National Broadband Plan May Recommend Specific USF Spending Cuts
The FCC broadband task force is considering some cuts for the Universal Service Fund that it will recommend in the National Broadband Plan due in February, a commission official said Wednesday. The FCC wants to change the focus of USF to broadband, but realizes simply adding broadband as a supported service would raise the already exorbitant contribution factor that carriers use to pay into the fund, the official said. Commissioners haven’t seen the proposals, but some industry players are already sounding alarm bells. FCC eighth floor staff were briefed on several aspects of the broadband plan as it is evolving late Wednesday, but were asked not to share the details.
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Five draft recommendations are on the table, and some or all could make it into the final plan, the agency official said. The broadband team may recommend reexamining the 11.25 percent “guaranteed” rate of return for rural local exchange carriers. The team doesn’t yet have a new target in mind, but believes 11.25 percent may be too high in this day and age, the official said. Another possible recommendation tracks with an NCTA proposal that would create a mechanism to take away high-cost support in areas where a cable competitor serves 95 percent of the market with voice service. The regulator sought comment Tuesday on the NCTA proposal (CD Dec 9 p12). A third proposal would implement a cap on high-cost support per line, a move to prevent “high outliers,” the FCC official said. For example, in some cases carriers receive about $14,000 per line in high-cost subsidies, the official said. The broadband team may also recommend limiting support to one competitive eligible telecommunications carrier per area, and further reduce the CETC cap set last year, the official said.
The FCC’s broadband team is behind the proposals, and commissioners will be briefed “very shortly,” said the agency official. Another agency official said one eighth-floor office expects to be briefed soon, and anticipates the broadband plan will include recommendations about USF. The FCC declined comment.
The telecom industry has expected the FCC to address universal service in the broadband plan, but it’s been unclear how specific any recommendations might be, Independent Telephone & Telecommunications Alliance (ITTA) President Curt Stamp said. He expects the plan to tee up a comprehensive USF reform proceeding in 2010, he told us, adding that it would be a “challenge to do reform concurrent” with the plan’s release. Stuart Polikoff, regulatory policy and business development vice president of the Organization for the Promotion & Advancement of Small Telecommunications Companies, agreed it would be reasonable for the commission to wait to seek comment on the proposed recommendations until after the broadband plan’s release.
OPASTCO has strong concerns about the first three proposals, which all likely would result in less money for its small rural local exchange carrier members. But the association supports the two proposals limiting support to CETCs. OPASTCO would not support any reduction to the 11.25 percent rate of return, Polikoff said. Carriers need that support to build broadband, and the current financial crisis has made it difficult to get credit from lenders, he said. NCTA’s proposal is “backwards-looking” because it focuses on support for voice rather than broadband services. Worse, he said, it assumes that all rural telcos’ customers cost the same to serve. In rural areas, most customers live in low-cost areas, and it’s the handful living in hard-to-reach remote areas that create the greatest network costs, he said. Under the cable plan, telcos could lose support for high-cost customers just because they represent a small percentage of the total base, he said.
Polikoff questioned the FCC’s motivation for wanting to stop big per-line payouts. “If the high-cost fund isn’t for high-cost customers, what is it for?” OPASTCO recognizes the fund must be sustainable, but there are other ways, such as revamping contributions, to accomplish the same goal, he said.
ITTA has previously supported keeping and further reducing the CETC cap, and ending funding of multiple CETCs in one area, but hasn’t taken positions on the other items under consideration, Stamp said. The association is working on comments about the NCTA proposal, he said. On the FCC’s proposal to limit payouts per line, Stamp warned the commission to be careful it doesn’t make cuts that fly in the face of statutory universal service goals, he said.