Martin Unveils USF, Intercarrier Compensation Overhaul

Martin’s plan imagines broadband buildout by carriers of last resort getting high-cost subsidies, the chairman said. The carriers would have to commit to building out broadband “with at least DSL-like speeds” over a five-year period, extending service to another 20 percent of their territory each year, he said. If carriers said they were “unwilling” to commit, the FCC would hold a reverse auction to find someone who could meet the obligation, Martin said.

The draft item would cap the USF high-cost fund at current rates, not including money doled out through a new access recovery mechanism associated with Martin’s intercarrier compensation plan, he said. Wireless competitive eligible telecommunications carriers would have to show high costs to get USF high-cost support, he said. Wireless carriers would have to prove they meet the “same benchmark standards” as wireline carriers requesting USF support, he said. If they can’t show they're high-cost, and no one else in the study area can either, the FCC would hold a reverse auction to find another carrier to supply wireless service, he said.

Martin pitched a numbers-based USF contribution plan in which carriers would pay $1 per residential phone number. The proposal would reduce USF fees on residential customers’ phone bills, he said. For lines owned by businesses -- including universities -- the FCC would keep the current, interstate revenue-based system, at least until the agency can figure out how to move the lines to a numbers- or connections-based system, Martin said. The carve out would answer some critics’ concerns that a numbers-based system would inflate businesses’ costs, since they may own thousands of lines to cover employees or students. The FCC will ask for comment on how to proceed on that issue, Martin said.

Martin wants to launch a pilot Lifeline program aimed to make broadband more affordable for low-income households, he said. The program would set aside “several hundred million dollars” per year, the chairman said.

To revamp intercarrier compensation, Martin would have each state set uniform rates within its borders, replacing current interstate and intrastate rates with state-set reciprocal compensation rates, the chairman said. Each state would hold a reciprocal compensation proceeding and establish a uniform rate, he said. Eventually, regulators would work to drive the rates down “even lower” than reciprocal compensation, he said. The draft order “explicitly” claims jurisdiction over IP-based traffic, he added.

So that rural carriers could recover access revenue needed to cover costs, Martin’s plan would increase subscriber line charge caps and create a USF-based recovery mechanism, the chairman said. The draft order would increase the residential SLC cap by $1.50 to $2, and the business cap $5 to $11.50. If that’s not enough to recover costs, small rate-of-return carriers could get more money from USF, he said. Large price-cap carriers would be allowed to take from USF only if they can show their costs exceed their revenue in a given study area. It’s important for the “smallest rural carriers” to be “made whole,” but the FCC shouldn’t “place a burden on [USF] and on the rest of consumers” to maintain larger carriers “high dividends,” Martin said. Depending on how many carriers show they need support, the cost to USF would likely be $300-$500 million over two years, Martin said.

Martin was mum on whether the overhaul package could be segregated if commissioners can’t reach consensus by Nov. 4. A court order gives the FCC until the next day to tackle the narrower issue of ISP-bound traffic compensation. The comprehensive package addresses that issue by moving ISP- bound traffic to reciprocal compensation, Martin said. Tackling discrete issues rather than a total overhaul will “exacerbate” a broken system, he said. Three weeks is enough time for commissioners to find consensus, especially since Martin announced his comprehensive intentions almost six months ago, he added.