Some at FCC Focused on Stand-Alone Broadband Fix if USF Overhaul is Too Much

Travis Litman, wireline aide to Commissioner Jessica Rosenworcel, repeatedly said the commission’s first priority should be to fix the stand-alone broadband problem, which prevents rate-of-return telcos from receiving high-cost support for a broadband customer that receives voice service from another provider, such as wireless or VoIP. Litman, speaking on an NTCA panel with two other wireline advisers, said Rosenworcel committed to Senate Commerce Committee Chairman John Thune, R-S.D., that she would act on stand-alone broadband by year-end. If broader USF changes are made, they should be “stress tested” and “transparent,” Litman said.

Rebecca Goodheart, wireline aide to Commissioner Mignon Clyburn, said all the commissioners committed to acting on stand-alone broadband by the end of the year. “We’re really committed to trying to get it done,” she said. But Goodheart said there was also an opportunity to “modernize” rate-of-return USF to foment more broadband deployment while maintaining existing service.

Amy Bender, wireline aide to Commissioner Mike O’Rielly, said the FCC should address stand-alone broadband but also make progress toward helping carriers bring broadband to unserved customers. Bender noted NTCA’s recent letter urging the FCC to make sure reform is "done right" (see 1511100064). She and the other agency officials said the timing and scope of the FCC’s rural USF effort is in the hands of Chairman Tom Wheeler. Spokesmen for the chairman had no comment.

Pai said the FCC didn't commit to carrying out comprehensive reform by year-end. “We said that we would address the stand-alone broadband problem this year. That’s exactly what we should do,” he said. Pai again urged the FCC to make targeted changes that he first proposed in June (see 1506290039) and that were based on principles for a "simpler and straightforward plan" espoused by 115 House members in a May letter. First, Pai said stand-alone broadband costs should be included in the current high-cost loop support and interstate common line support rate-of-return USF mechanisms.

Second, Pai said, rural carriers should be given the option of moving to USF support based on a revised broadband cost model. “The model might not be perfect -- it wasn’t initially designed for small, rural companies, for example,” he said. “But that is no reason to prohibit participation on a strictly voluntary basis. And I’m open to using some of the reserves that have built up within the rate-of-return budget over the past few years to fund additional volunteers, but only so long as we remain fiscally responsible and prioritize participation for those areas that have the lowest build-out of high-speed broadband.” Pai said he wished he could promise NTCA members that the FCC would act by year-end and stick with something simple that works to make USF support predictable and sufficient, but said he's a minority commissioner who doesn’t make those calls. “So I wish you all the best of luck,” he said, drawing audience laughter.

Goodheart said there's much consensus on a voluntary model-based approach, though a few issues remain open, including what the broadband deployment milestones would be, the details of a challenge process for determining eligible areas (which are supposed to be unserved by unsubsidized competition), and whether there would be additional funding from the USF reserve fund.

“A funny thing happened on the way to stand-alone broadband” after lawmakers pressed the FCC to act, NTCA Senior Vice President Mike Romano told the audience. First, he said, the FCC started looking at comprehensive reforms, which he said could be “fine” -- and he noted the framework proposals of rural groups (see 1506030052 and 1506040028) -- though he said any such overhaul takes more time and effort. FCC officials this summer then started pushing a “bifurcated approach” to overhauling the legacy high-cost mechanisms under which USF support for investments prior to a selected date would be based on old rules and USF support for investments after that date would be based on new rules. Romano said it’s clear “that’s where the FCC wants to go,” but he said the bifurcated approach raises many questions that require more work and time to resolve, including testing of projected USF outcomes for carriers.

On other USF matters, Pai urged the FCC to scrap a “rate floor” that sets a minimum price for telcos to charge customers for local phone service. He said the only purpose of the rate floor is to drive up the price of service, including for farmers, ranchers and small-town entrepreneurs. Bender said O’Rielly had concerns that an upcoming reverse auction for larger, price-cap telcos might exhibit a bias toward fiber deployment, which he believes could hurt consumers in areas that could be better served through wireless or satellite solutions. A pending draft order to set a framework for the auction (see 1509250057) “hasn’t been voted,” said Goodheart, who along with Bender invited further rural carrier input into the proceeding. And Litman suggested that extending Lifeline USF support for low-income consumers to broadband was vital in light of the large public policy problem created by households that lack broadband, leading to a “homework gap” among students.