Wireline Companies Argue Over Eligibility for CAF Phase I Support

If a census block contains one served location with at least 768 kbps downstream and 200 kbps upstream, that block is not considered “unserved,” and is therefore ineligible for Phase I support. The changes proposed by ITTA and others would expand eligibility to include these partially-served census blocks. ACA and NCTA say the proposed changes are a “waste of scarce universal service funding” because these partially-served areas are the most likely to experience private investment (http://xrl.us/bmzv6w). Determining which locations are unserved further raises “a variety of serious evidentiary questions,” and would increase the likelihood of funding areas where service is already available, they said.

ACA and NCTA had already expressed “major concern” with the Phase I mechanism adopted in the USF/intercarrier compensation order, arguing it violates “the principle of competitive neutrality” and inefficiently spends limited funds. The order provides $300 million in incremental support to price-cap ILECs for the purpose of providing “an immediate boost to broadband deployment in areas that are unserved by any broadband provider,” and provides a one-time support payment of $775 per unserved location to “spur immediate broadband deployment to as many unserved locations as possible."

The Phase I regime as currently conceived “will produce an unjustified disparity in how fiber-unserved areas are treated,” Windstream Senior Counsel-Federal Policy Jennie Chandra told a legal adviser to FCC Chairman Julius Genachowski this week (http://xrl.us/bmzv9a). Areas where a carrier has invested in copper-fed DSL access multiplexers (DSLAMs) will be ineligible for Phase I support, while comparably high-cost areas where a carrier has not engaged in any broadband investment will be eligible, she said in an ex parte filing. It said the result will be to “reward carriers that have invested the least in rural broadband deployment” while penalizing consumers served by carriers who have made incremental upgrades to deliver broadband to rural consumers more quickly.

Copper-fed DSLAMs aren’t enough to keep up with increasing demand on bandwidth, but the carriers who provided these incremental upgrades and need to move to fiber-fed DSLAMs will be denied Phase I funding, Windstream said. This is a problem not just for wireline broadband but also wireless broadband, because the more customers served by fiber, the lower the cost to connect other providers’ wireless cell sites to fiber connections, thereby increasing wireless capacity, the company said. Windstream proposed allowing areas to get additional support if they're currently unserved or supported only by copper-fed DSLAMs, and would not be covered by the relevant carrier’s broadband projects planned for the next three years.

ACA and NCTA don’t like the new plan, which they argue would “further bias the Phase I incremental support regime in favor of the incumbent carriers, thereby harming competitors.” Expanding the scope of the Phase I mechanism would run counter to the commission’s decision to not allocate scarce CAF dollars in areas which see unsupported competition, they said. The proposals are inconsistent with the commission intent to use Phase I incremental support only for “areas that are unserved by any broadband provider,” they said.

Proponents of the changes say truly unserved areas are unfairly kept from Phase I eligibility. “There could be just a handful of customers in a census block that have broadband and everyone else in the census block would not be able to get broadband deployed using CAF Phase 1 funds,” ITTA President Genny Morelli told us. “We want the FCC to change the rules so that ILECs can use Phase 1 money to serve unserved locations in partially-served census blocks.”