Adak Eagle, Windy City Seek Commission Review of USF Waiver Rejection
The FCC Wireline and Wireless bureaus “blatantly violated competitive neutrality” when they denied a USF waiver petition by Adak Eagle Enterprises and its subsidiary Windy City Cellular based on a promise by General Communications Inc. to serve Adak Island, the companies argued in an application for review Thursday. The bureaus last month rejected the request of the Alaskan carriers, finding they had “not shown good cause for a waiver,” and their plans to reduce costs failed to address, among other factors, “disproportionate executive compensation relative to the size of the companies” (CD July 17 p14). The companies had sought waivers of rules establishing a $250-per-line monthly cap on high-cost universal service support, arguing the island could lose voice service if not granted.
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"The Bureaus have improperly gambled the fate of Adak Island consumers, taking at face value the unsubstantiated and unenforceable ‘pinky promise’ of a competitor (one with a disgraceful history of service to the island) to hypothetically provide service that is already being provided by AEE and WCC,” the companies wrote. General Communications Inc. has said it could provide service to Adak Island if AEE and WCC are unable (CD May 28 p9).
As support for the denial, “the bureaus inexplicably rely on GCI’s ‘willingness’ to ’take over'” certain AEE and WCC assets, but they “fail to explain how this is legally possible,” the companies said. Nowhere in the USF/intercarrier compensation order did the commission delegate authority to the bureaus to “deny a waiver based on another company’s hypothetical and unenforceable statements that it will (for pennies on the taxpayer-funded dollar) ‘by hook or by crook’ just seize another unrelated company’s assets, or that it will build and offer additional services at some hypothetical point in the future to customers in areas where it has never provided service and has never previously bothered to make the investments necessary to do so,” the companies said. “The Commission should not be complicit in such a scheme."
GCI has “never bothered to invest in the plant, infrastructure or personnel necessary to provide service beyond a small portion of downtown Adak, or even provide 911 service,” AEE and WCC said. “GCI has not made any enforceable commitment or entered into any contract with the Bureaus to build the necessary facilities to ensure continued, universal service to Adak Island. Nor has GCI been in communication with AEE or WCC about purchasing any facilities."
"The Bureau reviewed all the mud that AEE chose to sling, and rightly rejected AEE’s tactics,” said Wiltshire Grannis partner John Nakahata, who represents GCI. “The fact of the matter is that Adak Island can be served for far less than AEE and Windy City would charge the USF. GCI stands by the commitments it made to maintain voice and enterprise services on Adak Island, including to the school and health clinic."
AEE and WCC also criticized the bureaus for failing to observe the “proper waiver standard” by “virtually ignoring that AEE will be forced to default on its substantial [Rural Utilities Service] loan.” In the USF/ICC order, the commission directed the bureaus to consider the existence of a loan as a factor in its waiver analysis, the companies said. But the bureaus only acknowledge that waiver standard in “a single footnote” that concludes any default on its RUS loan would “be far more than offset by savings” to the USF, the companies said. “The Bureaus’ conclusion is erroneous both because it is unsupported by any cost analysis, and because it is beyond the Bureaus’ authority to judge the acceptability of default on a loan approved and awarded to AEE by the Department of Agriculture and RUS.”
"The bar is relatively high for the FCC to completely overturn a bureau-level decision, even though it happens on occasion,” said Medley Global analyst Jeffrey Silva by email. It’s possible that if the FCC had “second thoughts” about the bureaus’ actions, the companies may have been encouraged to file for reconsideration, Silva said. But more likely, he said, is that AEE is “exhausting its regulatory remedies (and building a record) at the FCC with an eye to a possible court appeal later.”