FCC Chairman Julius Genachowski’s proposed Universal Service Fund reforms are...

and regulatory reforms that will spur job creation and overall economic expansion,” said the Rural Broadband Alliance’s letter, according to an alliance release Monday. “However, the FCC is preparing reform measures that will completely undercut such investment and growth by sidestepping the broadband issue while simultaneously cultivating an environment of continuing regulatory and economic uncertainty throughout much of rural America.” The alliance was formed in July by several rate-of-return carriers angry that the big rural associations were about to make a separate peace with price cap carriers on USF reform (CD July 29 p1). Pending USF reforms and the intercarrier compensation regime will have a “relatively muted” impact on mid-sized, price cap carriers, analysts at UBS predicted Monday. Most of the companies “have lowered their exposure to subsidies with their recent acquisitions” and the FCC’s proposed reforms “will also allow [the mid-sized carriers] to offset most of the pressure with increases in subscriber line charges and/or with access to the new Connect America Fund,” analysts Batya Levi and John Hodulik wrote. USF and intercarrier comp represent 4 percent of revenue, 8 percent of earnings before interest, taxes, depreciation and amortization, and 12 percent of free cash flow for CenturyLink; 5 percent of revenue, 8 percent of EBITDA and 15 percent of cash flow for Windstream; and 8 percent of revenue, 12 percent of EBITDA and 18 percent of cash flow for Frontier, the analysts said. “However, our models already incorporate significant revenue declines in this revenue stream, capturing most of the impact of the new reform,” Levi and Hodulik said. “If the competitive environment does not allow the carriers to raise the SLC or if the carriers are unable to tap the new fund, then we would have to cut our … estimates by 3-5 percent for revenues, 6-8 percent for EBITDA and 9-10 percent for FCF.” The mid-sized price cap carriers offered up the ABC plan, but they have been increasingly dismayed by the direction of USF reforms over the past few weeks (CD Oct 19 p1).