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.
The California Public Utilities Commission is weighing a nearly $1 million refund to AT&T for erroneous contributions to state USF and other programs based on intrastate text-messaging and prepaid data revenue. Commissioners may vote March 14 on a proposed resolution to refund the carrier. AT&T notified the CPUC in January 2016 that it overpaid January 2013-September 2015, arguing that assessing text and prepaid data revenue violated federal law. The CPUC said refunds would be limited to one year before AT&T’s notification. The agency ruled in January it wouldn’t assess surcharges on text-message revenue (see 1901310023).
Congress should include broadband in any infrastructure package, said Tim Donovan, Competitive Carriers Association senior vice president-legislative affairs, at a House Small Business Committee hearing Wednesday. Donovan warned 5G “is not inevitable,” especially in rural America. Chairwoman Nydia Velazquez, D-N.Y., said “for carriers both large and small, buildout in rural areas is often prohibitively expensive." After "30 years of building wireless networks,” some places still aren’t served because “there is not a business case to build out those networks with private capital alone,” Donovan said: The USF helps “but that’s not enough to close the size of the gap that we have.” Many small businesses “remain on the wrong side of a persistent digital divide,” he said. Donovan emphasized “reliable coverage maps” to help determine what areas aren’t served. “Members of this committee know that coverage is frequently overstated,” he said: “This is a cornerstone issue which must be addressed.” Donovan stressed the importance of funding, spectrum and deployment challenges. The Mobility Fund II program will pay for only part of the needed build out, he said.
Even with FCC progress in easing the infrastructure path to 5G deployment and extending broadband connectivity, industry officials at a Multicultural Media, Telecom and Internet Council event Wednesday sought lower barriers to infrastructure deployment. Some commissioners also said the draft Telecom Act Section 706 broadband deployment report points to big progress in closing the digital divide.
Former FCC Commissioner Mignon Clyburn, now a consultant to T-Mobile/Sprint on their proposed deal, offered her first public defense during a Capitol Hill lunch sponsored by the Georgetown Institute for Tech Law & Policy Tuesday. The panel presented arguments for and against the transaction, now before the FCC and DOJ. T-Mobile acknowledged to lawmakers it spent $195,000 at the Trump International Hotel in Washington since announcing its proposed buy of Sprint in April (see 1903050044).
FCC staff rejected as "overly broad" an Alaska Telecom Association request to waive a requirement that carriers receiving Alaska Plan USF support submit fiber network maps accurate within 7.6 meters. ATA "fails to plead with particularity the facts and circumstances warranting relief," said a Wireless and Wireline bureaus order in Monday's Daily Digest and docket 16-271. It noted ATA's Feb. 6 petition came after some members submitted data meeting the accuracy standard and less than a month before a March 1 deadline. "Relief is unnecessary for the over fifty percent of ATA members who have already certified in their initial filing," nearly six months early, the order said. "ATA provides no detailed information on the level of accuracy of the network data that its other members possess, why they do not possess similarly accurate data, or why a majority of its members had no problem meeting the requirement." ATA declined comment Monday. GCI Communication and its United Utilities and Yukon Telephone submitted confidential information Friday "to comply as fully as possible" but "cannot certify" that all fiber information is locationally accurate to the standard. "I certify that the links depicting aerial and buried fiber are accurate to within 50 meters to an 80 percent confidence level," wrote Frederick Hitz, vice president-regulatory economics and finance. "I also certify that all other information is accurate to within 7.6 meters to a 95 percent confidence level." ATA changed its name from the Alaska Telephone Association in mid-2018.
The Q2 USF contribution factor will fall to 18.8 percent from Q1's 20 percent of carriers' U.S. interstate and international telecom end-user revenue, consultant Billy Jack Gregg emailed Friday. Universal Service Administrative Co. projected USF-applicable telecom revenue will edge down $23 million to $12.27 billion in Q2, which combined with a previous projection of $1.92 billion in quarterly USF demand produces the expected factor drop. The Q2 revenue decline continues a downward trend that places long-term upward pressure on the factor, he noted: USF revenue for the year through Q2 is expected to be $1.9 billion lower than the year ending in Q2 2018, a 3.6 percent decline.
Utah’s connection-based USF surcharge will increase to 60 cents monthly from 36 cents, starting May 1, the Utah Public Service Commission ruled 3-0 last week in docket 18-999-15 (see 1901150026). The commission noted CTIA red flags about increasing state USF costs but said “these concerns offer no basis upon which to delay or refuse to implement the necessary increase to the surcharge.” The commission won’t second-guess the legislature, which made changes that "significantly increased costs," including adding broadband to services eligible for disbursements. The change will be published in the Utah State BulletinMarch 15, with a comment period ending April 15, the agency said.
Windstream's Chapter 11 bankruptcy filing is "concerning," given its status as a large internet and voice service provider, said FCC Commissioner Geoffrey Starks Tuesday. "I will be monitoring the situation closely to ensure that there are no disruptions," he said, citing Windstream's provision of 911 and broadband services, and receipt of USF support. He's thankful Windstream "took immediate steps to ensure that it can continue to operate." Wireline Bureau Chief Kris Monteith made similar comments Monday (see 1902250058). The Communications Workers of America plan "to take an active part" in the bankruptcy proceeding to reorganize the telco's debt. "We are assessing the details as they emerge and have retained an experienced law firm to help protect the interests of our members and retirees," said a release posted Tuesday, noting CWA represents about 1,200 active members at Windstream locations. Windstream sought bankruptcy protection Monday after a recent court reversal in a bondholder dispute. The U.S. District Court of Southern New York awarded bondholder Aurelius Capital Management a $310 million judgment over the telco's spinoff of telecom network assets into Uniti Group (ticker: UNIT), a real estate investment trust, and their leaseback arrangements (see 1902190043). "While we are one pivotal event through the decision tree, and at current levels there are various upside opportunities for UNIT shares, there is simply too much process risk, too little visibility, and outcome variance far too wide (i.e. payment cut can range) to recommend the stock," Cowen analyst Gregory Williams wrote investors Tuesday. "What’s ultimately at stake for UNIT shares is the level of rental cuts, if any, that the company could incur through the Windstream restructuring process." Uniti's proposed deal related to Bluebird Network (see 1901150052) involving Otto Maly was granted antitrust clearance under an FTC early termination notice posted Monday. Maly is chairman of Maly Commercial Realty. Moody's downgraded Windstream's probability of default rating to "D-PD from Caa3-PD" Tuesday and said it subsequently will withdraw its ratings for the company due to the Chapter 11 filing.
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) .