Commission Declines to Make Major Changes to USF/ICC Order
The USF/intercarrier compensation order remained intact after the sixth order on reconsideration, released Wednesday. In response to several petitions for reconsideration, the FCC declined to reconsider adoption of its high-cost universal service support rules for rate-of-return carriers, and declined requests to reconsider the monthly per-line cap of $250. The original order “represents a careful balancing of policy goals, equities, and budgetary constraints,” the commission said. The latest iteration did make what Chairman Julius Genachowski called “some modest adjustments” to simplify spending caps and give the Wireline Bureau more flexibility to “maintain certainty regarding year-to-year funding levels.” Commissioner Ajit Pai wrote separately to criticize unpredictable benchmarks he thinks will undermine efficient and prudent decisionmaking by rate-of-return carriers.
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The order combines the two separate capital and operating expense benchmarks into one benchmark to simplify the regression analysis, a change Commissioner Jessica Rosenworcel had been seeking (CD Nov 20 p5). Pai praised that part of the order, which he said will provide short-term relief for rural carriers affected by the 2013 benchmarks. The order also adds a 15 percent backstop to limit the total amount of support a rural carrier can lose in 2013 based on the benchmarks. That change will give rural carriers “a slightly easier time managing their cash flow in 2013 and, hopefully, keeping their doors open."
The order directs the Wireline Bureau, as it updates the benchmarks for 2014, to “consider whether these benchmarks should be held constant for multiple years.” If so, the bureau should do so in a way that will “best advance our objectives to preserve and advance the deployment of voice- and broadband-capable networks while providing better incentives for carriers to invest prudently and operate efficiently.”
But Pai said he was “disappointed” that the commission didn’t do more to reform the benchmarks. “Universal service support should be stable and predictable and distributed consistent with the law and common sense,” he said in a statement (http://bit.ly/XdlwBc). “I am not so sure that the [quantile regression analysis] benchmarks that we reaffirm today pass that test.” Pai criticized the benchmarks as unpredictable, based on past cost data that won’t clearly indicate future results.
To make the caps more predictable, the commission should hold the benchmarks constant for several years, with annual adjustments for line loss, Pai said. That would let rural carriers make longer term investments because they could actually predict the benchmarks that will apply to them in the future, he said. Pai also recommended phasing in the new reduced benchmarks over a year to “ease the financial impact” of unexpected changes. “It is my sincere hope that the Commission will, in the coming weeks, seek to address those concerns,” he said.
The commission kept in place the monthly cap of $250 per-line on total high-cost federal universal service support for incumbent telcos. It rejected rural association arguments that the cap “fails to take into account the economic realities” of expanding carriers, and could have “devastating impacts” on some companies. Ninety-nine percent of ILEC study areas receiving USF support are already under the $250 monthly limit, the commission said, and petitioners presented no new evidence to persuade them to reconsider adoption. Carriers with unique circumstances can always apply for a waiver, the order said.
NTCA, one of the associations that had petitioned for reconsideration, said the order provides some necessary near-term changes, but there’s still much work to be done. “We're hopeful that this reconsideration order can serve as a springboard for additional dialogue with policymakers about how to resolve our remaining concerns and how to achieve the statutory universal service mandate in a broadband-oriented, IP-enabled world,” said Mike Romano, NTCA senior vice president-policy. NTCA plans to work with the commission to correct errors in study area boundary data in the regression analysis model and address “mismatching of census blocks to study area boundaries,” Romano said. NTCA also hopes the commission tests the effects of model updates on capping levels and support payments, before it makes further changes to the model each year. That could create more predictability for rural carriers, Romano said.
The Telecommunications Industry Association praised the order, saying it will provide “much needed business certainty for carriers operating in especially hard to serve markets, and will result in customers benefiting from additional telecommunications investment.” Commissioner Mignon Clyburn said the order made “essential modifications” that will provide more flexibility while providing “checks and balances” to encourage efficient investment.