two commissioners are more adamant the agency undertake a targeted “stand-alone broadband” fix in December, even if an overhaul takes longer. Rural telco groups are working with regulators to hash out policy proposals, and some believe the parties are close to a solution. But at least two of them, NTCA and WTA, appear concerned the FCC might rush into making major changes to legacy systems that would be harmful to their members.
FCC Chairman Tom Wheeler said he plans to circulate a draft rural USF item in December, but said he isn't going to be "held hostage to the calendar." Wheeler was asked at the FCC's news conference Thursday about his intentions on rate-of-return USF mechanisms in light of rural telco concerns that a broad overhaul could need more time combined with pressure from some commissioners to fix the "stand-alone broadband problem" that prevents carriers from receiving support for broadband customers using other providers for voice service (see 1511160043). Wheeler said he is working with Commissioners Mignon Clyburn and Mike O'Rielly on possible changes to the current USF support mechanisms for rate-of-return carriers. He said central to that effort is taking steps to encourage broadband expansion and not just ensuring carriers get paid for existing broadband. He said the parties are making "good progress." He repeated he's "not going to be held hostage to the calendar."