Large, Mid-Sized Telcos Move Closer on USF Reform
Large and mid-size telcos have moved closer together on Universal Service Fund and intercarrier compensation regime reforms, but several questions remain -- as does the gulf between small rural carriers and the rest of industry, the public record shows and FCC officials told us. Executives from USTelecom, Windstream, CenturyLink, AT&T and Frontier met with wireline advisers to three commissioners last week, USTelecom Vice President Jonathan Banks said in an ex parte notice filed late Friday. The executives were invited in by the staffers, two FCC officials said. The executives said they have agreed in principle to reforms that roll out in stages over several years, the officials said.
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"Under that framework, legacy support for voice networks would be carefully transitioned to explicit support for the construction and operation of broadband networks in high-cost areas within a budget of current USF support,” Banks wrote in his ex parte notice. “In order to accomplish this objective, existing intercarrier rates would be harmonized and reduced, while solutions to reduce arbitrage would be implemented, and carriers with legacy obligations would be provided an opportunity to recover a substantial portion of revenue losses due to mandated rate reductions. Support for high-cost broadband networks would be provided on a more geographically targeted basis than is typical of today’s legacy support program.” The support would be calculated using the “forward-looking” model that USTelcom has backed, Banks said.
USTelecom has been leading talks for months in the hopes of coming up with an industry-endorsed reform package. The executives were invited in because commission staff had been hearing rumors of closer accord between large carriers such as AT&T and Verizon and the mid-size companies such as CenturyLink and Frontier, the officials told us. All the executives agreed that terms still have to be worked out to fill in the “framework,” officials said. It was pointed out during last week’s meeting that rural telcos were conspicuously absent, the officials said. The executives acknowledged that they have some work to do with rural companies, but were hopeful that a deal could be reached, the officials said.
It appears that rural companies are digging in. The three largest rural telco associations are organizing a Hill and commission blitz (CD July 5 p6). One day after the large- and mid-size company executives met with staff, NTCA CEO Shirley Bloomfield and Vice President Mike Romano had a meeting of their own, according to an ex parte notice filed on docket 10-90. Rural telcos are worried “that certain reform proposals would have a drastic adverse impact on the affordability and availability of basic and advanced services in some of the most high-cost areas in the United States,” their ex parte notice said. “NTCA urged the Commission to examine this evidence carefully, and to ensure that it is taken fully into account in the final design and adoption of any reform initiatives."
The biggest rural concern appears to be whether the Universal Service Fund is going to be capped. That, Bloomfield and Romano said, “would be arbitrary and capricious, unsupported by any meaningful evidence, and most significantly, contrary to the congressional mandate in Section 254 of the Communications Act, as amended, that universal service be ’specific, predictable and sufficient.'” In a separate ex parte notice, the Western Telecommunications Alliance took aim at proposed cost caps, saying said it would have “an adverse impact” on its member companies.