FCC Plans Response to 2005 10th Circuit Remand
The FCC opened a rulemaking to revamp universal service high-cost support for non-rural carriers. In a notice of inquiry adopted 3-0 Tuesday and released Wednesday, the FCC asked how it should respond to a 2005 remand by the 10th U.S. Circuit Court of Appeals. In 2005, the court called unlawful the FCC’s current non-rural rules, which address carriers like Qwest that serve high-cost areas with too many lines to be considered “rural” by the statutory definition.
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The FCC plans to issue a final order by April 17, 2010. “By that time, we will have had the benefit of completing the National Broadband Plan, which will further inform us when it comes to advancing universal service,” said acting Chairman Michael Copps in a statement Wednesday. Commissioner Robert McDowell applauded the FCC’s commitment to a timeframe. “The Commission has for too long avoided answering the fundamental questions raised on remand” by the court, he said.
The FCC sought comment on multiple proposals, submitted by Qwest, Embarq, CostQuest Associates and telecom regulators in Vermont and Maine. It also asked how it should define “reasonably comparable” rates to meet the goal of Section 254 of the Communications Act requiring the FCC to ensure consumers in high-cost areas have access to telecom services at rates “reasonably comparable” to those paid by consumers in urban areas, and how to define “sufficient” to meet Section 254’s requirement to establish “specific, predictable and sufficient” support mechanisms to preserve and advance universal service.
The FCC additionally asked how high-cost reform will impact major broadband plans the FCC must develop for Congress. In the 2008 Farm Bill, Congress required the FCC to develop a rural plan and a national plan was mandated the American Recovery and Reinvestment Act.
Qwest wants the FCC to target high-cost support to the highest-cost wire centers served by non-rural incumbent local exchange carriers, and reduce the current non-rural high-cost support benchmark to 125 percent of the national average urban rate, the FCC said. In a May 2008 filing, Qwest estimated the change would increase support to non-rural carriers by $1.2 billion, but suggested the FCC could reduce the hike to $322 million if it didn’t give support to AT&T and Verizon.
The Maine Public Utilities Commission and Vermont Department of Public Service proposed in 2006 that the FCC “use ‘net subscriber cost’ as a proxy for rates in its reasonable comparability rate standard and in its support calculation,” the FCC said. “Under this proposal, the Commission would first determine each carrier’s costs for serving local customers, then deduct revenue from other sources (including intercarrier net revenue, special access revenue, private line revenue, and customer revenue from non-universal service supported services), and finally divide by the number of switched lines to determine the per-line net subscriber cost.” Like Qwest, the state regulators support a 125 percent benchmark, the FCC said.
Embarq wants the FCC to replace all non-rural high-cost support in price cap study areas with a new mechanism called “Broadband and Carrier-of-Last-Resort Support.” Under the plan, submitted last September, about $1 billion per year would be allocated to wire centers based on household density. As a condition for support, recipients would have to commit to make broadband of at least 1.5 Mbps downstream available to at least 85 percent of customers in each wire center. The plan envisions funding for only the incumbent and one competitor at maximum.
CostQuest proposed that the FCC adopt a new cost model to fund all high-cost universal service mechanisms for all eligible telecom carriers. In a November filing last year, CostQuest said “the ideal, modern cost model for use in a reformed universal service system is one that is designed to model forward-looking costs; all carrier types and all technologies would be modeled, and geographic granularity would be used.”
Qwest applauded the FCC for tackling the non-rural USF issue. In January, the company petitioned the 10th Circuit for a writ of mandamus to force the FCC to act on the remand (CD Jan 16 p6). “We look forward to discussing this important matter with the commission as it crafts a universal service support mechanism that addresses the court’s concerns,” said Steve Davis, the company’s senior vice president, in a statement Wednesday.
Comments are due May 8, replies June 8. The FCC plans to release a further notice of proposed rulemaking no later than Dec. 15.