FCC, small telco showdown on Universal Service set for February 8

The FCC’s next big showdown with the telecom industry is on tap for February 8. The commission has released the agenda for the open meeting scheduled for that date and on it is a notice of proposed rulemaking involving the Connect America Fund and intercarrier compensation reform.

The Connect America Fund is the broadband-focused Universal Service fund recommended in the National Broadband Plan that has generated considerable controversy on the part of small telcos. The small telcos are concerned about recommendations to phase out rate-of-return regulation, to award funding based on a “market mechanism” such as a reverse auction and to set a 4 Mb/s minimum target speed.

One telecom policy pundit does not expect to see the NPRM deviate much from what is proposed in the National Broadband Plan, but also reminded stakeholders that NBP recommendations do not necessarily have the backing of all five FCC commissioners. The February 8 meeting should “give some further sense of the full Commission’s thinking, if not direction,” wrote Stifel Nicolaus analyst Rebecca Arbogast in a research note.

Small telcos seeking a silver lining also should note that the commission apparently has the good sense to tackle Universal Service and intercarrier compensation simultaneously. Funding for small telcos currently depends on both of these systems—and it would be impossible to assess the impact of reforms to one of the systems without the other.

The meeting agenda says the NPRM also will address intercarrier compensation arbitrage, which could be good news for small telcos that have been pleading with policymakers to address revenue leakage resulting from what is sometimes called “phantom traffic.”