An FCC order setting broadband USF duties for Alaska Communications takes effect Dec. 22, after a summary was published in Tuesday's Federal Register. A certification mandate won't take effect until approved by the Office of Management and Budget because it involves a new information collection requirement, the summary said. The commission issued the order Oct. 31 establishing "tailored service obligations" to accompany almost $20 million in annual Connect America Phase II price-cap "frozen" USF subsidy support that Alaska Communications elected to receive instead of model-based support (see 1610310056).
NTCA and members pressed the FCC for $260 million in additional annual funding for rate-of-return USF mechanisms distributing model-based and non-model support. Without the additional funding for the non-model mechanisms, standalone broadband loop rates could be $20 to $100 over the $42 broadband-only monthly benchmark the commission specified in its March overhaul order, said an NTCA filing posted Monday in docket 10-90 on meetings with aides to all five commissioners and Wireline Bureau officials. Those rates are not for the actual retail service to consumers, but just the broadband-only loop components of that service, it said. When the component costs are combined "with unavoidable costs" -- access recovery charges, transport and transit costs, other operating costs and USF contribution fees -- "the actual retail broadband prices to consumers (putting aside any prospect of actual return or profit margin) would need to be $90 to $110 per month in some cases, and in some very rural service areas with few standalone broadband consumers to start the rates could approach $200 per month," the group said.
FCC financial statements received high marks overall from an independent auditor, according to a memorandum Tuesday from Managing Director Mark Stephens accompanying one piece of the agency's FY 2016 Annual Financial Report (AFR). Although the White House Office of Management and Budget granted the FCC an extension until March 1 to publish its FY 2016 AFR, it didn't extend a Nov. 15 deadline for its "improper payment reporting section," said the memo. It said the rest of the report would be issued before March 1 or when the incentive auction bidding process is completed. The auditing firm Kearney & Co. found the FCC's consolidated FY 2016 financial statements "present fairly, in all material respects, the financial position of the Commission as of Sept. 30," Stephens wrote. He said it was the 11th straight year of "clean audit opinions" for the FCC, which was an "unprecedented accomplishment" for the agency. "The Commission made significant strides in FY 2016 by resolving a prior year finding by the auditors that the FCC was not in compliance with the Debt Collection Improvement Act," he wrote. "This is the first year that the auditors have reported no instances of non-compliance with applicable provisions of laws and regulations for the FCC." The audit did not find "any material weaknesses but did identify three significant deficiencies ... related to Universal Service Fund budgetary accounting, accounting for non-exchange revenue, and information technology controls," he wrote, noting his office concurred with auditor recommendations. On USF, the FCC addressed a previous material weakness regarding budgetary accounting in the E-rate telecom discount program for schools and libraries, but auditors found a significant deficiency in the rural healthcare program, Stephens wrote. He said the FCC was committed to addressing a "new control weakness in accounting for non-exchange revenue" and "remediating information technology control deficiencies."
Rural telcos backed trade group calls for the FCC to fully fund rate-of-return USF mechanisms for model-based and nonmodel broadband-oriented subsidy support (see 1611140036). About 50 RLECs, represented by JSI, said the commission should consider allocating enough additional funding to cover the more than $160 million in extra annual support needed to meet demand after 216 companies opted into the Alternative Connect America Cost Model (A-CAM) mechanism (see 1611030046). Reducing A-CAM support amounts to address the excess demand "will dangerously push the FCC toward making a move contrary to the Communications Act mandate to make Universal Service Support 'specific, predictable and sufficient,’” said a JSI filing posted Tuesday in docket 10-90. If the FCC can't fully meet model-based demand, it should allow carriers to switch to the revised, nonmodel support, it said. Among others calling for fully funding model-based support were nTelos (representing two Lumos telco subsidiaries), three RLECs represented by Fred Williamson & Associates, ENMR Telephone Cooperative, Project Mutual Telephone, Hot Springs Telephone, Accipiter Communications, Adak Eagle Enterprises and Etex Telephone Cooperative. Some also called for fully funding the nonmodel support, which NTCA says needs up to $100 million in further annual funding. If the FCC can't fully fund the A-CAM mechanism, some urged the FCC to take steps to fund as many carriers as possible, tap $50 million from a Connect America Fund reserve, and reduce broadband deployment obligations to account for the reduced support. A few carriers said the FCC should prioritize support for carriers that aren't as far along in their broadband deployment as others.
If the FCC creates a mobility fund, as proposed by Chairman Tom Wheeler, it should avoid any “flash cut” of current USF support for wireless, T-Mobile said in a filing in docket 10-90. T-Mobile representatives met last week with aides to the commissioners, except for Wheeler. “We urged the Commission to carefully consider eliminating legacy support so as to avoid sudden adverse effects on network operations and customers,” the carrier said. “The majority of T-Mobile’s legacy high-cost support funds our operations in Puerto Rico, and because of the currently depressed economic environment there, maintaining current levels of support for a transition period is critical.” Commissioners are scheduled to take up an order on the fund at their meeting Thursday (see 1611080048). Verizon added another wrinkle, noting that many competitive eligible telecom carriers (CETCs) are in partnerships with larger national carriers. A Verizon official told a Wireless Bureau official that “to the extent that the Commission adopts different phase-down schedules for small CETCs and nationwide carriers, partnerships between small rural entities and nationwide carriers should be subject to the same phase-down schedule as other small CETCs,” said a filing.
Rural telco groups asked the FCC to hike funding for rate-of-return USF mechanisms to address budgetary concerns as RLECs attempt to meet broadband buildout duties under program cost controls. "NTCA urges the Commission to make additional budget resources available to fund fully both the model-based and non-model aspects of the reforms it adopted in March," said a filing by the group posted Monday in docket 10-90. NTCA cited an opportunity to address concerns it has been expressing, including last week (see 1611090015). "Providing an additional $160 million per year for ten years to fund the model offers, paired with up to $100 million per year in additional to fund the budget shortfall in the nonmodel mechanisms represents the best, most comprehensive way to seize this opportunity," it said. WTA effectively echoed the call for another $160 million in model-based support beyond the $150 million in additional support the commission already allocated for the mechanism, from a Connect America Fund reserve, to meet strong demand. "This singular opportunity supports full funding of A-CAM [Alternative Connect America Cost Model] at the $200 per location benchmark and at a budget that would entail an additional allocation of an average of approximately $310 million annually in additional funding," said a filing from the group. If the FCC can't provide that much, WTA said it "should reduce its per location funding cap from $200 to $175, and modify the associated fully funded (25/3 and 10/1) and partially funded (4/1 and reasonable request) buildout obligations accordingly," referring to broadband download/upload data-speed requirements. That would require an additional allocation of $125 million to $150 million, WTA said. ITTA, which represents mid-size rural-oriented telcos, also supported additional funding to address the anticipated shortfall, but said it understood the commission may not be able to fully fund the A-CAM mechanism. "Should that be the case, ITTA urges the Commission to allocate an additional $95 million of funding annually for model-based support," said a filing from the group. "This would enable all carriers that accepted such support to receive $146.10 per location, the same amount of per-location support that the Connect America Phase II program provides to price cap carriers." USTelecom said it agreed with the proposals to provide an additional $160 million annually to the A-CAM mechanism. If the FCC cannot do that, it "should reduce its per location funding cap from $200 to $175, and modify the associated fully funded (25/3 and 10/1) and partially funded (4/1 and reasonable request) build-out obligations accordingly," requiring an estimated additional allocation of $125 million, said a USTelecom filing that hadn't yet been posted in the docket. The FCC didn't comment.
Pennsylvania adopted updated federal eligibility rules for Lifeline ahead of the FCC’s Dec. 2 implementation deadline to align state rules. At a Wednesday meeting, the Pennsylvania Utility Commission voted to align its rules with the federal low-income program. The PUC “retains authority to designate ETC providers that offer fixed and mobile voice service or voice and mobile services combined and will continue to do so until voice only Lifeline support has been phased out on December 1, 2021,” it said of eligible telecom carriers in an order. Self-certification will not be permitted to determine initial eligibility, “but is allowed in some instances for recertification purposes until the National Verifier is deployed in Pennsylvania,” it said. NARUC will vote next week on a draft resolution asking the FCC to grant waivers for states that need more time to align Lifeline rules (see 1611020045). The Oregon Public Utility Commission filed a petition Tuesday for temporary waiver of the December Lifeline deadline until June 1. "Implementation of the new benefit port freeze regulation requires significant modifications to the OPUC's Lifeline database and operations," the OPUC said in FCC docket 11-42. Also at the Pennsylvania PUC meeting, commissioners adopted an order increasing the state USF contribution rate to 1.83 percent from 1.74 percent. The agency said it increased the rate after seeing a decrease in assessable carrier revenue and estimating a $1.5 million year-end 2016 cash balance for the fund. Revenue from contributions to state USFs has declined in multiple jurisdictions (see 1607010010).
NTCA called on the FCC to increase funding for rural broadband subsidy support in the wake of recent agency indications there's a USF budget shortfall for rate-of-return carriers. First, the commission announced small rural carriers receiving "non-model" funding would face an average 9 percent reduction in support in the first half of 2017, which the group estimates could cost the carriers $100 million, said CEO Shirley Bloomfield in a blog post Tuesday. Then, she said, the FCC revealed that an additional $150 million in funding for carriers opting into model-based support was $160 million less than the demand. "The sum total of these two numbers -- just under $260 million -- provides proof positive that the high-cost USF program for smaller carriers is woefully underfunded,” she wrote. "Failure to address such budget concerns comprehensively could both undermine the success of model election efforts and have a significant adverse impact on the consumer rates for standalone broadband that were a substantial driver of reform," said a related NTCA filing Wednesday in docket 10-90 on discussions with aides to Commissioner Jessica Rosenworcel and Mike O'Rielly. "In finalizing the implementation of model-based support, the Commission should: (1) ensure appropriate recalibration of buildout obligations in light of any USF support shortfalls; and (2) avoid any adverse impact of any kind now or in the future upon the hundreds of companies that did not elect model-based support but yet already face significant USF support reductions in 2017 due to the 'budget controls' that will hinder their ability to keep investing, to repay loans for investments already made, and to offer affordable, quality broadband services to consumers."
Sen. Kelly Ayotte, R-N.H., seems to have narrowly lost her re-election bid against Democratic Gov. Maggie Hassan, who declared victory Wednesday. The final count for this Senate race was initially unclear at the day’s start (see 1611090001), with Ayotte a fraction of a point in the lead. She would be the only Commerce Committee member to lose this cycle, a contrast to strong GOP showings Tuesday in retaining the House and Senate in addition to winning the White House. Ayotte formally conceded.
Verizon opposed expanding the District of Columbia Universal Service Trust Fund to support broadband for low-income households. "The Commission lacks jurisdiction over broadband services, and thus may not regulate the provision of broadband services," the company commented Monday on the D.C. Public Service Commission’s notice of inquiry in docket FC988. The D.C. Office of the People’s Counsel supported expanding the District’s USF to include broadband as a measure to close the digital divide. “Federal and state programs, like the Lifeline program, designed to facilitate universal access to communications services, must continually evolve to ensure that cost and social barriers do not foreclose the participation of low-income and marginalized consumers,” OPC commented. The USTF should be “updated to reflect changes to the manner in which District residents use communications technologies,” it said. It’s legal for the D.C. program to support broadband because the Communications Act allows states to adopt regulations that advance universal service consistent with FCC rules, and the federal program now supports broadband, OPC said. Section 706(a) directs state commissions to encourage deployment of advanced telecommunications capability, it said. To further close the divide, OPC said the PSC should set up a schools and libraries fund through USTF to supplement the federal E-rate program, and help subsidize the cost of computers for District schoolchildren who participate in the National School Lunch program. In an interview last week, PSC Chairwoman Betty Ann Kane said she expects the her agency will align Lifeline rules with the updated federal program ahead of the December implementation deadline but supports a NARUC resolution seeking waivers for states that need more time (see 1611020045). “It will be tight” meeting the deadline in the District, but doable, she said. Lifeline isn’t a statutory program there, so the PSC merely must make rule changes, she said. However, some other states need legislators to change the statute and probably won’t make the FCC’s deadline, she said.