The FCC circulated a draft order that would extend Lifeline USF support to broadband coverage and to streamline administration of the program that subsidizes low-income telecom service, as expected. The draft is expected to be considered at the agency's March 31 meeting, as Communications Daily first reported. The order would allow Lifeline support to be used for stand-alone broadband or bundled broadband/voice packages in addition to current voice service. The order would phase out the support for stand-alone mobile voice service and phase in broadband minimum standards over the next few years, said an FCC fact sheet.
The Benton Foundation urged the FCC to expand Lifeline USF support to broadband. It also asked the commission either to allow non-eligible telecom carriers to provide Lifeline service or to ease the ETC designation process by forbearing from certain eligibility requirements and establishing a national ETC process. The requests came in a letter posted Friday in docket 11-42 by the group's attorneys at the Georgetown Law Institute for Public Representation.
Sprint supports expanding the Lifeline program to pay for broadband, but the FCC shouldn't forget about voice-only subscribers, carrier representatives said in a meeting with Wireless Bureau Chief Jon Wilkins and others at the agency. “While recognizing the importance of Lifeline support for broadband services, Sprint emphasized the fundamental need to maintain a voice-only Lifeline service option and described the significant impact an end-user co-pay would have on participation rates by the most vulnerable consumers,” Sprint said in the filing posted filing posted Thursday in docket 09-197. Sprint also issued a warning on the cost of providing broadband service. “Given the financial constraints under which the federal Universal Service Fund operates and the economics of providing broadband service" a "broadband-centric Lifeline program which includes overly ambitious performance standards will almost certainly involve out-of-pocket payments by Lifeline subscribers, both for monthly service and for the purchase of a broadband-capable device,” the carrier said. “There is no support in the record that a monthly subsidy of $9.25 would cover the cost of providing broadband service.”
The FCC seems disinclined to cap or control Lifeline subsidies as part of an effort to modernize the USF program supporting low-income telecom service, Commissioner Mike O’Reilly said in a blog post Thursday. “Failing a major change in direction, the FCC is preparing to massively expand the size and scope of the Lifeline Program without the necessary inclusion of a hard budget or financial constraints,” he said. “Such irresponsible action will balloon a program plagued by waste, fraud, and abuse and result in higher phone bills for every American -- including those already struggling in the current economy. In sum, it’s a recipe for disaster, and I can’t and won’t be part of it.”
The USF contribution factor for carriers will fall in Q2 to 17.9 percent of interstate and international telecom revenue due to lower subsidy demand, industry consultant Billy Jack Gregg said in an email update Tuesday. He said the Universal Service Administrative Co. projected industry long-distance telecom revenue for Q2 at $14.74 billion, about $191 million less than in the current quarter. The downward revenue trend is putting upward pressure on the contribution factor over time, but Gregg noted USF demand for Q2 also edged down to $2.211 billion -- due mainly to "out of period adjustments" (see 1602020047) -- allowing the rate assessed to carriers to decline somewhat from the current quarter's 18.2 percent.
FairPoint Communications reported lower revenue and net income in Q4 than in Q3, but lower operating expenses helped the company beat an analyst's expectations on cash flow metrics. FairPoint is "committed to delivering on our unlevered free cash flow [FCF] objectives," said CEO Paul Sunu in a company earnings release Wednesday. It also expects "to be an active participant in our consolidating industry," though that partially depends on reasonable financing, he said. Revenue dropped $11.8 million to $209.8 million in Q4 due to "seasonality" and an anticipated $4.8 million reduction in regulatory funding, primarily lower USF subsidies under a transition to Connect America Fund Phase II support, the telco said. Net income was down $10.8 million to $42.3 million, primarily due to the revenue reduction, which was partially offset by a $1.9 million decrease in operating expenses to $90.9 million due to lower head count and debt expense, it said. The company ended 2015 with 2,718 employees, down 334 from a year before. Adjusted EBITDA dropped $2.8 million to $63.9 million and unlevered FCF fell $9.8 million to $23.3 million due in part to higher pension contributions. But Wells Fargo analyst Jennifer Fritzsche said she had estimated adjusted EBITDA would be $60.2 million and unlevered FCF would be $21.2 million. So while the revenue decline had been expected, the company's cost containment focus allowed it to beat expectations on both adjusted EBITDA and unlevered FCF, she emailed investors. FairPoint said it continued to make progress in 2015 on customer service, reporting "fewer repair tickets in the queue and improved ability to timely address the service orders received." The improvements produced less employee overtime and fewer repeat calls, and should yield more brand loyalty and lower customer churn over time, it said. FairPoint's share price closed down 3 percent to $14.98 Wednesday.
FCC Chairman Tom Wheeler faced many questions about his set-top box proposal during Wednesday's Senate Commerce Committee oversight hearing. Both committee leaders questioned the merits. But there was little rancor at the two-and-a-half-hour hearing, with much attention devoted to spectrum policy and relatively little to the agency’s net neutrality order.
Broadband providers and consumer advocates jointly backed modernizing Lifeline USF support for low-income subscribers. Almost two dozen major telcos, cable companies, consumer groups and public-interest organizations signed a letter to commissioners Tuesday saying it was time to use Lifeline subsidies to make broadband more affordable for low-income persons and change the way the program is administered regarding consumer eligibility verification and industry participation. An informed source said the FCC continues to target its March 31 meeting for adopting a Lifeline order, as expected (see 1602180055).
Senate Commerce Committee members filed 25 amendments, not released publicly, to Mobile Now (S-2555) ahead of its Thursday markup. Some of the amendments would raise the broadcaster repacking relocation fund by $1 billion, force a national unlicensed spectrum strategy, and include stronger dig once provisions. But Senate Commerce Committee Chairman John Thune, R-S.D., told us Tuesday that he doesn’t expect too many up-or-down votes during the markup and he anticipates a possible manager’s package to address some of the members’ concerns. Thune filed a substitute amendment text, as expected (see 1602290069), proposing some technical changes to Mobile Now.
A year after the FCC approved its net neutrality order in a contentious 3-2 vote, tensions remain high. Commissioner Ajit Pai, who voted against the order, said in a speech at the Heritage Foundation Friday that the order has led to a reduction in spending by ISPs on their networks, a result he said he had predicted. Small ISPs in particular have cut investments, he said.