The FCC found just one rural telco market is ineligible for continued USF support based on a rule requiring subsidies to be eliminated where there's 100 percent overlap with an unsubsidized competitor. Pineville Telephone Co. faces unsubsidized competition in all of its “study area” in North Carolina and will have its USF support phased out over the next three years, the Wireline Bureau said in an order Monday in docket 10-90.
FairPoint Communications asked the FCC to allow it to recover $4.2 million in annual costs that it said it currently couldn't under USF and intercarrier compensation (ICC) transformation rules. FairPoint, which receives USF support as a price-cap telco but is regulated as a rate-of-return carrier under the ICC transition, is the only telco being penalized by the rules, which were designed to prevent duplicate recovery, the company said in a petition for declaratory ruling Thursday in dockets 10-90 and 01-92. "There is no duplicate recovery," FairPoint said, but it's only receiving part of what it is due. "FairPoint should not be paid twice for the funding formerly received as [local switching support], but it should be paid once."
The FCC proposed a USF contribution factor for Q1 of 18.2 percent of interstate and international telecom revenue, the Office of Managing Director said in a public notice Friday in docket 96-45. That was as projected by industry analyst Billy Jack Gregg (see 1512040003). The proposed contribution factor will be deemed approved if the agency doesn't act on it within 14 days, the PN said. U.S. interstate and international (long-distance) revenue from end-users was projected to be $14.9 billion next quarter, continuing a long-term downward trend. Total USF support is projected to be $2.2 billion next quarter, with high-cost, rural support at $1.25 billion, followed by school and library E-rate discounts at $603 million, low-income (mainly Lifeline) support at $396 million and rural healthcare at $73 million. FCC Commissioner Mike O'Rielly voiced concern about the rising USF assessments on telecom carriers, and issued a warning about assessing broadband. "After hovering around the 16% mark throughout 2014 and 17% this year, the USF contribution factor tacked onto a portion of everyone’s telecom bills jumps past 18% to kick off 2016," he said in a statement Friday. "And with an unrestrained expansion of Lifeline plus an expansion of USF fees to broadband consumers at the top of many wish lists, who knows how much deeper Americans will have to dig into their pockets by next December? The entire situation is clearly unsustainable but the solution cannot be to capture broadband services in this morass."
Level 3, Sprint and Verizon are pressing the FCC to act on a longstanding intercarrier compensation fight between LECs and interexchange carriers (IXCs) over “intraMTA” (major trading area) wireline-wireless traffic. Representatives of the three met with various FCC officials Tuesday to press their case, especially in light of a November decision by Judge Sidney Fitzwater of the U.S. District Court for the Northern District of Texas, Dallas Division, siding with LECs (see 1511200070).
TracFone resisted AT&T Lifeline proposals for the FCC to overhaul the USF support program for low-income consumers. TracFone opposed AT&T suggestions that carriers be removed from all Lifeline enrollment functions and that eligibility be initially tied solely to the federal food stamps program, which TracFone said would have a “devastating impact on Lifeline availability.” The comments came in a response posted Tuesday to a Nov. 23 AT&T filing flowing from an NPRM (see 1506180029). Other parties filing recently in docket 11-42 included the Cherokee Nation, Incompas, Lifeline Connects Coalition and Smith Bagley, with many comments addressing proposed minimum service standards for Lifeline broadband/voice coverage.
The regulatory fee battle raged as the American Cable Association and ITTA urged the FCC to shift some fees from wireline to wireless companies, while CTIA opposed that. CTIA also opposed NAB’s proposal to reapportion regulatory fees to the wireless sector because of the planned incentive auction, which will allow wireless providers to bid for broadcast TV spectrum. ACA and CTIA filed reply comments (here and here), while ITTA made an ex parte filing this week in docket 15-121 on a recent meeting with FCC officials. NAB met with officials last week to discuss its proposal (see 1512030061).
The FCC Wireline Bureau gave an interim USF waiver extension to Allband Communications Cooperative. In an order released Monday and included in Tuesday's Daily Digest, the bureau extended by six months Allband's waiver to continue to receive the lesser of high-cost USF support based on its actual costs or the annualized total high-cost support that it received in the first six months of 2012. The bureau gave Allband a three-year waiver in July 2012, and in December 2014 Allband filed a petition for a further, 12-year waiver. In June of this year, the bureau extended the original waiver until the earlier of Dec. 31 or until action is taken on its 12-year waiver request.
FCC efforts to overhaul Lifeline USF mechanisms could run into trouble in Puerto Rico, said a filing by Connected Nation's chief policy counsel on a meeting the chairman of the Telecommunications Regulatory Board of Puerto Rico, two advisers and the counsel had with FCC officials. Lifeline modernization is important for Puerto Rico, which has a broadband adoption rate of 48 percent that is "far lower than any state," the filing said. Only five metropolitan areas in the U.S. have home broadband adoption rates below 50 percent, and three of those are in Puerto Rico, the filing said: "We emphasized strongly that proposed limitations on the eligibility of low-income consumers use to qualify for the program would be devastating for Puerto Rico and create enormous 'qualification gaps,' due to the fact that federal nutrition assistance, school lunch, and other federal assistance programs operate differently in Puerto Rico. The Commission’s effort to modernize Lifeline will not succeed if it does not succeed in Puerto Rico," said the filing, posted Thursday in docket 10-90.
The USF contribution factor will jump to 18.2 percent in Q1, from this quarter's 16.7 percent, said industry consultant Billy Jack Gregg in an update Thursday. He said the Universal Service Administrative Co. projected industry long-distance telecom revenue for Q1 at $14.93 billion, about $72 million less than in the current quarter. Combined with projected USF demand of $2.277 billion, the revenue decline caused the industry contribution (assessment) factor to spike, he said. "The drop in first quarter 2016 revenues continues the downward trend in the USF contribution base, which places upward pressure on the USF assessment factor." Gregg recently said the contribution factor could top 18 percent for the first time, depending on the projected revenue (see 1511030037).
FCC Wireline Bureau Chief Matt DelNero outlined nine key proceedings his bureau is working on, though he said the list isn't exhaustive. First on his list is a draft order that would partially approve a USTelecom forbearance petition for ILEC relief, which is on the commission's Dec. 17 tentative meeting agenda. Speaking at the Practising Law Institute conference Thursday, DelNero said he is personally involved every day in working on separate efforts to overhaul rural rate-of-return USF mechanisms. Asked about the timetable in light of signals from a key senator that the FCC could go beyond a year-end commitment for solving the "stand-alone broadband problem" for rural carriers, DelNero said the agency is eager to complete the rulemaking but also wants "to get it right." He also invited interested parties to provide input on commission efforts to craft an NPRM on broadband privacy under Title II of the Communications Act. Among the other draft items in proceedings he cited are: a Connect America Fund Phase II reverse auction framework order, which is circulating; an order to reform Part 32 accounting rules; the 2016 broadband progress report; a Lifeline modernization order; special-access reform actions; and orders on industry transactions, including Charter Communications' proposed buys of Bright House Networks and Time Warner Cable, and Altice's proposed buys of Cablevision and Suddenlink. On a subsequent panel at the conference, a Netflix official sparred with officials of CenturyLink and Cox Communications over the net neutrality order. Corie Wright, Netflix director-global policy, said she believes the FCC would be upheld in court, as did Washington Utilities and Transportation Commissioner Phil Jones. Jennifer Hightower, Cox senior vice president-law and policy, said the net neutrality order is discouraging broadband investment and that her company is "more cautious than ever" due to uncertainty from the order. Melissa Newman, CenturyLink senior vice president-federal policy and regulatory affairs, agreed, saying her company doesn't know what is allowed under the Internet conduct rule's prohibitions against broadband ISP practices that create "unreasonable interference" or "unreasonable disadvantage" for other parties. Wright disputed the criticisms, which she said were contradicted by the statements and actions of industry executives and Wall Street investors. Jones also said he hadn't seen any drop in broadband investment in his state.