ST. LOUIS -- While some panelists at NARUC’s annual meeting see a continuing state role in a broadband world, others urged regulators to be mindful of market changes that have resulted in loss of revenue. And while some said they can live with the FCC’s Universal Service Fund order, others find it unacceptable.
The FCC “put the cart before the horse” when it ordered that relinquished Universal Service Fund cash shouldn’t be redistributed among a state’s eligible telecom carriers, telecom lawyer Todd Daubert told an appellate panel Tuesday. That January order paved the way for last month’s universal service order (CD Jan 4 p2), but Daubert,representing the Rural Cellular Association and the Universal Service for America Coalition before a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit, said the FCC exceeded the “plain language” of Section 254(d) of the Telecom Act.
ST. LOUIS -- The FCC is careful not to disturb states’ role as it revamps the Universal Service Fund and intercarrier compensation system, said Wireline Bureau officials at NARUC’s annual meeting Tuesday. They didn’t address the timing of the order’s release, though several state officials expect it to be out before Thanksgiving.
ST. LOUIS -- Instead of taking the FCC to court, state regulators and consumer advocates should focus on working together with the FCC on implementing the Universal Service Fund revamp, FCC Commissioner Michael Copps said at NARUC’s annual meeting Tuesday. The FCC, which took many of the Federal/State USF Joint Board’s recommendations as it works to finalize the order, seeks to strengthen the federal/state partnership going forward, he said. Meanwhile, the outgoing commissioner said he plans to continue to advocate for media reform even after leaving the FCC.
ST. LOUIS -- State members of the USF Federal/State Joint Board, the Federal/State Jurisdictional Separation Joint Board and the Federal/State Joint Conference on Advanced Services were schedule to meet with the FCC officials attending the NARUC meeting in here late Monday, after our deadline, John Burke, chair of the NARUC telecom committee told us. The FCC attendees, including Commissioners Michael Copps, Mignon Clyburn, Wireline Bureau Chief Sharon Gillett and Deputy Bureau Chief Carol Mattey, were expected to talk about the timing of the release of the full universal service fund/intercarrier compensation order and an overview of what is in the order, Burke said.
Democratic FCC Commissioner Mignon Clyburn urged critics of the recent Universal Service Fund changes not to take their claims to court. “Instead, I ask that we work together to complete and perfect these reform efforts,” Clyburn told an audience Tuesday in Boston for a broadband conference. “By doing so, we can ensure that the transition of the fund from voice to broadband opens the door for every citizen to become a part of our digital economy. When that occurs, the decade-long struggle to achieve these reforms will have been well worth the effort.”
Verizon Executive Vice President Tom Tauke rejected claims that his company was a net beneficiary of the sweeping changes to the Universal Service Fund and the intercarrier compensation regime. “It’s something of a mixed bag,” he said in an interview on “The Communicators” on C-SPAN that was to have been telecast over the weekend. The company’s wireless division will gain from the FCC’s order, but its wireline division will lose, he said. Analysts and telecom observers had suggested that Verizon and AT&T were the biggest winners from last week’s order (CD Oct 28 p1). “But overall, it’s going to be good for the industry, it’s probably good for our company,” he said.
The telecom world largely responded cautiously as the FCC on Thursday adopted its Universal Service Fund and intercarrier compensation regime changes. But telecom officials and observers predicted lawsuits would begin pouring in after the 400-plus page order is published and digested. Meanwhile, the order itself hadn’t been finished, an FCC official told us. Staff were continuing to incorporate edits agreed upon by the commissioners late in the process but before the vote, and the order won’t be ready for release until at least the end of next week, the official said. Less-substantive changes are also still being made.
AT&T is clinging “to an outdated and unworkable conception of intercarrier compensation” when it lobbies against cable operators’ request to allow CLECs to charge the same access rates as ILECs even when the CLECs don’t terminate calls, Comcast, Cox Communications and Time Warner Cable said in a letter filed Monday (CD Oct 24 p6). The dispute between the two companies flared up late last week, as the sunshine rules took effect and closed lobbying on the pending Universal Service Fund and intercarrier compensation system order. AT&T was trying “to maintain ILEC-centric rules,” but is striving “mightily to obscure a simple, fundamental point,” the cable companies said.
FCC Chairman Julius Genachowski’s proposed Universal Service Fund reforms are “inconsistent with the White House’s vision and direction,” a breakaway group of rural carriers wrote to President Barack Obama last week. “Your administration has announced its commitment to broadband deployment and regulatory reforms that will spur job creation and overall economic expansion,” said the Rural Broadband Alliance’s letter, according to an alliance release Monday. “However, the FCC is preparing reform measures that will completely undercut such investment and growth by sidestepping the broadband issue while simultaneously cultivating an environment of continuing regulatory and economic uncertainty throughout much of rural America.” The alliance was formed in July by several rate-of-return carriers angry that the big rural associations were about to make a separate peace with price cap carriers on USF reform (CD July 29 p1). Pending USF reforms and the intercarrier compensation regime will have a “relatively muted” impact on mid-sized, price cap carriers, analysts at UBS predicted Monday. Most of the companies “have lowered their exposure to subsidies with their recent acquisitions” and the FCC’s proposed reforms “will also allow [the mid-sized carriers] to offset most of the pressure with increases in subscriber line charges and/or with access to the new Connect America Fund,” analysts Batya Levi and John Hodulik wrote. USF and intercarrier comp represent 4 percent of revenue, 8 percent of earnings before interest, taxes, depreciation and amortization, and 12 percent of free cash flow for CenturyLink; 5 percent of revenue, 8 percent of EBITDA and 15 percent of cash flow for Windstream; and 8 percent of revenue, 12 percent of EBITDA and 18 percent of cash flow for Frontier, the analysts said. “However, our models already incorporate significant revenue declines in this revenue stream, capturing most of the impact of the new reform,” Levi and Hodulik said. “If the competitive environment does not allow the carriers to raise the SLC or if the carriers are unable to tap the new fund, then we would have to cut our … estimates by 3-5 percent for revenues, 6-8 percent for EBITDA and 9-10 percent for FCF.” The mid-sized price cap carriers offered up the ABC plan, but they have been increasingly dismayed by the direction of USF reforms over the past few weeks (CD Oct 19 p1).