The FCC’s Aug. 1 commissioners’ meeting will be headlined by proposed rulemakings on robocalls and the Rural Digital Opportunity Fund, per the tentative agenda and drafts released Thursday late afternoon. Members will vote on an NPRM on low-power FM technical rules, orders on 911 location and small satellites, plus items on a toll-free number auction and local franchising authority over cable.
Federal Universal Service Fund
The FCC's Universal Service Fund (USF) was created by the Telecommunications Act of 1996 to fund programs designed to provide universal telecommunications access to all U.S. citizens. All telecommunications providers are required to contribute a percentage of their end-user revenues to the Fund, which the FCC allocates for four core programs: 1. Connect America Fund, which subsidizes telecom providers for the increased costs of offering services to customers in rural and remote areas 2. Lifeline, which directly subsidizes low-income households to help pay for the cost of phone and internet service 3. Rural Health Care, which subsidizes health care providers to offer broadband telehealth services that can connect rural patients and providers with specialists located farther away 4. E-Rate, which subsidizes rural and low-income schools and libraries for internet and telecommunications costs The Universal Service Administrative Company (USAC) administers the USF on behalf of the FCC, but requires Congressional approval for its actions. Many states also operate their own universal service funds, which operate independently from the federal program.
Requiring Lifeline providers to use a federal database to check if consumers are eligible for government-subsidized, carrier-provided phone and broadband services is causing more concerns from states, as they lose the ability to run their own checks. NARUC members will vote at their July 21- 24 meeting on asking the FCC to halt activation of the national verifier (NV) in any more states this year, and separately on recommending the agency not cap the overall USF. NV rollout prompted concerns subscribers are being dropped from carriers' customer rolls over difficultly verifying eligibility even though they may indeed be eligible (see 1907080009).
Kentucky Lifeline subscribers may be decreasing partly due to the FCC and Universal Service Administrative Co.’s Lifeline national verifier rollout, said a group of RLECs and CLECs. They commented Wednesday in docket 2016-00059 at the Kentucky Public Service Commission about possible changes to state Lifeline support. Kentucky should expand state Lifeline support to include mobile service, revisiting a 2017 decision to limit it to landline carriers with declining enrollments, wireless companies said.
Some USF program allies raised alarms in interviews and statements about Friday's FCC 3-2 NPRM calling for an overall budget cap for the four programs (see 1905310069). Some plan to spread the word about the rulemaking to the public, hoping for a critical response. Advocates for government fiscal discipline had kinder words about the rulemaking.
By a party-line FCC member vote, the regulator began asking about starting an overall USF budget cap, as expected (see 1905240064). "Mindful of our obligation to safeguard the USF funds ultimately paid by ratepayers," and to ensure the money is "spent prudently" and consistently, the NPRM asks a number of questions.
Industry lawyers are watching a pledge by FCC Commissioner Mike O'Rielly to develop rules to prevent new E-rate-subsidized fiber networks from overbuilding existing USF-funded broadband providers and "stealing" their prime customers, such as schools. Kelley Drye said in a Thursday email blast that "one of the most significant things to watch may be Commissioner O'Rielly's questioning of USAC [Universal Service Administrative Co.] over possible use of USF money to overbuild existing broadband networks." Joel Miller, O'Rielly's chief of staff, emailed us that "Commissioner O'Rielly has made fixing the problem of overbuilding a high priority." Several Texas telcos this week offered suggestions for an FCC rulemaking to oversee the matter (see 1905230005). O'Rielly also calls for legislative fixes to prevent duplicative spending on broadband across federal agencies, and if other agencies and departments become involved, to ensure proper coordination.
As frustrated stakeholders watch an FCC drafting process that they want to be more transparent for an NPRM circulating on USF budgets, concerns about the document's details (see 1903270042) are mounting (see 1903280050). All stakeholders we interviewed this week and last wish the rulemaking had been set for consideration at a monthly commissioners' meeting, so it would be public three weeks beforehand. Or, they wanted it released another way in advance.
FCC Commissioner Mike O'Rielly again objected to E-rate overbuilding of networks and asked Universal Service Administrative Co. to clarify its understanding of the rules and detail its treatment of applications. He's "very concerned" E-rate subsidies are reportedly being used to overbuild USF-backed fiber networks in some Texas school districts. "At least three regional-based consortia (representing 'Educational Service Centers') have sought proposals, via the Form 470, for the construction of Wide Area Networks (WANs) to provide Internet access to entire school regions, each covering well over ten thousand square miles, even though multiple fiber-based providers are already capable of serving the individual schools," he wrote Thursday to USAC CEO Radha Sekar, citing a Nov. 19 filing by telco cooperatives. The consortiums have filed Form 471 and "largely been approved" for "over $100 million to lay new fiber to schools already served by fiber networks. ... partially paid for with federal funds," O'Rielly said. "This number does not even include the subsidies requested for connecting individual schools within the WAN that were already connected to existing fiber networks." In one case, "a winning bidder was approved to receive over $40 million in special construction costs for a fiber build, even though most of the district already has fiber connectivity," he added. It's "likely that support for these fiber builds will also subsidize warehousing of fiber capacity not needed for E-Rate purposes." He asked Sekar to respond by April 1 to questions, including if E-rate rules let USAC fund: (1) special construction projects, whether through self-provisioned or commercial networks, that "duplicate, in whole or in part, fiber networks" built with federal funds; and (2) consortium "construction of a WAN to provide Internet access to the entire consortium, even where fiber-based providers are already capable of serving individual consortium members." He sought answers on the number of WAN-related applications, approvals and denials, and on any USAC warnings to the FCC about "overbuilding risk" or "an apparent gap" in rules permitting overbuilding approvals. USAC and FCC spokespersons didn't comment.
Windstream expects to continue operating normally after its Chapter 11 filing Monday seeking to restructure debt in U.S. Bankruptcy Court for the Southern District of New York (see 1902250025). The FCC welcomed the assurance but vowed to remain vigilant on potential USF and 911 ramifications. Others suggested more Chapter 11 bankruptcy filings are possible and cited difficult economics for rural-oriented telcos. Some had suggested Windstream could seek Chapter 11 after a federal district court reversal in its dispute with bondholder Aurelius Capital Management (see 1902190043). Moody's Friday downgraded the carrier (see 1902220057) .
There are ways to move forward on policymaking to improve broadband deployments as the new Congress begins, federal and communications sector officials said Tuesday during a Next Century Cities-led event. Officials highlighted the potential for compromise as a contrast to the rancor over the ongoing partial government shutdown. They also noted policy disagreements. Later, the conference heard about spectrum (see 1901150043).