Three rural groups add support to USF-ICC reform initiatives

Three rural telecom associations and several large U.S. telcos have agreed upon what the rural groups are calling “a framework and complementary set of reform plans” involving Universal Service and inter-carrier compensation reform.

The rural associations--the NTCA, OPASTCO and the Western Telecommunications Alliance—stopped short of signing on to Universal Service and ICC reforms expected soon from the U.S. Telecom Association and large carriers, including AT&T and Verizon (CP: Financial analysts: Large carriers will recommend cost model for broadband Universal Service program). Instead, the associations said they are simply filing a joint letter with the other stakeholders “explaining how their plan and the Rural Associations’ plan can work in tandem to create an effective framework for reasonable USF and ICC reform.” The rural associations filed a Universal Service and ICC reform plan with the FCC several months ago, but the FCC appears unwilling to accept some of the ideas proposed by the rural telco groups.

According to a release issued today by the three rural telco associations, highlights of the reform framework that will be referenced in the anticipated joint letter include:

- Maintain rate-of-return cost recovery
- Start from current funding levels received by rate-of-return carriers
- Enable reasonable, measured growth in funding over time that is not subject to a cap
- Restructure terminating local switching ICC rates over an eight-year transition period
- Enable continued charging of ICC rates for terminating transport and tandem switching functions at current interstate levels
- Ensure sufficient funding for access restructuring for carriers of last resort
- Include VoIP within the ICC framework
- Adopt strict phantom traffic rules that would require identification of the true calling and called parties

The eight-year transition period for reducing ICC rates appears to have been a small victory for the rural telco groups, as the USTA proposal was reported to have been targeting a five-year transition period. Retaining rate-of-return regulation also is an important gain for rural telcos, as the FCC initially wanted to phase out that system.

What’s not on the list
What isn’t included on the list outlining the proposed framework is a recommendation about how Universal Service funding for broadband services to high-cost areas would be awarded. The USTA proposal is expected to recommend using a cost model, while the rural telco groups have suggested a system that would calculate support levels by subtracting revenues based on an urban benchmark from a carrier’s broadband network transmission costs.

Perhaps the rural telco groups are thinking that as long as the consensus framework recommends retaining current funding levels for rate-of-return carriers, the method by which funds are awarded would not be so critical.

The list outlining the proposed framework also did not include any discussion of an access revenue recovery mechanism. The rural groups’ original proposal included a recommendation on that, and the USTA proposal reportedly also has a recommendation there, but perhaps the two camps could not agree on details.

Meanwhile, a fourth rural telecom group has issued a press release urging rural telcos to “vigorously oppose the large carrier-industry deal.” The group appears to be an informal coalition of rural telcos. In a press release issued today, the group said the USTA proposal will create a “windfall” for AT&T and Verizon.

Meanwhile the USTA and the other rural association will now have to persuade the FCC to adopt their ideas. Addressing attendees at an OPASTCO event this week (CP: FCC bureau chief: USF reforms will provide 'stable' inter-carrier compensation system), FCC Wireline Competition Deputy Bureau Chief Carol Mattey said several times how interested she was in seeing the USTA proposal but added that “our job is not to rubber stamp any proposal . . . but to ask if it will benefit consumers.”