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.
The Rural Wireless Association takes issue with arguments that the FCC doesn't need to approve a new mobility fund, it told the commission. RWA specifically cited recent speeches by FCC Commissioner Mike O’Rielly. At a Competitive Carriers Association event, O’Rielly said small carriers should instead focus on preserving a role for mobility in the USF high-cost fund (see 1510080024). The FCC “has recognized that mobile voice and mobile broadband services are increasingly important to consumers and the nation’s economy, and that ubiquitous mobile overage must be a national priority,” RWA said. “The continuing need for dedicated support for mobile voice and broadband services remains as critical as ever, and it will persist as wireless networks evolve to Fifth Generation mobile technologies.” RWA filed a report on a recent meeting with Wireless Bureau officials.
FCC Chairman Tom Wheeler tried to calm USF concerns from members of the Washington state congressional delegation, which aired strong concerns about the Alternative Connect America Cost Model (A-CAM) in an Oct. 29 letter led by Sen. Maria Cantwell, D-Wash. The Washington lawmakers warned of “significant reduction in high-cost support” for the rural parts of their state under current models of the A-CAM and feared the model's “efficacy.” The dozen signatories of the bipartisan letter include Sen. Patty Murray, a Democrat in leadership, and Rep. Cathy McMorris Rodgers, chairwoman of the House Republican Conference. Wheeler responded Dec. 16, defending the A-CAM modeling: “I expect the next version of A-CAM will include company-specific inputs for plant mix (the ratios of aerial, buried and underground outside plant) also based on submissions by rate-of-return companies.” He said that under recent examinations eight of 18 Washington state rate-of-return carriers “would receive more support from the [A-CAM] model than they currently receive from the legacy funding mechanisms, rather than less.” He said work on the model is ongoing but the current results suggest benefits for Washington.
The FCC said it reached a settlement with the New York City Department of Education resolving a commission investigation into whether the school system violated competitive bidding rules for the E-rate USF support program. Under a consent decree entered into with the FCC Enforcement Bureau, the NYC DOE will pay $3 million to the U.S. Treasury and withdraw funding requests for the 2011-2013 period, which already had been frozen by the commission, said an FCC news release and a bureau order issued Wednesday. The NYC DOE also agreed to withdraw claims for any further E-rate funding for services it purchased in 2002-2010, adhere to a detailed compliance plan and auditing schedule, and provide "extensive employee training on E-rate rule compliance," among other measures, the release said. The NYC DOE had no immediate comment.
The Universal Service Administrative Co. projects $1.9 billion will be available from past years to carry forward into funding year 2016 for the Schools and Libraries Support Mechanism, which funds E-Rate USF discounts, USAC CEO Chris Henderson told the FCC in a letter Monday filed in docket 02-6. Of that amount, $1.36 billion is from funding years 2013 and before, $355 million is from funding year 2014 and $188 million is from funding year 2015, Henderson said.
USF support should be directed toward the services most demanded by consumers, CTIA said in a filing at the FCC in docket 11-42. CTIA representatives met with various FCC officials, the filing said. CTIA said wireless is the largest industry contributor to the federal fund. “In most cases, consumers are migrating towards mobile wireless services to meet communication, educational and occupational needs,” the group said.
Comments are due Jan. 19, replies Feb. 4 on a petition from FairPoint Communications seeking to collect USF and intercarrier compensation (ICC) transition revenue that the telco said is being improperly withheld, said the FCC Wireline Bureau in a public notice in Friday’s Daily Digest. “FairPoint asks the Commission to declare that [the National Exchange Carrier Association] should (1) correct its Eligible Recovery calculations under Section 51.917 of the Commission’s rules, retroactive to Jan. 1, 2015; (2) restore the funding that NECA has been subtracting under an erroneous interpretation of the Commission’s rules; and (3) to the extent necessary, refile its access tariffs for 2014/2015 and 2015/2016 to effectuate the correct calculations.” FairPoint is seeking to recover $4.2 million in annual USF-ICC revenue that it previously collected from local switching support (see 1512110070).
NTCA clarified Thursday it believes the FCC can adopt a single order relatively soon to set the rules for giving rural rate-of-return carriers the option of receiving USF support based on a broadband cost model, fix a "stand-alone broadband problem," and adopt some other changes to legacy mechanisms. NTCA believes a second, later order would be needed, but not to nail down further model details; instead, it believes the FCC can make technical refinements to the model as it implements the first order -- including by conducting a "challenge process" to RLEC high-cost areas -- and addresses other issues, NTCA Senior Vice President-Policy Mike Romano told us Thursday. Romano was reacting to a Communications Daily story that said NTCA had proposed a "two-step path" for adopting a rate-of return model-based support option (see 1512160060). He acknowledged there was a "semantics" issue in how different phases and actions could be described. NTCA does believe the FCC should take more time to adopt an order on its proposed "bifurcated approach" to updating legacy rate-of-return USF support that would be available for RLECs not opting for model-based support, Romano said. NTCA believes a Further NPRM would be helpful on the bifurcated approach, but isn't necessary on the model, he said.