What service providers must know about the Connect America Fund order

The Connect America Fund order adopted by the FCC in late October and released to the public just before Thanksgiving is poised to impose big changes on the voice-focused Universal Service program that has been in place for decades. This week and next, Connected Planet will recap what communications service providers need to know about the order, which aims to transform the high-cost Universal Service program into a broadband-focused program dubbed Connect America while also phasing out the inter-carrier compensation system, which also has helped fund communications networks nationwide.

This week we’ll look at Universal Service reforms. Next week we’ll look at ICC reforms.

The Connect America Fund
Some information about the Connect America Fund has been known since the reform order was adopted, including how the FCC plans to divvy up the money that currently goes toward the high-cost program, with funding shifting somewhat toward price cap areas, where the majority of homes that cannot get broadband today are located (CP: FCC adopts Universal Service and inter-carrier compensation reform order). The FCC also made clear at the time the order was adopted that it would not provide support to areas where an unsubsidized competitor offers broadband service.

The final text of the 750-page order fills in some additional details, while leaving others for future resolution. More than 100 pages of the order are devoted to a notice of proposed rulemaking which, among other things, aims to resolve details about how Connect America funding for rate of return carriers should be awarded.

The FCC was considerably more forthcoming about what’s on tap for price cap territories, however. Plans there include:
-- Initially targeting support to areas where broadband service at speeds of at least 4 Mb/s downstream and 1 Mb/s upstream is not available.
-- Any supported broadband service must have sufficiently low latency to enable the use of real-time applications such as VoIP.
-- Funding recipients must allow usage at levels comparable to residential terrestrial fixed broadband service in urban areas. This is important because some price cap carriers had been hoping to use 4G wireless service to meet their Connect America Fund deployment requirement. It appears that would be an option under the program parameters—but the capacity requirement suggests the network operators might have to rethink their usage caps.
-- FCC to be responsible for the creation of a cost model to determine where support is needed along with the target level of support per line.
-- Incumbent price cap carriers can agree to bring service to unserved areas at the target level of support within five years or opt out on a state-by-state basis. The requirement to serve all or none of the high-cost areas in a state is aimed at preventing cherry picking, the FCC said.
--If the incumbent opts out, funding will be awarded through a reverse auction open to competitive carriers. The idea of using a reverse auction in all areas where the price cap carrier has not deployed service to a certain percentage of households appears to have been abandoned.
-- In Year 5 of the program, the minimum target speed will be increased to 6/1.5 Mb/s for a “number of supported locations” to be determined as part of the process of developing the cost model (unfiltered: Universal Service reform order targets 6 Mb/s broadband speed in certain cases).


“Based on the information before us today, we expect that consumer usage of applications, including those for health and education may evolve over the next five years to require speeds higher than 4 Mb/s downstream/ 1 Mb/s upstream,” the FCC wrote in the order.
D’ya think?

The FCC has finally admitted what rural telcos have been saying for nearly two years now. Yet despite all sorts of rhetoric about how rural areas should not be left behind, the FCC—at least for now--has refrained from imposing a similar step-up in the target speed for rate of return areas.

Part of me is surprised we haven’t heard more from small rural telcos about this discrepancy. Then again maybe after two years of haggling over Universal Service reforms some of the fight has gone out of them. Or maybe they’re too busy focusing on resolving the parameters for their CAF program.

Perhaps the 6/1.5 Mb/s target should be viewed as a sort of carrot dangled by the FCC to encourage the rate of return carriers to resolve those program parameters as soon as possible.