Broadband Plan May Provide ‘Window’ for USF, Intercarrier Compensation Overhauls
CHICAGO -- The FCC’s National Broadband Plan presents an opportunity to take on long-awaited revamps for the Universal Service Fund and intercarrier compensation, said industry executives on a panel Thursday at Supercomm. But analysts said they were skeptical. “The realist in me doesn’t think it’s going to happen,” said Moody’s analyst Gerald Granovsky.
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For people following telephone regulation, the overhauls have been the “gift that keeps on giving,” said moderator Kathleen Abernathy of Wilkinson Barker Knauer. From the perspective of a former FCC commissioner, by the time one realizes there’s no “good answer” and that the “bad” answer must be taken, “your time is up” at the commission, she said.
There’s now “general consensus” that USF and intercarrier compensation are broken, said Qwest Vice President Melissa Newman. “That’s half the battle,” considering people didn’t even agree on that a few years ago, she said. The other “good news” is that the FCC broadband team has said USF and compensation likely will need to be addressed as part of the national broadband plan, she said.
If the FCC is going to set broadband goals, it must reform USF and the intercarrier compensation regime, said Windstream Senior Vice President Mike Rhoda. Money from both makes up a significant portion of rural carriers’ income, he said. The funding makes up 11 percent of Windstream’s revenue and 50 percent of its free cash flow, he said. If the FCC requires broadband deployment but doesn’t redirect USF to broadband, the FCC will leave a lot of rural consumers “in the lurch” and rural providers in a “world of hurt,” he said.
The pending revamps have been brewing so long, investors “have become very cynical about the process,” said Regulatory Source Associates President Anna Kovacs. Many believe the overhaul will never happen because there’s too much political back and forth, she said. Even if the national plan opens a window, switching USF funding to broadband from voice isn’t going to be an easy process, she said.
Debt investors are “keenly interested” in what happens with USF and intercarrier compensation, Granovsky said. Technology continues to move ahead of existing rules, and Verizon has said all its traffic will be IP in five to ten years, he said. “Regulations have to catch up to that.”
In a “perfect world,” there would be a legislative fix, Kovacs said. The FCC may not be able to do a “perfect fix” otherwise, she said. Piecemeal revamps would be “the worst thing you could do,” she said. Access charges can’t be reduced without having a replacement mechanism ready, she said. And policymakers can’t declare USF a broadband fund without widening the base of contributors to all providers, she said. The issues are “too interrelated” to handle separately, agreed Rhoda.
Newman said regulators could tackle some specific, “more egregious” aspects of intercarrier compensation ahead of a comprehensive revamp. However, “whatever starts the process, I'm all for [it].”