Rural Telcos Leery of Changing USF Definitions

Applying new definitions to rural firms as a side effect of the non-rural proceeding could imperil high-cost support for rural incumbent local exchange carriers, OPASTCO said. Rural carriers differ significantly from non-rural carriers, hence their separate support mechanisms, OPASTCO said in comments filed Mon. “This is a critical distinction because what may be ’sufficient’ high-cost support for non-rural carriers to achieve the statutory objectives of affordable and reasonably comparable services and rates in their rural areas will almost surely be insufficient for rural ILECs to accomplish these same objectives,” OPASTCO said. It also is concerned about another part of the proceeding that could lead to an interim support mechanism for non-rural “insular areas,” it said. Were the FCC to expand that mechanism to rural telecom companies, it could “negatively affect… the high-cost support received by rural ILECs,” OPASTCO said.

Universal service funding mechanisms for non-rural companies “differ in purpose, structure, characteristics and recipients from the federal high-cost mechanisms relied upon by… rural carriers,” said the Western Telecom Alliance. If the FCC decides later to tackle definitions of “sufficient” and “reasonably comparable” for rural carriers, “it should focus upon entirely different considerations than those for non-rural carriers,” WTA said. For rural carriers, “the term ’sufficient’ should concentrate upon cost recovery necessary to maintain existing rural infrastructure and encourage investment in rural network upgrades,” WTA said. “Likewise, the term ‘reasonably comparable’ should focus upon investment in and provision of telecommunications facilities and services in rural areas that are reasonably comparable to those in urban areas.”

Rural carriers said it’s particularly important that any caps set in the non-rural proceeding not apply to rural carriers. “Were the same cap to be used for both mechanisms, it could negatively affect the high-cost support available for rural ILECs, to the detriment of their subscribers,” said OPASTCO.

On another issue, the Neb. Rural Independent Cos. urged the FCC to continue to base non-rural high-cost support on costs, rather than rates. “A rate-based support mechanism could lead to unnecessary growth and could also lead to irrational state rate setting in order to maximize federal universal service support,” the group said: “Maintaining a cost-based structure will best position the mechanism for a transition to universal service provided over an Internet protocol platform.”

CenturyTel, which has both rural and non-rural units, expressed “deep concerns about the viability of a rate-based support mechanism.” CenturyTel told the FCC: “At least at this preliminary stage, there appear to be too much potential harm to consumers and too many implementation obstacles to warrant further development of a rate-based proposal.”

Verizon said this proceeding offers a chance to address 2 key problems of the universal service program -- more demands for funding and need for a neutral way to levy contributions to the fund. The 10th Circuit indicated the issues raised in its remand “cannot be considered in isolation,” Verizon said: The court instead said the issues “must be evaluated as part of a holistic analysis that takes into account other and sometimes competing principles -- including such key principles as affordability, sustainability and a competitively neutral and equitable assessment mechanism.”

AT&T made a similar plea, saying “an overhaul of the Commission’s complete plan for universal service support is urgently needed and long overdue… Simply tinkering with [the non-rural mechanism on remand… is not a sufficient response. Both the Telecommunications Act and the public interest require that the Commission commit itself to adopting a universal service support mechanism that actually works.”

Carriers should be treated the same in seeking universal service funding, whether defined as rural or non-rural, the Wyo. PSC said: “Carriers serving [high-cost] exchanges are virtually identical in all respects except for a federally- mandated classification [of] rural versus non-rural and should be treated the same.” The PSC said Qwest’s exchanges in Wyo. “are ‘non-rural’ by definition only, while in reality they are equally rural in nature to those served by ‘rural’ carriers… Qwest, with its local exchange costs and operations equal to that of a rural carrier, should be eligible to receive high-cost support in the same manner as the rural carrier.”

The Neb. PSC had a similar suggestion: “A single model should be adopted that would apply to both rural and non- rural carriers. The purpose of universal service funding should be to support high-cost areas irrespective of the company that serves those areas.”