Adelstein Says FCC May Split Intercarrier Compensation Overhaul

The FCC must, by court order, explain the legal basis for compensation rules on ISP-bound traffic by Nov. 5. It’s a “narrow question,” Adelstein said, but the legal theories that the FCC adopts could have “broad implications for many other intercarrier compensation issues.”

Adelstein condemned inaction on intercarrier compensation. “We all wish this subject was like a good wine -- mellowing and improving with time,” he said. “Instead, we need to watch out for it turning into vinegar.” The FCC should harmonize compensation rates, reducing arbitrage opportunities along with consumers’ incentives to bypass the wireline network, Adelstein said. But the commission must be careful not to “put at risk the high levels of connectivity that we've all worked so hard to achieve,” he said.

Adelstein applauded the commission’s efforts to overhaul USF, but said he would have preferred a discussion based on “one comprehensive vision” instead of three notices of proposed rulemaking. The commissioner also said he has “reservations” about proposals to use reverse actions, cap the high-cost fund and give “limited support” to a broadband fund.

Reverse auctions “appear to be a flawed mechanism” for USF distribution, Adelstein said. Auctions may not provide “adequate incentives” for rural buildout, he said. And reverse auctions would make USF support unpredictable for carriers, discouraging investment, he said. If the FCC splits its USF work, Adelstein said he would like to leave reverse auctions “to another day, another decade, or maybe another century.”

Devoting $300 million to rural broadband deployment, as suggested by the Joint Board on Universal Service, “appears far short of what will be needed,” Adelstein said. The National Exchange Carrier Association estimates it will take $12 billion, and Educause believes the figure is $100 billion, he said.

Adelstein called on rural incumbent local exchange carriers to make large broadband investments. Carriers are losing switch-based lines, but regulatory uncertainty can make investment in IP broadband unattractive, Adelstein said. He cited the possible effects on revenue streams of overhauls of intercarrier compensation and USF overhauls. “Given all the turmoil you see ahead, you might feel like you're in a rowboat about to face that giant waterfall down the river.” But it’s better to “prepare now and chart a new course,” he said. “Once you're already headed down the falls, it’s too late.”

Rural areas need broadband so they can hold onto jobs, Adelstein said. Young people won’t stay where they “sense a lack of local opportunities,” he said. Broadband can restore “the sense of opportunity that first made Americans venture out and settle the frontier,” he said. Broadband-based communications services are also critical for fast response to emergencies, he said, citing recent flooding in the Midwest.

Broadband is closely tied to the economy’s health and soon will be a more significant measure than gas prices, Adelstein said. “The broadband price per megabit is going to become one of the bell-weather indicators of our economic health,” he said. People should stop making excuses for the low ranking of U.S. broadband by international organizations, he said. Arguing that the U.S. is more rural than higher- ranked nations is “a tiresome refrain,” he said. “I mean, we're here in Canada -- pretty rural country -- and they're doing better than us in a lot of these ratings.”

“Real leadership at all levels of government” is “sorely needed,” Adelstein said. “Rural America deserves better than a dirt road access to the information superhighway.” He lauded the FCC’s recent effort to improve broadband data collection. “Fortunately, like a student waking up late for a test, the FCC has finally begun to grasp the importance” of mapping, he said. What’s still needed is a national strategy, including “benchmarks, deployment timetables and measurable thresholds to gauge our progress,” he said. Goals should be ambitious, he said. The FCC’s new minimum standard for broadband speeds -- 768 kbps to 1.5 Mbps -- is still “far” from the 100 Mbps anticipated by “forward-looking analysts,” he added.

Congress also has a role, Adelstein said. Congress should provide more money for Rural Utilities Service broadband loans and grants and improve the program’s targeting, he said. It should also set up new grant programs supporting public-private partnerships, give tax incentives for rural broadband companies, devise better depreciation rules for capital investments in targeted telecom services and promote the deployment of high-speed Internet access to public housing units and redevelopment projects, he said. The government also should increase investment in basic science research and development, improve math and science education, and ensure all children affordable access to computers of their own, he said.