Genachowski Asking About COLR Obligations, Cable Executives Say
FCC Chairman Julius Genachowski has asked cable lobbyists about what the commission should do with carrier of last resort (COLR) obligations as it contemplates universal service reform, cable executives told us Wednesday. Wireline staff have also asked questions about whether cable companies would be willing to go through the eligible telecommunications carrier process if the commission gets rid of the provision for ILEC right-of-first refusal in the proposed America’s Broadband Connectivity plan, executives said in a reporters’ briefing Wednesday at NCTA headquarters in Washington.
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The so-called America’s Broadband Connectivity plan is backed by the incumbent telcos. Smaller cable companies said they met with Genachowski, his staff and the other commissioners’ staffs Tuesday. They're largely pleased with the incumbent-backed plans, but are opposed to the right-of-first refusal, the segregation of VoIP charges during the transition to the new model and the deregulation of tandem-access charges, said Midcontinent Communications Senior Vice President Tom Simmons and Suddenlink Executive Vice President Dave Rozelle Wednesday. Also in Wednesday’s briefing were Mediacom Vice President Tom Larsen and Sjoberg CEO Dick Sjoberg.
When the executives raised their concerns about the ABC plan in meetings with Wireline Bureau staff, the staffers asked whether cable companies would consider submitting to the ETC process if the commission got rid of the right-of-first-refusal provision, Larsen said. The right-of-first refusal provision has been one of the most contentious issues in the proceeding. Most cable companies have opposed the matter. But the incumbents have dug in. Last week, Verizon told Zac Katz, Genachowski’s top aide for wireline matters, that right-of-first refusal “was an important element of the Plan because it balances competitive neutrality with the need to leverage existing facilities in high-cost areas,” the company said in an ex parte notice posted to docket 10-90 Wednesday (http://xrl.us/bmdero).
The right-of-first-refusal provision is “a deal breaker from a public-policy point of view,” said USTelecom Vice President Jon Banks, who helped lead the negotiations that led to the ABC Plan. Cable and others have advocated for reverse auctions. Structuring such a program will take years, Banks said. “If we're going to do auctions, it’s going to delay the award of the ... money for years, and it’s going to delay the broadband build-out for years.” The ABC Plan would allow auctions for about 20 percent of the Universal Service Fund.
Cable companies wouldn’t be able to charge the same rates for VoIP traffic that incumbents would while the ABC’s transition takes effect. The cable executives want all VoIP calls to be treated as traditional circuit-switched calls. “We seem to be listed as kind of second-rate citizens,” Simmons said. “We see that as a question mark. How do you even justify that?” Tandem-access charges are guaranteed by Section 252(c)(2) of the 1996 Telecom Act, Simmons said. It’s the only effective way to protect competition, he said. “It’s a monopoly situation.” Incumbents have said they've given a lot to cable companies in their plan, especially the provision that would forbid USF subsidies to areas where there are unsubsidized competitors working. Cable executives said Wednesday that the provision only applies to price-cap companies, rendering the provision hollow.
National Telecommunications Cooperative Association Vice President Mike Romano acknowledged that rate-of-return carriers would be exempt from the no subsidies rule under the ABC plan, but said his members are open to reconsidering it. “We've said the commission should take up the question,” Romano told us: “But no one’s been able to come up with a process to” cut off USF funding in rate-of-return areas where cable companies are operating.
Cable companies are adamant that all USF cash goes to areas that are 100 percent unserved. FCC officials asked the cable executives about carrier-of-last-resort obligations in such a scenario, the executives said. The questions were open-ended and Simmons said he didn’t have any firm idea of where the commission is heading on the question. But Rozelle said the question is largely moot from his point of view, because carrier-of-last-resort “is backward looking.”
Cable companies are also upset that the ABC plan doesn’t cap the USF and would like to see some kind of “sunset” on the rate of return regime, the cable executives said. Simmons likened the current regime to “corporate welfare.”
A few breakaway rural carriers are lobbying in the opposite direction. Hargray Telephone, for instance, told Katz last week that the ABC plan goes too far. “It would have the effect of discouraging rate-of-return carriers that might otherwise consider converting to price cap, and thus reduce the need to conduct costly cost studies, because it combines with the Commission’s existing rules to create an ‘all or nothing’ choice with respect to high cost support that also would subject the carrier to an aggressive reduction in intercarrier compensation,” Hargray said in an ex parte notice released Wednesday (http://xrl.us/bmdesc).
Simmons said NCTA and its member companies had been hopeful that they could influence the ABC plan sooner. “Frankly, our team was negotiating until the last moment” when the incumbents made their separate peace, he said. “We were right in there.”