Carriers Endorse Windstream Move to Price Cap
Carriers of various sizes told the FCC they back a bid by Windstream to convert to price cap regulation (CD Aug 8 p9) -- but for different reasons. Big companies like Verizon saw Windstream’s regulatory shift as raising a prospect of savings in access charges and Universal Service Fund contributions. Midsized rural companies saw a chance to follow Windstream’s lead and gain flexibility themselves.
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Adding a price cap carrier would mean “a likely reduction in access rates and a potential reduction in the size of the Universal Service Fund,” Verizon said. “If Windstream’s analysis is correct, Windstream would draw less support from the [universal service] fund under price cap regulation,” the carrier said. “This would result in a corresponding reduction in the size of the USF.” AT&T, calling itself a large buyer of access services from rate- of-return carriers, said the plan could make Windstream more efficient, lowering prices. “Price cap regulation encourages carriers to respond more efficiently to consumer demands than they would under ROR [rate of return] regulation,” it said.
Frontier Communications said there are no clear rules about conversion from rate of return, and Windstream could lead the way for other rural carriers. “In the absence of clear rules, the most appropriate policy for the Commission to follow is to allow carriers flexibility to propose reasonable solutions that fit their circumstances and that provide a public interest benefit,” Frontier said. “Windstream proposes a methodology to resolve the lack of clarity.” Frontier called the proposals reasonable, urging that the FCC “allow similarly situated carriers to propose their own reasonable solutions.” Embarq told the FCC that “all incumbent local exchange companies” should have similar “flexibility to determine the appropriate form of regulation or their individual operations and to seek change in classification when warranted.”
Windstream told the FCC last month it wants the change to make its operations more efficient because it now operates some rural lines under rate-of-return regulation and others under price cap. The company said FCC rules allow rural carriers to move to price cap regulation but don’t provide a path. The plan relies on the CALLS access charge reform order issued in 2000 but requires waivers of the universal service support mechanisms and one of the CALLS price cap rules.
As long as the plan doesn’t hurt the USF, as Windstream has assured the FCC, a carrier should be allowed to use the structure best for it, the Independent Telephone and Telecommunications Alliance said. “Flexibility enables carriers to structure products and pricing based on market conditions in a manner that maximizes consumer benefits,” ITTA said. USTelecom said “the Windstream petition is a classic win/win proposal. It benefits Windstream’s customers through reduced access rates and through more competition in areas served by Windstream, reduces the costs of regulation to the carrier, and lessens the demands on the universal service fund.”