Pai Urges 'Targeted' Rural Carrier Broadband USF Fix With Path to Model
FCC Commissioner Ajit Pai proposed adapting rate-of-return USF support to broadband while allowing rural carriers to voluntarily opt into model-based support, but not at the expense of a near-term fix he sees as more urgent. Pai issued a statement Monday that proposed focusing on "targeted" rule changes to solve "the standalone broadband problem," in which generally smaller rate-of-return rural LECs can lose USF support if customers drop voice service. Groups representing RLECs welcomed Pai's proposal, which came after FCC Chairman Tom Wheeler Friday appeared to issue a warning to RLECs about the absence of more telco consensus (see 1506260024).
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The Wireline Bureau "will be studying Commissioner Pai’s proposal along with the many other proposals that have been put forward by various parties,” emailed an FCC spokesman. The spokesman also called attention to Wheeler's comments Friday to develop and implement major rate-of-return USF changes by year end. "We had been in search of a consensus proposal from the rate-of-return carriers that would help us meet the policy objectives the commission unanimously adopted in April 2014," Wheeler said. "Unfortunately, while I appreciate the carriers’ willingness to engage, if we are to keep on schedule, time is not our friend. Absent a consensus from the parties involved, we will put forth our own proposal."
Pai said RLECs can face a "Hobson's choice" under current USF rules if consumers want to drop their traditional voice service: they can offer stand-alone broadband and lose USF support, or they can deny consumers a broadband option and risk losing customers. Pai said Senate Commerce Committee Chairman John Thune, R-S.D., Sen. Amy Klobuchar, D-Minn., Sen. Deb Fischer, R-Neb., and 58 colleagues recently wrote the FCC to urge adopting a simple, targeted fix to the stand-alone broadband problem rather than sweeping changes that could base support on a new cost model.
"This broad, bipartisan coalition is right," Pai said. "The rule changes needed to redirect funding to support stand-alone broadband facilities can fit on a single page, which I have attached as an appendix to this statement. They would include stand-alone broadband costs when calculating high cost loop support and interstate common line support. They would determine how much of that support should be attributed to stand-alone broadband. And they would direct that support be used to offset the cost of service." Pai said that the proposals would fit within the existing high-cost rate-of-return USF budget, which is about $2 billion a year.
Pai said he nevertheless believed the FCC should "open a path" for rate-of-return carriers to opt into a system based on an alternative cost model this year. The model wasn't perfect, he said, but should be good enough for carriers voluntarily accepting it. He said model-based support should last at least 10 years and target unserved locations with broadband speeds of at least 10/1 Mbps. He said carriers whose support would decrease under the model should receive a five-year transition to the lower level, but he said he was open to tapping some USF reserve funds to help fund those carriers whose model-based support would be higher than their traditional levels. "We must be fiscally responsible and prioritize participation for those areas that have the lowest build out of high-speed broadband," he said.
Pai recognized there are other details that need attention, such as whether carriers should have a second chance after two or three years to opt into model-based support, and what changes would be made to the model in the meantime. "But we should not let divisions on other high-cost reforms delay the adoption of a commonsense, broadly appealing solution to a specific problem," he said. NTCA and others have voiced concerns about the current alternative cost model.
RLEC/ILEC groups issued statements lauding Pai. "USTelecom appreciates not only Commissioner Pai's focus on this issue, but also the strong emphasis on the need to deliver broadband connections to rural America and his proposal to get there," said Senior Vice President-Law and Policy Jonathan Banks. ITTA is "particularly pleased" by Pai's "recognition of the importance of providing [rate-of-return] carriers with the opportunity to participate in a model-based support mechanism by the end of this year," said President Genny Morelli. NTCA CEO Shirley Bloomfield said Pai's thoughts add to "positive momentum" created by Wheeler and other commissioners, and she said her group had long backed "targeted, carefully designed" broadband-oriented updates to existing mechanisms combined with an optional path toward voluntary model-based support.
Pai also joined with Fischer in backing rural broadband development through USF changes. The current system "penalizes any rural company that offers customers broadband as a stand-alone service," they said in an online commentary, calling for a USF fix that gives "rural consumers the same options for broadband as every other American." Pai and Fischer also suggested the FCC's recent net neutrality order was discouraging broadband Internet investment.
Fischer issued a statement on Pai's USF proposal: "I brought Commissioner Ajit Pai to Omaha because rural broadband is important to our cities, our farms, our ranches, our businesses, and our families. We heard from businesses across Nebraska that they want to deploy more broadband but that regulatory uncertainty has been holding them back. I commend him for laying out a concrete plan of action."