The 1Q USF contribution rate for carriers could for the first time top 18 percent of interstate and international telecom revenue, said industry consultant Billy Jack Gregg in an update Tuesday. The USF contribution rate could jump from its current 16.7 percent to 18.1 percent if the industry revenue base is the same as for the current quarter, Gregg said. He said interstate/international telecom revenue is expected to be $15 billion for 4Q and $60.5 billion for all of 2015, which he said would be the lowest quarterly and annual amounts in the program's history. “If the trend of declining quarterly revenues continues, the USF assessment factor for the first quarter will be higher than 18.1%,” he said. Gregg said the Universal Service Administrative Company will project 1Q revenue at the end of November, which will allow him "to accurately calculate" the new contribution rate. He said projected 1Q demand for USF support is $2.28 billion, up $155.2 million from 4Q, led by a Lifeline support increase of $74.4 million and a high-cost support increase of $49.5 million. Much of the hike was due to “out of period adjustments,” he said.
WTA members voiced doubts about a broadband cost model and some other aspects of a potential FCC overhaul of high-cost USF mechanisms for rural rate-of-return telcos. Arvig Enterprises, 3 Rivers Communications and the Range family of telecom companies said they have yet to determine the likely impact of possible future USF support on their operations “due to the number of significant details that remain unresolved” in two-track proposals to give rural telcos the option of receiving support based on a broadband cost model or based on updated USF mechanisms. The companies “expressed concerns regarding the general accuracy of the price cap-based model for rural companies, as well as their present inability to determine the amount of Model-based support they might receive and their associated build-out obligations,” said a WTA filing posted Monday in docket 10-90 on their meeting with an FCC staffer. They said their ability to serve remote, high-cost customers would be undercut if the FCC reduces a cap on model-based support per location. “They also noted that many state universal service funds are tied to the existing federal mechanisms, such that shifts to Model-based support could mean loss of state support by some rural carriers,” the filing said. “The companies also expressed concern that the proposed bifurcated rate-of-return path was being developed in a rapid and untested manner, and could well entail a number of unforeseen consequences. They pointed particularly to the increased recordkeeping and accounting complexities and costs and the difficulties of accurately and equitably allocating investments and associated operating expenses.” In addition, they suggested the FCC’s current 10/1 Mbps broadband USF definition won't be “reasonably comparable to urban broadband speeds and applications for very long” (such reasonable comparability is a statutory USF standard). Whatever high-cost support changes the FCC makes, the companies stressed the need for “stability, predictability and sufficiency." WTA made similar filings (here and here) on behalf of Range and Volcano Communications after meetings with other FCC staffers.
The FCC should get going on reforming its USF contribution system, ITTA and the Montana Telecommunications Association (MTA) said Friday. There is “growing pressure on the Universal Service Fund as the Commission considers expanding the scope of services supported by USF programs,” said midsize-telco group ITTA in a filing posted in docket 10-90 summarizing an Oct. 28 meeting with Gigi Sohn, counselor to FCC Chairman Tom Wheeler. “We urged the Commission to undertake USF contribution reform and broaden the base of contributors before taking any further steps to modify the Lifeline program to include support for broadband services.” MTA also urged the FCC to address contribution reform, “particularly given the increasing pressure on the high cost reform efforts caused by budgetary restraints and the shrinking contributions base,” the association said in a filing on its meetings with aides to Wheeler and Commissioners Mike O'Rielly and Jessica Rosenworcel. An FCC spokesman said the issue was before a federal-state joint board. Carriers currently contribute 16.7 percent of their interstate and international telecom revenue to USF, a rate that has trended up over the years as subsidies have increased and the industry revenue base has eroded. Carriers generally pass the fees along to consumers.
FCC Wireline Bureau Chief Matt DelNero highlighted the IP technology transition among wireline proceedings on the bureau's agenda, in remarks posted online Thursday that he gave last week to the Connect Michigan: 2015 Broadband Conference. DelNero said he wanted to focus on a few items that would be of particular interest to attendees. "First on that list is our continuing efforts to future-proof the Nation’s communications networks through our technology transitions proceedings," he said. The FCC this week received various comments on the agency's proposals to establish discontinuance criteria for replacing traditional copper-based circuit-switched TDM services with fiber-based packet-switched IP services (see 1510270058). DelNero also cited bureau efforts in various USF proceedings, including to institute competitive bidding for Connect America Fund support not accepted by price-cap telcos, rate-of-return carrier high-cost reform, and broadband-oriented Lifeline support for low-income consumers.
Public Knowledge President Gene Kimmelman rejected the latest proposal for net neutrality legislation from the Information Technology and Innovation Foundation. The think tank released the proposal Thursday and hosted a panel on which Kimmelman was the only participant who hadn't previously advocated for a bipartisan compromise open Internet bill.
Rural telco groups asked the FCC to increase USF broadband speed requirements, with some wrinkles, as part of a planned agency overhaul of high-cost subsidy mechanisms for rate-of-return carriers. NTCA, USTelecom and WTA said the FCC’s current 10 Mbps requirement for broadband-oriented Connect America Fund support “risks locking rural America into lower service levels” contrary to statutory mandates, including that USF ensure “reasonably comparable” rural services at “reasonably comparable" prices. “This is particularly true when one considers that the networks that the USF program enables require planning years in advance and then have life cycles measured in decades once built,” the associations said in a filing posted Tuesday in docket 10-90. “The Associations propose to tether more closely the applicable USF broadband speed objectives to the Commission’s Section 706 broadband speed objectives.” But the groups said they understood the USF budget may not provide enough support for rural carriers to always meet the FCC’s current 25/3 Mbps wireline broadband definition under Section 706 of the Telecom Act. So they suggested some flexibility be built into proposed USF reforms to change existing mechanisms to cover broadband while giving carriers the option of receiving support based on a broadband cost model. For carriers not electing model-based support, the associations proposed they be required to deliver 25/3 Mbps service (or any new Section 706 definition) upon receiving a “reasonable request,” which the FCC interprets as generating sufficient anticipated revenue to justify the upgrades. If a rural telco can’t offer at least 25/3 Mbps, it would be required to offer 10/1 Mbps if feasible or 4 Mbps/768 Kbps if only that level of service is feasible, they suggested. For carriers electing the model-based approach, the groups would keep a 10/1 Mbps broadband requirement covering increasing percentages of customer locations over time, but with a duty to report how many locations are receiving 25/3 Mbps service, they proposed.
Lifeline USF should subsidize broadband, and eligibility verification should shift from service providers to a neutral third party or parties, speakers said on a panel Wednesday organized by the Internet Innovation Alliance. Most IIA panelists also supported coordinating Lifeline enrollment with other federal-assistance programs overseen by states. Moderator and IIA co-Chairman Rick Boucher pressed speakers for as much consensus as possible, but there were differences over some concepts and proposals, including to give Lifeline users vouchers. The panelists generally supported establishing a Lifeline “budget” instead of a cap, but declined to discuss specific figures.
The FCC plans to promote broadband adoption efforts targeting four groups -- seniors, veterans, persons with disabilities and students -- said Gigi Sohn, counselor to FCC Chairman Tom Wheeler. The commission’s Consumer and Governmental Affairs Bureau will “explore and highlight best practices” helping these groups gain broadband access, she said Thursday in a speech to the Partnership for Progress on the Digital Divide Conference in Scottsdale, Arizona. “One of the goals of this effort is to develop a roadmap for these communities that can be used by advocates and the philanthropies and companies that support their work,” she said, according to her posted remarks. Sohn said achieving universal broadband adoption is like running a marathon: The final stage before the finish line is the hardest part. In thinking about the broadband challenge, she cited a “50/50” concept, with two categories of people who have “pretty much reached universal adoption -- people under the age of 50 and people earning over $50,000.” That shows “that for those populations that face no significant barriers, market forces can be sufficient to get us to our goal of universal adoption,” she said. But the flip side is market forces won’t be enough to achieve universal broadband adoption because some people face significant barriers, she said. “Getting where we are now was relatively easy. Getting from here to universal adoption is the hard part,” she said. “Think of our adoption challenge as a marathon. They say that the race really starts at mile 20, and those last 6 miles are a bear. Considering we have about 75 percent home adoption, that math is about right.” She said the FCC is attempting to close various broadband gaps based on income, education, location and disabilities through USF programs -- the high-cost Connect America Fund, E-Rate school and library discounts, and Lifeline low-income support -- and certain accessibility and adoption efforts, including the new best-practices initiative. But the digital divide is "less of an infrastructure challenge and more of a civil rights and human rights challenge," she said.
AT&T hires Raquel Noriega, ex-Connected Nation, as director-federal regulatory, working on USF issues and focused on E-rate ... Univision Communications adds to responsibilities of John Eck, naming him chief local media officer, succeeding Kevin Cuddihy, who is stepping down as president-Local Media ... Activision Blizzard starts e-sports division, names Steve Bornstein, ex-ESPN and NFL Network, division chairman, and Mike Sepso, ex-Major League Gaming, senior vice president ... ZoneTV, digital platform for pay TV that was renamed from ES3, hires Jeff Weber, ex-AT&T, as CEO ... Coalfire hires cybersecurity experts Luke McOmie as director-penetration testing and Ryan Jones, ex-Cisco, as managing director, Labs division, which they will help run ... ICANN Governmental Advisory Committee members named GAC vice chairs for 2016-17 Olga Cavalli, representing Argentina, Henri Kassen, Namibia, Gema Campillos, Spain, and Wanawit Ahkuputra, Thailand, GAC said after ICANN's just-completed meeting in Dublin ... Lobbyist registrations: DraftKings, Morgan Lewis, effective Sept. 17 ... MSG Sports & Entertainment, Liz Robbins Associates, effective Oct. 1 ... Univision, The Raben Group, effective Sept. 11.
Sen. Jerry Moran, R-Kan., fears the effects of the FCC’s direction on USF and what it has done to rural telecom companies’ ability to invest. Moran. a member of the Commerce Committee, also chairs the Appropriations Agriculture Subcommittee, where he held a hearing on rural development Wednesday and aired many concerns about how FCC policies may affect investment.