Potential USF, Intercarrier Compensation Overhaul Remains Divisive

Verizon, AT&T, Sprint Nextel, T-Mobile and MetroPCS urged the FCC to adopt an order at the meeting. “The time to act is now,” Sprint said. The FCC’s overhaul plan for USF and intercarrier compensation “is not perfect” and “undoubtedly inflicts pain on various parties,” it said. “But it is critically important to the development of a competitive telecommunications industry, and with adjustments, it can form the basis of a more rational system of intercarrier compensation and targeted, technologically and competitively neutral universal service support.” However, the carriers urged the FCC to half the proposed transition period to a maximum five years. “Although the draft orders achieve a uniform terminating rate in the end, the loophole in the draft orders allows for a lengthy and unstructured transition that allows states to postpone uniformity and to permit some carriers to retain their artificially high access rates for ten years,” Verizon said.

Not surprisingly, OPASTCO urged the FCC to immediately adopt Appendix C, the plan incorporating revisions the organization worked out with Martin. OPASTCO said the “fair and balanced” plan “contains the minimum support and protections” that rural, rate-of-return incumbent LECs “need to maintain their existing networks and continue to upgrade them for broadband. Failure by this Commission to act now on the Alternative Proposal will place additional strain on rural RoR ILECs’ revenue streams and thus their ability to provide consumers … high-quality basic and advanced services at affordable rates.”

Others said Dec. 18 is too soon for the FCC to decide anything, since reply comments are due Dec. 3. The Rural Telecommunications Group “suggests that the Commission take the time necessary to digest industry comments concerning the outgoing FCC Chairman’s three proposed Orders,” it said. “The last-minute nature of the proposed new rules, and questionable legal foundation for many of them, makes any hasty December decision on such major universal service and intercarrier compensation issues a risk that the FCC should not take and a paradigm shift that the rural telecommunications industry, given the current state of the United States’ economy, may be unable to survive.”

Some urged more time to comment on overhauls. U.S. Cellular said the FCC should issue another further notice “for the purpose of further exploring options and proposals for the optimum delivery of broadband Internet Access and mobile services to consumers in rural and high-cost areas.” Citing the Thanksgiving holiday, the Rural Cellular Association and the National Association of State Utility Consumer Advocates separately urged the FCC to extend the reply comments deadline. Replies are currently due Dec. 3, an already problematically tight deadline because it’s less than three weeks before the FCC’s December meeting (CD Nov 13 p1). The RCA asked the FCC for 14 more days, while NASUCA asked for 21. Either extension would effectively prevent the FCC from tackling USF or intercarrier compensation Dec. 18.

If the FCC doesn’t do comprehensive reform now, it should at least tackle traffic pumping and phantom traffic, Verizon said. To address phantom traffic, the FCC should either adopt the plan from its drafts or the USTelecom proposal, the carrier said. CenturyTel said the FCC should adopt rules now to tackle phantom traffic, revamp USF contribution, and kill the identical support rule. The FCC should act promptly on issues for which commissioners other than Martin have cited a “growing consensus,” the National Exchange Carrier Association said. Those include lowering intrastate access rates to interstate levels, imposing moderate subscriber line charge increases in conjunction with a national rate benchmark, tackling phantom traffic and traffic pumping, and killing the identical support rule, NECA said.

Reactions to the FCC’s three plans ranged from conditional support to outright rejection. USTelecom said it “believe[s] that with certain critical modifications, the structure proposed in the Commission’s Further Notice could form the basis of an acceptable, balanced and legally defensible reform” (emphasis in original). CTIA said it liked pieces of each FCC draft order. “CTIA generally advocates the adoption of Plan C for high-cost universal service reform, Plan B for contribution reform, and Plan A for intercarrier compensation reform,” the wireless association said.

Comcast said it supports setting a uniform terminating access rate according to the pricing terminology detailed in Appendix C. But the cable company wants the FCC to make a few revisions, including a shorter, three-year transition period, it said. Comcast backs the FCC’s numbers-based USF contribution plan, it said.

Qwest supported the FCC’s intercarrier compensation proposals, but rejected the agency’s USF ideas. “While the [intercarrier compensation] proposal can be made effective with a few minor changes, the same is not true for the proposal for USF reform,” Qwest said. Qwest backs revamping USF to eliminate waste and reshaping fund distribution to support broadband, it said. “However, none of the variations for USF reform contained in the [further notice] would accomplish that.” Qwest worries that the FCC USF plan isn’t legally sound, won’t be effective in enhancing broadband adoption by low-income households, and includes a too- complicated contribution plan that’s not sufficiently fair and neutral, it said.

States sharply criticized the FCC’s A and C proposals on intercarrier compensation. Those plans “virtually rewrite key sections of the Statute - overriding literally decades of case law, ignoring express reservations of State authority, and redefining statutory terms in a manner that Congress could never have intended,” said the National Association of State Regulatory Utility Commissioners. “Not one of these proposals is likely to survive judicial review.”

Mid-sized rural carriers also rejected the FCC’s plans, and the Independent Telephone & Telecommunications Alliance again pitched its own proposal. “As written, the FNPRM would order carriers to provide more broadband with less revenue, “ ITTA said. “Such a proposal, however, would effectively shut the doors on meaningful broadband deployment in more than half of rural America.” Embarq agreed and said “the proposed order’s approach … is arbitrary and capricious in many ways, and cannot be expected to withstand appeal.”

Representing a group of small rural carriers that also have opposed the FCC’s overhaul plans, the National Telecommunications Cooperative Association said the FCC “must not adopt” the proposed orders. “The consequences of the Proposed Orders in the FNPRM will be to stifle efforts to extend and maintain broadband to the most rural, high-cost parts of the United States, while providing windfall cost savings to the nation’s large interexchange and wireless carriers,” NTCA said. The association said the FCC should instead adopt NTCA’s plan.

Small rural competitive carriers also rejected the FCC plans. If adopted as written, they will “literally and visibly chill further competitive investment in rural under-served areas of the nation and seriously threaten the continued financial viability of the existing competitive operations of … rural carriers,” said the Rural Independent Competitive Alliance.

CompTel said the FCC’s intercarrier compensation proposals aren’t legally sound and are “fraught with ambiguities.” As written, moving to a uniform rate for all traffic “is beyond [the FCC’s] jurisdiction to adopt,” CompTel said. It’s unclear how the FCC plans to treat switched-IP traffic during the ten-year transition, it said. CompTel also rejected the FCC’s USF contribution proposal as laid out in Appendix B. That plan “would disproportionately shift the burden for funding universal service to smaller business customers,” it said. “These smaller business customers will experience a substantial increase in the monthly USF fees they are assessed while enterprise customers will experience a substantial decrease.”