Price-cap telcos accepted up to $1.5 billion of the $1.675 billion in annual USF support the FCC offered under its new Connect America Fund program that subsidizes broadband (and voice) service in high-cost rural areas, the FCC said Thursday in an emailed statement. The money is expected to help the carriers deliver and improve broadband to up to 3.6 million rural homes and businesses and 7.3 million customers, the commission said.
Comments on proposed high-cost loop USF payments to some RLECs are due Sept. 24, replies Oct. 9, the FCC's Wireline Bureau said in a public notice Tuesday in docket 05-337. To implement an FCC rule change, the National Exchange Carrier Association proposed high-cost loop formula modifications that would give "average schedule" rural carriers $11.3 million in 2016, up from $8 million in 2015 (see 1508240014). The proposed formula, if approved by the FCC, would be set to take effect Jan. 1, the bureau said.
A table showing how census blocks are classified -- rural, suburban or urban -- in the FCC's Alternative Connect America Cost Model is available through a link at the bottom of a public notice put out by the Wireline Bureau Monday. The notice invited parties wishing to comment on plant mix values for the model to view the table. The broadband cost model is being developed for use in a possible new Connect America Fund mechanism to give USF support to rate-of-return carriers providing service in rural, high-cost areas.
Some small rural telcos will receive an additional $3.3 million in USF high-cost loop support under formula modifications proposed by the National Exchange Carrier Association for "average schedule companies." The proposed extra money payable for 194 average schedule study (coverage) areas would mean the affected rural LECs would receive about $11.3 million in 2016, vs. $8 million in 2015 for 165 study areas under the current formula, a 41 percent increase, NECA said in a report posted Friday in FCC docket 05-337. Most of the proposed increase is due to an FCC rule change in December aimed at keeping total payments under a cap through across-the-board cuts rather than other loop cost adjustments. "The new method of controlling the fund has a smaller impact on lower cost companies than the old method," NECA said. "Under the old rules, the proposed formula would have increased payments to average schedule companies by approximately 2%." If the FCC approves the proposed changes, the average schedule payments still will be only 1.6 percent of the $718 million in total high-cost loop support for RLECs in 2016, NECA said.
Micronesian Telecommunications was authorized to receive its full $2.63 million allotment in annual USF support from the FCC Connect America Fund Phase II, the Wireline Bureau said Friday in docket 10-90. Micronesian will use the subsidy for calendar years 2015-2020 to provide broadband service to 11,143 locations in the Northern Mariana Islands, the bureau said in a public notice that also authorized Hawaiian Telcom to receive $4.42 million in annual USF subsidy to provide broadband service to 11,081 locations after that price-cap carrier announced it would accept its full CAF Phase II allotment (see 1508200045).
FairPoint Communications will accept $37.4 million of annual USF subsidies under Phase II of the FCC Connect America Fund (CAF II), a company release said Tuesday. The support for 2015-2020 will help FairPoint provide 10/1 Mbps broadband to about 105,000 homes and businesses with over 200,000 rural customers in 14 states, an FCC release said Wednesday. The Wireline Bureau in a Wednesday public notice authorized the CAF II distributions, the biggest chunks of which will go to upgrading high-cost networks bought from Verizon in three New England states: $13.3 million for Maine, $8.8 million for Vermont and $4.4 million for New Hampshire. "We are committing hundreds-of-millions of dollars in capital to build and upgrade infrastructure in our service territories to extend affordable broadband services to remote areas which will help businesses and residents alike stay connected to the world,” said CEO Paul Sunu in the company release. FairPoint was eligible for $38.2 million in 16 states but declined support for Colorado and Kansas. It said it would evaluate the competitive bidding process the FCC plans for areas where price-cap telcos decline CAF II money. FairPoint expects it will no longer receive $39.3 million in current high-cost "CAF frozen support" but will receive $7.4 million in transitional support. Wells Fargo analyst Jennifer Fritzsche said the transitional support will wind down in stages by 2018. "Like the other RLEC peers, we believe FRP will be able to use this CAF support to its advantage," she said in a note to investors. "While there is of course a [capital expenditure] element to this build, the additional revenue it receives from the buildout of these additional households should help it longer term. We view the recitation of the prior guide for both [free cash flow] and capex as a positive and continue to believe FRP has greater cost cutting opportunities which could further drive EBITDA higher." Price-cap telcos have until Aug. 27 to make their CAF II decisions, but some others have already make announcements: Frontier will accept its full $283.4 million (see 1506160039); Windstream will accept $174.9 million of the $178.8 million it's eligible for (see 1508050072); and CenturyLink expects to accept at least $300 million of the $514.3 million it's eligible for, though it's still reviewing whether to take support in 11 of its states (see 1508140052).
The FCC’s push to extend Lifeline USF support to broadband is receiving support in early comments, but some state and local officials are concerned it could come at the expense of traditional phone services. Some Native American groups also have urged the commission to reach out more directly to tribal authorities to address their needs. Responding to several requests for more time, the FCC extended its Aug. 17 deadline to Aug. 31 for commenting on its NPRM to revamp its Lifeline USF support for low-income consumers (see 1508050032), but some parties filed comments in docket 11-42 by the original deadline.
ASPEN, Colorado -- NCTA Executive Vice President James Assey tore into what he sees as many problems with how the federal government subsidizes competition, which he believes creates problems for the big cable operator incumbents that belong to his association. During the Technology Policy Institute’s conference, he and other panelists on Tuesday debated what overhaul to USF and other subsidies may be needed.
CenturyLink plans to cut its workforce by about 1,000, the company confirmed Friday in an emailed statement. "After careful consideration, CenturyLink has made the difficult decision to reduce its workforce," the statement said. "This includes current positions as well as not backfilling open positions." Affected employees will receive severance packages and assistance to find new jobs, including within the company. "Additional steps will include minimizing the number of contractors we work with, reducing travel expenditures and further reductions of non-employee-related expenses." CEO Glen Post said on an Aug. 5 analyst call that CenturyLink was planning a "reduction in the number of employees" to cut costs, according to a transcript of the call. On that call, Chief Financial Officer Stewart Ewing said CenturyLink estimates it will take at least $300 million of the $514 million in annual USF support it's eligible for under the FCC's Connect America Fund Phase II. CenturyLink is continuing to evaluate whether to take more than that and expects to notify the FCC of its final decision on or before an Aug. 27 deadline for price-cap telcos, the company said in a separate emailed statement. Ewing said the $300 million would go to about two dozen states where CenturyLink serves high-cost areas and it's studying whether to take the CAF II subsidies in another 11 states. If the telco doesn't accept the CAF II support there, Ewing said the company could continue to receive about $100 million in USF "frozen support." He said the FCC is unlikely to write rules before late 2016 or maybe 2017 for a reverse auction in areas where price-cap carriers don't accept CAF II money.
Some state telecom associations, especially those representing rural telcos, said they are struggling with increased federal intrusion into areas that have traditionally been under state jurisdiction. Such overreach is the main reason one of the two rural telecom associations in Montana -- the Montana Independent Telecommunications Systems (MITS) -- chose to disband at the end of the month after 22 years, said state Public Service Commission Chairman Brad Johnson. That type of intrusion has been noticed less in states such as Kentucky, where an association is going strong and continues to advocate for members and figure out how to deal with FCC orders.