Chief of Staff Ruth Milkman defended the FCC’s decision to set aside some incentive auction spectrum for companies that don’t have significant low-band spectrum holdings in a particular market, in a speech Tuesday to Evercore Tech Change Conference. “With more than 70 percent of low-band spectrum in the hands of just two providers, this reserve assures that multiple providers without significant amounts of low-band spectrum have a meaningful opportunity to compete to acquire these valuable airwaves,” Milkman said, according a text posted by the FCC. “Where competition cannot be expected to exist, we will not hesitate to act to protect consumers and advance the public interest.” Milkman said the TV incentive auction is now the biggest single item on the FCC agenda, noting the World Radiocommunication Conference is underway in Geneva (see 1511040040). She stressed the potential significance of the FCC recent NPRM on spectrum frontiers (see 1510220057), as the WRC looks at new bands for wireless broadband. “We’re talking about 3,800 megahertz of spectrum that we are going to look at,” she said. “That’s six times all of the commercial spectrum that the Commission has authorized for broadband. And we’re potentially doubling the amount of high-band unlicensed spectrum.” Milkman also emphasized the importance of the USF program. The new Connect America Fund “is moving forward with plans to invest $9 billion over 6 years to preserve and expand broadband deployment to 7.3 million rural Americans,” she said. “These investments are targeted and fiscally responsible. These contributions leverage investment from private ISPs. We will only fund one service provider per area, and we won’t provide funding in areas where there is an unsubsidized competitor.”
NTCA raised questions about a possible FCC “bifurcated approach” to rural telco USF reform under which prior expenses would be recoverable through existing mechanisms while new investments and some stand-alone broadband expenses would be recoverable through new mechanisms. “While it is important to get reform done quickly, it is more important to get reform done right,” NTCA said in a filing posted Monday in docket 10-90 on a meeting with a senior FCC staffer. The rural telco group asked what the bifurcated approach's objective is, given that it believes FCC-articulated reform principles are more likely to be achieved by “already-proposed measures,” such as “budget controls and reasonable limits on operating expenses and prospective capital investments." Plus, NTCA said existing high-cost loop support (HCLS) and interstate common line support (ICLS) mechanisms have "shortcomings," but they have worked "better than any other system" to encourage and enable sustainable rural broadband investment. It's “essential that any reforms strike a careful balance toward both a reasonable opportunity to recover costs in accordance with the rules in place at the time the relevant investments and associated expenses were incurred and the need to provide sufficient and predictable support for future broadband deployment and operations; neither can or should be sacrificed for the other,” NTCA said. The group also voiced concerns about any “artificial cut-off” of HCLS/ICLS support that would move all associated costs “to the new mechanism as of a future date certain.” NTCA said HCLS and ICLS support should “continue for the useful life of networks used to deliver supported services; even after those networks are fully depreciated, rural rate-of-return-regulated local exchange carriers ('RLECs') will continue to incur expenses to deliver voice and broadband services over them.” NTCA also noted the “time sensitivity” of a request for commission review of a Wireline Bureau denial of a petition for reconsideration of an HCLS rate floor, which rural telcos believe was flawed. Rural telcos aren’t substantively challenging the application of the rate floor to HCLS support, but its methodology, and the FCC should act “well in advance of June 2016" to set "a more reasonable methodology,” the group said.
The current FCC appears to be waging a “war” against private infrastructure investment, Bob Quinn, AT&T senior vice president-federal regulatory, said Tuesday in a blog post. Quinn cited reports that the agency is sending out “SWAT” teams of FCC staffers “to preach the use” of USF dollars “to build government-owned and operated broadband infrastructure in rural and non-rural areas,” and pointed to the agency’s enhanced look at special access rates. “To be clear, we at AT&T have no problem with government-owned networks in areas where there has been a market failure because the economics for the private sector just don’t work,” Quinn wrote. “Unfortunately, the FCC’s advocacy here … doesn’t appear to be limited to circumstances of market failure.” In the past, “incenting all companies to build broadband was THE goal of all policymakers. It doesn’t feel that way anymore,” he said. The FCC started down this “circa-1980’s regulatory journey” three years ago, he said. “I fretted that these moves signaled its intent to abandon policies that were designed to, and did, result in significant broadband infrastructure investment in the U.S. I called the FCC’s moves the Bridge to Nowhere. My point then, and still is, that the FCC should be focused on establishing policies that lead to more fiber and broadband infrastructure investment in this country. ... It’s high time the FCC got serious about policies that incent that kind of investment.”
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.