Rural Telcos Tout USF Plan, Recognize Hard Work Remains
Rural telco groups outlined a "two-path" framework agreement to revamp rate-of-return USF mechanisms that they believe gives the FCC a jump-start in its drive to modernize the $2 billion high-cost voice subsidy program for the broadband era. Rural carrier representatives submitted their proposals Wednesday for creating a voluntary model-based approach and revising existing USF mechanisms to support stand-alone broadband, while noting there were some areas where disagreements remained and FCC guidance was needed (see 1506030052).
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An overview of the proposals and remaining open issues was in an ex parte letter submitted by ITTA on behalf of the various groups Wednesday, the agency's deadline for industry to reach agreement. The FCC prodded rural telcos to draft a plan in order to facilitate an overhaul of rate-of-return USF this year (see 1506010057). "The industry agrees that adoption of both components of the two-path approach (i.e. changes to existing support mechanisms and adoption of a model-based plan) should occur simultaneously by the end of this year," the ITTA letter said. "Implementation of each component of the two-path approach would follow as soon as possible thereafter."
"The letter summarizes what I think is a good amount of consensus in the industry," Mike Romano, NTCA senior vice president-policy, told us Thursday. He acknowledged differences and details still needed to be addressed, but he said industry was eager for further discussions with the FCC. "We've given them something to start with and there's still work to be done." The FCC didn't comment.
The proposed new USF mechanism based on a cost model would be open to all rate-of-return carriers, study area by study area, and deliver support for at least 10 years, the ITTA letter said. Carriers would have two opportunities to opt in: at the start of Year 1 and at the start of Year 3, with the FCC reviewing its model in Years 2 and fine-tuning it for use by rate-of-return carriers. Some rural telcos want the FCC to do a limited review of the model before Year 1 funding.
The telco groups agree carriers should be allowed to move to model-based support in one flash-cut step if desired, the ITTA letter said, but disagree whether or to what extent carriers should be allowed to phase in the support over some transition period. "Related matters such as the structure and length of any transition, the performance obligations that would apply during the transition period, and the use of support dollars freed-up during the transition also remain subject to review and discussion," it said. These disagreements have been difficult to overcome, one telco official told us. Some carriers want the predictability the 10-year plan would provide but would receive less money; so they're pushing for a glide path to ease the transition, said the official, saying as their amounts are reduced, money will be freed for other purposes, raising questions about its use.
The telco groups agree that for telcos due more support under the model, Connect America Fund reserve dollars would be used to make up the difference, the ITTA letter said. If funding is insufficient, it should focus on areas with the lowest percentages of 10/1 Mbps broadband service, which the groups agree should be the required speed level. Some carriers could build out faster speeds for longer terms of support. The groups agreed that the total number of eligible locations that a carrier would have to serve with 10/1 Mbps "should be less than the carrier's total eligible locations because the model is not fully funded and per-location support would be capped" by the FCC, the letter said.
The second path is aimed at revising existing systems to allow for stand-alone broadband support (rate-of-return telcos currently lose support when consumers drop traditional wireline voice service) for carriers not opting into the model. The groups that developed a "Data Connection Support" plan (NTCA, WTA-Advocates for Rural Broadband and National Exchange Carrier Association) continue to believe it's the best approach, the ITTA letter said. But industry representatives "are supportive" of an alternative proposal that responds to FCC Wireline Bureau concerns. "This alternative to the DCS proposal entails limited, targeted updates to the existing High-Cost Loop Support (HCLS) and Interstate Common Line Support (ICLS) mechanisms to enable continuing cost recovery even where a consumer chooses to take only broadband and to cease purchasing voice services from a [rate-of-return] carrier," the letter said.
Romano said the vast majority of rural LECs support the DCS plan but want to address FCC concerns. "We've given the FCC a couple choices for updating the existing mechanisms to solve the stand-alone broadband problem, and we're eager to hear what they want to do," he said. "If they have different ideas, we're all ears. We're not going to be dogmatic as long as it solves the problem. We just want to get to 'yes.'"