Genachowski’s USF Order Would Raise Speed Standards, Cut Price Cap Set Asides, Officials Say

The order also would create a mobility fund that would guarantee rural wireless carriers “at least” $300 million per year during the reform transition, the officials said. Genachowski’s wireline adviser, Zac Katz, briefed industry starting Tuesday. One telecom lobbyist said colleagues left the room “white as ghosts” after meeting with commission staff. Genachowski’s spokesman declined to comment.

The chairman’s order largely follows the incumbent-backed ABC plan, telecom and FCC officials told us. But the departures have been significant enough that many mid-sized and small carriers were wondering aloud Wednesday whether they could support it. States are already threatening to challenge the order in court because it would preempt their authority over rates. Consumer groups have attacked the plan and draft order because it creates the potential for higher subscriber line charges, though it remains possible rates will not rise for many customers. Cable, satellite and wireless firms attacked the ABC plan because they see it as a carve-out for incumbent wireline companies. The draft order raises the possibility that the coalition that built up around the ABC plan could unravel.

Two lobbyists for price cap companies said their companies were unhappy with what they're hearing from the commission. One lobbyist described price cap reaction as “panic,” the other said the order “is bad news."

As word was trickling out about the contents of the FCC’s order, the Senate Commerce Committee opened hearings on universal service reform. Chairman Jay Rockefeller, D-W.Va., told a packed hearing room that the proceeding was being held over the FCC’s objections. “The FCC was not thrilled about the prospect of having this hearing,” he said. “All of that strikes me as missing the point. What we're all saying here is that we're very much behind the incredible effort of the FCC … we need to hear [the FCC] and they need to hear us.” Rockefeller noted the FCC was doing its work “without a full complement of commissioners.”

The witnesses -- Frontier Vice President Kathleen Abernathy, U.S. Cellular CEO Mary Dillon, NCTA President Michael Powell, NTCA CEO Shirely Bloomfield and Washington state Utilities and Transportation Commissioner Philip Jones -- stuck to their sectors’ scripts in their testimony. Bloomfield and Abernathy defended the incumbent-backed reform plans, while Dillon, Powell and Jones attacked it.

Missing from the panel was any consumer advocate. Consumer groups are expected to have substantial clout in the proceeding and Free Press political adviser Joel Kelsey told us ahead of Wednesday’s hearing that he was worried their voice might be lost. “It would be really disappointing if the Senate used this opportunity only to discuss what the impact will be on industry and not on cash-strapped consumers,” he said. But Rockefeller said in his opening comments that “reform requires big choices” and that a big problem was that, under the current system, “reimbursement is based on the company rather than the constituency.” That, Rockefeller said, has to change. “The fact is, most people are unhappy about what they're getting, especially their bills,” Rockefeller said.

Questions over first refusal dominated Wednesday’s hearing. Sen Mark Warner, D-Va., was most pointed in his critique of the proposal. “It seems to me a pretty blunt instrument and, frankly, not in the spirit of competitiveness,” Warner said. Abernathy was the lone defender of the proposal, saying it was “a compromise” because the incumbents are already in the area and have agreed to take on carrier of last resort obligations. Plus, she said, it would be quicker to give incumbents the cash to build broadband than to wait to structure reverse auctions. Powell scoffed at that: “At the end of the day, being hasty and being efficient are not the same thing over time."

Sen. John Thune, R-S.D., defended the ABC plan. He said he thought it a good starting point for reform and would be disappointed “if we make the perfect the enemy of the good.” He pressed Powell on the right-of-first refusal and got Powell to agree that cable stands to benefit overall if the system is reformed.

"USF support should aim to give competitive carriers the economic confidence they need to build out networks and benefit consumers, rather than create more uncertainty,” Rural Cellular Association President Steve Berry said. “The FCC’s current proposal underfunds wireless solutions, and without an effective replacement mechanism in place, leaves wireless carriers and their customers uncertain about the future. This is an absolutely unacceptable outcome and will harm every consumer in rural America. … With the FCC due to vote on USF in the coming days, I strongly urge the Commission to look to the future of wireless."

Rockefeller left the hearing early. Speaking in the Russell Senate Office Building hallway, he said he was wondering if there were places where industry could “compromise” on universal service reform. “I haven’t heard it yet,” he said. Asked why there were no consumer groups’ representatives on Wednesday’s panel, Rockefeller said that Washington’s Jones gave voice for consumers.