Reverse Auctions Violate Telecom Act, U.S. Cellular Executive Says
Using reverse auctions to speed up broadband deployment is contrary to the 1996 Telecom Act and could “blow up” the FCC’s ambitious Universal Service Fund reforms, U.S. Cellular Senior Director Grant Spellmeyer said during an FCC workshop Wednesday. Section 214 of the act gives states the power to designate eligible telecommunication carriers and USF is otherwise under Title II, Spellmeyer said. Reverse auctions fail both tests by reducing ETCs to a single carrier and opening up universal service cash to non-Title II carriers. “We think the FCC needs to stop, go to the Joint Board, and get a recommendation for broadband support,” he said. “Sections 214 and 254 are very clear. You can’t ignore all that. This is going to blow up if we skip all that stuff."
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U.S. Cellular supports “forward-looking cost models” for universal service support, but if the FCC insists on going through with reverse auctions, it ought at least to require non-Title II carriers to become ETCs, Spellmeyer said. “We think this is Title II money and is a Title II service and should carry significant obligations,” Spellmeyer said. “We think that’s the kind of stuff that needs be done here and that’s especially important if we're heading to the world of a single winner."
American Cable Association Vice President Ross Lieberman said he has no objections to making cable carriers conform with ETC-like requirements to bid in auction, as long as cable companies knew going into the auction they would have to abide by such requirements. It doesn’t require any further action that could delay reform, Lieberman said. In fact, Lieberman said the FCC should go even farther in its requirements for broadband service, saying the commission should require download speeds of 16 Mbps and upload of 4 Mbps.
Cox Communications already is an ETC in states such as California, said Executive Director-Regulatory Affairs Jose Jimenez. But the company faces “barriers” in attaining that status and if cable operators are going to be required to become ETCs before they qualify for broadband subsidies, “the FCC should work with the state commissions to make sure that the ETC process is as open as possible.” “We are willing to take on the obligations,” Jimenez said. “But there have been barriers to keep us from being an ETC."
RT Communications and other RLECs oppose reverse auctions because they'll allow bigger companies to obtain subsidies for relatively low-cost areas that would likely obtain broadband service within a few years anyway, said RT Director of Government Relations Jason Hendricks. This would leave the highest-cost areas uncovered, but with fewer carriers to address the problem because RLECs would be squeezed out by the auctions.
The sharpest exchanges in Wednesday’s reverse auction panel were among Spellmeyer, Hendricks and Angela Kronenberg, aide to Democratic Commissioner Mignon Clyburn. Kronenberg wanted to know whether the focus ought to be on getting broadband to the unserved. Spellmeyer said “the problem is, once you get a government-selected monopoly in there … you'll never get a competitor in there.” Kronenberg said she didn’t think that was true and “we have to be very careful about making blanket statements.” Later, Hendricks said he wasn’t sure the problem of “unserved” could be defined carefully enough. Kronenberg cut him off: “It could be defined. That’s what a rulemaking is, you make the rules. Looking at the draft of our deployment report … we're still looking at at least two and maybe three years of waiting to get service to those areas … that have no choice now.” Hendricks then said he thought any reverse auctions ought then to go through a series of carefully calibrated pilot projects: “Let’s work out the bugs and make sure the rules make sense.”
Referring to AT&T’s proposed acquisition of T-Mobile, Spellmeyer said the easiest route to universal broadband is to let AT&T “just serve the country. We're almost there -- we're back to one carrier.” Verizon Vice President Maggie McCready said she didn’t “want to go back to a one-carrier world, either,” but, “I keep coming back to the objective of what universal service is trying to do … and that is to get broadband to places that aren’t served. Doesn’t it make sense for the objective to be to get the most people a baseline level of service?"
FCC Chairman Julius Genachowski and Commissioners Robert McDowell and Mignon Clyburn made brief remarks before the panels. McDowell said he hopes someday technology and new innovation will overtake the need for a universal fund. “It’s really my hope and vision that someday we won’t need a universal service subsidy,” he said. Wireless technologies can help to that end considering that “there’s so much more potential to squeeze more efficiency out of the airwaves and that will bring a robust dynamic of broadband services,” he said. McDowell also hopes to see a vote “before the leaves fall off the trees,” he said.