Rural Telco Groups Laboring on USF Reform Plan Yet To Reach Consensus

“We’ve reached consensus on some issues and others are still open to discussion; it’s an ongoing process. We’ll be updating the FCC on Wednesday,” said Genevieve Morelli, president of ITTA, which represents mid-sized carriers, some of which are still under rate-of-return regulation while others are price-cap regulated. A rural carrier representative offered a similar assessment as to the coming meetings at the FCC: “We’re still having discussions about various plans. We probably won’t have anything finalized.”

FCC Chairman Tom Wheeler said April 17 that the USF program for rate-of-return carriers needed modernization to reflect the market and to support broadband deployment in rural America, in a blog post. Wheeler noted that he and his fellow commissioners committed to Senate Commerce Committee Chairman John Thune, R-S.D., that they would act by year-end. To facilitate the regulatory reform drive, Wheeler said that his staffers and other FCC officials, including Commissioner Mike O’Rielly, met April 16 with associations and others representing rate-of-return carriers “to ask for their creative cooperation in getting this job done for rural consumers.” FCC officials asked telco groups to hammer out a comprehensive industry plan within a month for updating rural rate-of-return carriers, telco representatives told us.

Telco representatives have been discussing the potential for rate-of-return carriers to voluntarily opt in to using the FCC Alternate Connect America cost model (A-CAM) for determining USF support, or to tap broadband funding under data connection service (DNS) proposals offered by the National Exchange Carrier Association, NTCA and WTA, said a May 8 WTA ex parte filing in docket 10-90. The biggest challenges have been sticking within the FCC overall USF budget goal and developing transition mechanisms, WTA said. There are also questions, WTA said, about broadband buildout and performance duties for carriers electing model-based support, opt-in details and how to determine the presence of unsubsidized competitors, making areas ineligible for support. Several representatives said an accurate estimate of the number of rural telcos opting into a model would have to wait until A-CAM model revisions are completed, actual support offers published and performance duties specified, WTA said.

Wheeler told senators at a hearing Tuesday that he hoped to have a revised model to support a stand-alone broadband mechanism in rural areas released “by football season” (see 1505120041). Rural telcos want stand-alone broadband support because under current rules, carriers lose USF support when customers drop their traditional wireline voice service, often in favor of wireless or VoIP, even if they still want to subscribe to broadband, rural carrier representatives said.

Morelli said the differing A-CAM and DNS thrusts reflect that some rate-of-return carriers will do better by opting into a model-based approach and others will do better under revised legacy mechanisms. “Folks have different interests and goals, and so you have to develop proposals that balance those interests,” she said. “So at least as it appears now, I don’t expect us to have a fully baked reform framework by next Wednesday. We hope to tell [FCC officials] where we have agreement and where we don’t. And there may be some areas where we will tell them we have to agree to disagree for now. But discussions will continue.”