FCC Order Establishes $30 Per Month Customer ‘Benchmark’ for Broadband Buildout

Sen. Jay Rockefeller, D-W.Va., said that in general he’s “not totally satisfied” with the FCC’s proposal for revamping USF, based on when he last saw it, the Senate Commerce Committee chairman told us Tuesday. Committee staff and the FCC have been in discussions since then and are addressing concerns, a Senate aide said. Genachowski and Rockefeller “talk so often” and the committee just had a hearing, but “you can never be satisfied,” Rockefeller said after Democratic senators’ policy lunch. “Because what you want is universal coverage, and it’s like healthcare: It’s tough to do.” In the committee’s hearing last week, Rockefeller said “no one reform plan is perfect” and referred to “serious” concerns about support for wireless, impact to consumer bills, and the role of state commissions. A spokesman for Genachowski declined comment.

Rural telcos and their advocates are pushing back against the benchmark, arguing that it should be about $25 per month, according to a telecom lobbyist and an internal email circulated by the leaders of NTCA, OPASTCO and the Western Telecommunications Alliance. “We are concerned this will undermine the stability needed during the ICC transition and harm consumers -- even in some states that have already reformed their rates,” the rural leaders said in their email, dated Monday evening. “We proposed a $25 benchmark, with a modest increase in residential SLCs per year, for ICC reform because rural telcos have fewer customers in their calling areas and to avoid shock to customer rates. We also thought this would provide an appropriate balance between states that had undertaken reform and those who had not yet done so.”

Consumer advocates are also uncomfortable with the proposed benchmark. Zac Katz, Genachowski’s top wireline aide, assured public interest groups at a meeting Oct. 12 that the access recovery matter was still very much under discussion, a public interest advocate told us Tuesday. The public interest lobbyists were pleased that, as a definitional matter, the order doesn’t contemplate using the SLC to subsidize broadband, but they're still not sure it’s a good idea to make customers foot the bill for industry’s broadband build-out, the advocate said.

The Oct. 12 Katz meeting has not been publicized, but was referred to in meeting notes filed inadvertently by Free Press. Policy Director Matt Wood said Free Press wasn’t actively lobbying Katz to make changes, but was merely listening to his presentation and the meeting is therefore exempt from ex parte rules. “I feel it’s a defensible decision,” Wood said. “In this case, we were simply receiving an update."

The SLC increase hasn’t been abandoned altogether, telecom officials said. The price cap-carrier backed ABC plan called for SLCs for multiline business to be frozen until the residential customers’ rate was equal to multiline businesses, the telecom officials said. The proposed order would increase both at the same time, the officials said.

Despite the controversies over the order, many thorny questions are left for another day, telecom and FCC officials said. They said the commission is expected to issue a further rulemaking notice. It will ask questions about how to structure first refusal rights, how to define the network edges for a bill-and-keep system, how to handle Internet Protocol-to-IP interconnection and whether incumbents or competitors should have to perform protocol conversions from IP to time-division multiplexing or back again, FCC and telecom officials said.

The fight over the right of first refusal provisions “could kill the deal,” said a wireless industry official. Any delay could prove bad for wireless carriers, the official said: “This will delay the implementation of the program. This thing could unravel."

The American Cable Association said it “appreciates the Commission’s dilemma in seeking to weigh its desire to deploy broadband in unserved and high-cost areas with the interests of both price cap ILECs in receiving high-cost support [but] a proposal cannot be considered balanced when, without seeing the benefits of competitive bidding, it cedes to price cap ILECs the ability to elect the right for all or most areas of the country.” The association “thus urges the Chairman and the other Commissioners to reject the right of first refusal proposal as set forth in the Chairman’s draft order,” the group said in a Tuesday latter.

Meanwhile, CTIA President Steve Largent wrote Genachowski asking that more USF funds be allocated to wireless broadband build out as the agency finalizes its plan. CTIA has previously raised questions about the ABC plan’s proposal dedicating just $300 million per year to a new Mobility Fund. “Your current plan appears to cut wireless funding by more than 66 percent and relegate mobile networks to 7 percent of the universal service high cost fund,” the letter said. “The Commission should use the final weeks before a vote to alter this approach and restore funding to mobile broadband networks more consistent with the public interest.” Consumers want wireless, Largent wrote: “The Commission’s most recent broadband report, reflecting data through December 2010, shows that mobile broadband connections at or above 3 Mbps download and 768 kbps upload skyrocketed from just over 2 million in December 2009 to over 11 million in December 2010 -- an increase of 550 percent in just one year’s time. … Consistent with the statutory requirement that universal service be ’sufficient,’ the Commission must ensure that it allocates ample support for the mobile broadband networks that American consumers need and want."

Rate-of-return carriers would be given first refusal rights, but would not receive funding for areas where unsubsidized competitors have achieved “thorough” broadband deployment, telecom officials said. Part of the further rulemaking would ask whether the deployment should be 100 percent or some lesser figure. Rate-of-return carriers are also worried that wireless or satellite companies could theoretically qualify as unsubsidized competitors, the officials said. Price cap carriers are upset by provisions that would require them to accept some $300 million in the first year of reform and deploy broadband in high-cost areas, telecom lobbyists said. In meetings with staff, lobbyists have said the commission would exceed its authority if it ordered price cap companies to accept money, the officials said.