USF Overhaul Said Possibly Leading to Contribution Revamp

Industry has generally been sanguine about the rulemaking notice, but was disappointed that contribution was left for another day. “We would have preferred that they take up contribution reform,” said Michael Romano, senior vice president for policy at the National Telecommunications Cooperative Association. “We were up on the eighth floor repeatedly taking up this issue, trying to get them to pay attention to this.” Republican Commissioners Meredith Baker and Robert McDowell also raised concerns about contribution. Free State Foundation founder Randolph May said on his website that “the omission seems curious and unhelpful if the Chairman really wants to rally public support for meaningful reform.”

Genachowski and his staff have promised that they will tackle contribution soon. It’s likely to be a tricky proposition even among Genachowski supporters, Lipman said. “There was a much clearer consensus in the Republican commission on having a numbers-based approach. I think a number of Democrats think that may be too regressive especially given the economic backdrop.”

The commission also proposes to eliminate funding for competitive eligible telecommunications carriers. That would mean that only one broadband provider would be funded in an area, a state telecom regulation analyst said. What’s most interesting about the change is that the FCC has backed away from immediately canceling moving rate-of-return carriers to competitive pricing, the analyst said. That would benefit rural carriers. The big question is how much money rural carriers really make. They get a lot from USF and some can well afford to give up the subsidies, the analyst said. They're going to fight hard to keep them, which is why the FCC has delayed that part of the revision to the USF plans, the analyst said. Romano acknowledged that some rural carriers are wary about the commission’s approach to rate of return, saying most carriers have only about 3 percent returns and he hopes the FCC is “surgical” and “takes stock of how we've been edging out broadband."

Consumer advocates have serious concerns about any sudden withdrawal of support for conventional phone service, “a crucial service that millions of Americans continue to rely upon” said Wayne Jortner, senior counsel with Maine’s Public Advocate Office. In many rural areas, such phone service offers the only reliable means of communication, said Jortner, a Genachowski appointee to the Universal Service Administrative Co. board. Without USF support for high-cost companies, rural telephone rates could easily become unaffordable, he said. Consumer advocates generally don’t favor the identical support rule because it’s an inefficient way to give competitive carriers the incentive to build out in rural areas, Jortner said. Since competitive carriers, mostly wireless carriers, have never had their cost of service examined, he said it’s “really arbitrary” to give them the same support as incumbents, whose costs have been measured for many years.

The FCC sought comment on satellite broadband-related proposals, in the order that was released late Thursday. One is to limit providers’ role to working with terrestrial providers during buildouts, satellite largely serving as a gap filler. “Limited satellite capacity would be better used to provide access to the areas most expensive for terrestrial technologies to reach,” and the FCC proposes “to allow satellite broadband providers to partner with terrestrial broadband providers that bid for support, subject to certain limits, but not to allow satellite broadband providers to bid on their own,” the rulemaking notice said. Also proposed are ways to rely on satellite broadband for the most expensive areas by limiting “support for any line with cost over a specified threshold … to the amount of support needed to serve the housing unit with satellite,” the notice said.

Hughes voiced frustration with the FCC’s treatment of the technology. The proposed rules show that the FCC “doesn’t understand how satellite broadband functions” in terms of new capacity and the planning involved, said Steven Doiron, director of regulatory affairs. He took particular issue with the proposed requirement of pairing with terrestrial providers, which would be new to Hughes. “We offer services directly to consumers, with the vast majority in rural areas,” Doiron said. “I don’t see why we should be pushed aside as access to these customers.” The agency’s conclusions about satellite broadband’s role in a revised USF are based on its current capacity rather than what’s coming, Doiron said. He said Hughes hopes to be kept out of payments into the fund and from it.