RLECs Make Model-Based USF Proposals, Ask FCC Questions on Legacy Reform
Four rural telco groups made proposals for implementing parts of an FCC plan to give rate-of-return carriers the option of shifting to a new USF support mechanism based on a broadband cost model. The ITTA, NTCA, USTelecom and WTA submitted “consensus recommendations” for allocating an extra $200 million a year in Connect America Fund reserve money for RLECs opting into the model-based approach and for proposed broadband buildout milestones over a 10-year period, said an ITTA filing posted Friday in docket 10-90. ITTA, joined by USTelecom and WTA, updated a proposed broadband buildout methodology, in a separate filing Friday. And USTelecom Monday made another filing, on behalf of all four groups, asking the FCC questions about possible changes to legacy high-cost USF mechanisms for RLECs that don’t opt in to the model-based support.
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ITTA President Genny Morelli said the proposals in her group's filings “advance the ball in putting details together on how a model-based plan would work.” She told us Monday the parties are further along in agreeing on a model-based plan than on mechanisms to replace existing USF support for those carriers that don’t opt into the model. USTelecom Vice President Lynn Follansbee told us the questions in her association's filing were those the groups need answered by the FCC to get to a consensus approach on overhauling the legacy systems.
The four groups said the FCC had indicated it would make some CAF reserve dollars available for rate-of-return RLECs that elect to receive model-based support. The rural groups noted there wasn’t enough USF support available to fund 10/1 Mbps broadband for all locations in areas served by RLECs seen as likely to elect model-based support. To adhere to the FCC’s goal of directing funding to areas with the lowest current buildout percentages, the groups recommended an approach that would incorporate both an RLECs current level of 10/1 Mbps buildout and the amount of model-based support for which it qualifies. “The Commission's policy objectives balance the need to fund more than merely the lowest-cost locations but keep funding per location at reasonable levels,” they said.
The four groups said their approach “ensures that scarce USF resources are distributed to those areas that have the greatest need for support.” Under their proposal, a projected $85.8 million of $199.3 million in annual CAF reserve funding would go to 233 RLECs serving areas with between 0 and 10 percent buildout of 10/1 Mbps, $28.8 million would go to 50 carriers serving areas with between 10 and 20 percent buildout, and $31.3 million would go to 33 carriers serving areas with between 20 and 30 percent buildout. Companies with more than 85 percent buildout wouldn't be eligible for the CAF reserve funding under the proposal.
The groups proposed a 10/1 Mbps broadband buildout schedule without milestones in the first four years, with a 50 percent company buildout requirement in year five, rising 10 percentage points each year until reaching 100 percent by year 10. They also proposed certain penalties for withholding some support for companies not meeting the schedule.
In its other filing, ITTA -- joined by USTelecom and WTA -- updated its proposed broadband buildout methodology and its projected impact on individual RLECs. NTCA is still reviewing the methodology and hasn’t decided whether it will join the proposal or not, or seek modifications, Senior Vice President-Policy Michael Romano told us. “We’re still working together with the other groups.”
In its filing, USTelecom noted members of all four groups recently discussed with FCC officials a possible “bifurcated approach” to existing USF support mechanisms for RLECs not opting into the model-based support (see 1509280057). In response to that discussion, the groups submitted a list of detailed questions to the FCC on a bifurcated approach. Under such an approach, USF support for investments before a selected date would be based on old rules and USF support for investments after that date would be based on new rules, with costs gradually transitioning from the old rules to the new rules as plant is depreciated and retired.
“We’re eager to have conversations with them on these issues, but we need guidance on the kinds of questions outlined in the USTelecom letter to take the next steps,” Romano said. Morelli said she hasn’t “heard anything recently that indicates there isn’t enough time to get [an overhaul] done in a timely manner,” which she said could be by the end of the year, as the FCC has sought, or early 2016, if necessary.