Various rural LECs disputed preliminary FCC findings that they face 100 percent overlap from unsubsidized broadband/voice competitors, which if they do, will lead to their high-cost USF support being phased out under commission rules. Cable companies and other RLEC rivals said they were providing overlapping competition in a number of areas. NTCA, which represents many RLECs, urged the commission to require the competitors to provide specific evidence beyond assertions of previously reported deployment data submitted by broadband providers on Form 477.
Some regulators and telcos want state and federal USF contribution revisions, while others representing wireless ISPs would rather see the entire system shut down and overhauled, said speakers during a National Regulatory Research Institute tele-seminar. Speaking Thursday, the deadline day for telcos to accept FCC Connect America Fund Phase II offers (see 1508270068), experts said the funds wouldn't cover building out all networks to FCC standards, so it’s up to states to try to supplement that spending to improve the networks' reach to rural areas. The companies are aware the investment needed will be more than the funding, so they're ready to work with each state on how far it will go and whether other assistance is available, telco representatives said.
The FCC affirmed Wireline Bureau denial of petitions by three small companies seeking to participate in the agency’s rural broadband experiment program. In an order Thursday, the full commission denied applications for review filed by Last Mile Broadband, Lennon Telephone Co. and Rural Broadband Service Corp. (RBSC), which sought waivers of financial qualification requirements. The companies were among the provisionally selected bidders that the bureau removed from consideration after they didn't provide three years of audited financial statements and/or a credit commitment letter from an acceptable bank. The full commission said the bureau’s strict enforcement of the filing duties was appropriate to ensure the experiments didn't delay offers of model-based Connect America Fund Phase II USF support to price-cap carriers. “Contrary to the suggestion of the petitioners, it was not arbitrary and capricious for the Bureau to apply those requirements evenly to all applicants, particularly given that there were so many other applicants that were able to meet the financial and technical information requirements without waiver,” the order said. “We find that it was appropriate for the Bureau to act expeditiously in order to finalize the list of areas that would be included and excluded from the Phase II offer of support.” The deadline for price-cap carrier CAF Phase II decisions was Thursday (see 1508270068). Commissioner Mignon Clyburn partially dissented, criticizing the “unnecessarily unyielding” denial of the Lennon application. She said Lennon submitted reviewed financial statements consistent with those it uses to receive high-cost USF support. “So, reviewed financial statements are sufficient for rate-of-return carriers to receive approximately $2,000,000,000 in universal service annually, but not sufficient to provide $60,000 in support to the same carrier for a rural broadband experiment?” Clyburn asked. She said the FCC had the means to address any concerns through Lennon’s USF participation. She also said the regulatory "inflexibility" could discourage small entities from participating in USF Phase II competitive bidding and leave some consumers in hard-to-serve areas without broadband. “While I appreciate that strict adherence to the rules may be appropriate for entities that do not currently receive universal service support because the Commission may be unable to recoup funding, that is not the case here,” she said. But the commission said Lennon mistakenly believed the reviewed financial statements were sufficient and didn't even seek a timely waiver. "Applicants were expected to familiarize themselves fully with the Commission's rules and requirements," the order said.
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.