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AT&T, Verizon and other price cap carriers send broadband USF proposal to FCC

Recommendations include retaining current fund size, allotting $2.2 billion to price cap areas, phasing out terminating ICC charges, access charge replacement mechanism. Details of how ROR carriers would be funded left to rural associations to recommend.

As expected, six of the nation’s largest telcos today submitted a Universal Service fund and inter-carrier compensation reform proposal to the FCC aimed at transitioning today’s high-cost voice-focused fund to one focused on broadband without increasing the overall fund size. Also expected today is a letter from three associations representing small rural telcos indicating their agreement with the larger telcos on several key issues, such as lowering per-minute terminating ICC rates, phasing out USF support for competitive carriers and requiring VoIP carriers to pay ICC. (See CP: Three rural groups add support to USF-ICC reform initiatives).

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In an interview with Connected Planet, Windstream Senior Vice President of Government Affairs Mike Rhoda emphasized that the proposal submitted today focuses primarily on the broadband Universal Service program as it pertains to price-cap carriers. These include the six carriers signing the proposal—including AT&T, Verizon, Frontier, CenturyLink, and FairPoint, as well as Windstream.

The three rural telco associations—OPASTCO, NTCA and the Western Telecommunications Alliance—along with other rural telco groups already have submitted a joint proposal about broadband USF for rate of return carriers, including the 800 or so small U.S. telcos that the groups collectively represent. And the larger carrier proposal submitted today essentially leaves many of the details about how to administer broadband service for ROR carriers up to those carriers.

Also, while price cap carriers would see their terminating access charges drop to $.0007 over five years, according to the price cap carriers’ plan, ROR carriers would see those charges drop to only $.005 over that same period. Their charges might drop to $.0007 over an eight-year period, but Rhoda said, the FCC would make a determination at a future point in time about whether to take the ROR access charges down to that level.

Divvying up the dollars
A critical element of the large carriers’ plan, however, is that it provides details about how today’s $4.5 billion USF would be reapportioned. The price cap carrier proposal, which the group is calling “America’s Broadband Connectivity Plan,” recommends apportioning $300 million for a mobility fund, $2.2 billion for broadband in high-cost areas and $2 billion for rate-of-return carriers, Rhoda said.

To stay within the current fund size, the proposal also recommends a satellite broadband solution to bring broadband to the 750,000 unserved U.S. homes that would be too costly to serve using a terrestrial solution, Rhoda said. If the FCC opts to subsidize that service, the price cap carrier proposal recommends drawing from the mobility fund.

According to Rhoda, the large carriers also are recommending that the broadband fund should support only a single carrier in an area and only in areas without competition. In addition, the proposal supports a minimum broadband target speed of 4 Mb/s downstream and 768 kb/s upstream—a target that is actually a bit lower than the 1 Mb/s downstream rate initially recommended by the FCC. Rural carriers, on the other hand, have recommended that speeds should be comparable with what is available in urban areas. At the present, perhaps that could be interpreted to mean 4 Mb/s- 768 kb/s speeds, but within a few years the rural carriers’ proposal could call for higher speeds.

The price cap carriers’ proposal does not discuss minimum speeds for the mobility fund, but the FCC previously has said it would target 3G minimum speeds.

Price cap recovery mechanism detailed
As Rhoda explained, other elements of the large carriers’ proposal for price cap carriers include:
- Creation of an access charge recovery mechanism to be funded initially from the $2.2 billion allotted to the price cap carriers but phased out over five years, at which point the entire $2.2 billion would go toward broadband service support
- Awarding of broadband USF support based on a cost model, allowing incumbent carriers that have deployed a certain minimum level of broadband the right of first refusal to offer service with that level of support. If the incumbent declines, another carrier could step in to offer service at the proposed support level. If multiple carriers bid to offer service at that level of support, the FCC would conduct a reverse auction and award funding to the carrier requesting the lowest support level. If no one offers to provide service at the proposed support level, the FCC would need to rethink either the support level or the service commitment, Rhoda said.

The FCC has indicated that it is “very interested” in hearing what the price cap carriers have to say about USF reform (CP: FCC bureau chief: USF reforms will provide 'stable' inter-carrier compensation system) and the partial support of the rural associations should offer the price cap proposal even more weight.

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© 2014 Penton Media Inc.

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