FCC Finds Single RLEC To Lose USF Due to 100 Percent Competitive Overlap

The bureau had preliminarily identified 15 RLEC study areas receiving almost $9 million in annual high-cost USF support as possibly subject to such 100 percent competitive overlap based on deployment information provided by various cable companies and other competitors on Form 477 (see 1507300038). USF support is to be phased out for carriers in study areas (carrier coverage areas) where an unsubsidized competitor or combination of competitors offers voice and 10/1 Mbps broadband to 100 percent of the area, as defined by the bureau.

Most of the RLECs provided information that countered or called into question those preliminary findings (see 1508310052 and 1509290063). The bureau said Monday it received responses from 12 of the 15 rural telcos and seven of the 19 competitors identified in its preliminary list.

In its preliminary analysis, the bureau found the Pineville study area was subject to unsubsidized competition from Time Warner Cable in all of its census blocks, based on the Form 477 data. In August comments, TWC said it offered fixed voice service at monthly rates under a "reasonable comparability benchmark" of $47.48, and its broadband offerings met a 10/1 Mbps speed and other benchmarks, the bureau said Monday. Pineville Telephone didn't respond. “Given the submission by Time Warner and the lack of any countervailing evidence, we make a final determination that the Pineville study area is 100 percent overlapped," the bureau said. The Pineville study area’s frozen 2014 annual USF support amount ($148,566) will be cut by one-third in 2016, by another third in 2017 and eliminated altogether in 2018.

The bureau said competitors didn't provide sufficient evidence to find additional study areas subject to the 100 percent overlap rule phasing out USF support. It noted disputes over study areas served by LaHarpe Telephone Co. in Kansas and Fort Mojave Telecommunications in Arizona, but concluded they weren't subject to complete competitive overlap. Regarding the other areas, the bureau said competitors either didn't comment or didn't even claim to be serving the entire rural telco study area.

NTCA Senior Vice President Mike Romano said the decision shows small telcos continue to offer the “best solution for broadband in rural America,” providing rural solutions that have the “farthest reach over nearly 40% of the U.S. land mass." Where competitors operate in rural areas, "they often choose to confine their operations to more densely populated towns -- leaving the telco to ensure that the statutory mission of universal service can be fulfilled across the remaining wide swaths of rural America. It is telling that out of over 1,000 study areas nationwide, this process indicated full competitive overlap in only one instance," he said. "We hope that this process will inform decision-making going forward -- given the results found here, NTCA believes it is important to take the time to learn from this process and to better understand the complex interplay of competition and universal service policies in rural markets before racing ahead with any further changes on competitive overlap determinations.” Comcast and TWC representatives didn't comment, but one RLEC rival representative had suggested previously the FCC set the bar too high by adopting a 100 percent overlap rule.

In the current rulemaking to overhaul rate-of-return carrier USF support, the commission is considering a proposal to disallow broadband-oriented support where there is 75 percent overlap, the ITTA said in a recent filing. “Should the Commission decide to move forward with its proposal to eliminate support in study areas where there is 75% 'overlap' by an unsubsidized competitor, ITTA urges the Commission to apply the 75% standard on a geographic (i.e. coverage), rather than location, basis. Many of the study areas at issue are sparsely populated overall, but have population ‘pockets’ within the study area in which many consumers reside."