FCC Grants Some USTelecom Relief Requests; Extra Voice USF Support Ditched

A majority of commissioners found parts to like and dislike. The order was approved because all provisions got at least majority support. In an unusual development, three commissioners dissented from parts of the order, but not always the same parts. The outcome appeared largely consistent with a draft order and expectations of FCC officials, (see 1512160067, 1511250047 and 1511240070). Some additional USF voice support that had been proposed was withdrawn.

Chairman Tom Wheeler said the order scraps "costly regulations that are no longer necessary,” which he said will encourage ILECs to deploy broadband and other advanced systems. “At the same time, it preserves requirements that remain essential to our fundamental mission," he said. “If you want to make way for the new, you need to get rid of the old,” said Commissioner Jessica Rosenworcel, who along with Wheeler backed the entire order. “We discard stale requirements for stand-alone long-distance service. We remove duplicative policies for wholesale services. And we dispense with practices that were built for narrowband rather than broadband markets."

Commissioner Mignon Clyburn said the order did a reasonable job of striking a balance, but she voiced concern about giving ILECs relief from regulation providing competitors regulated access to “entrance conduits” reaching some businesses. She said more granular market analysis was needed to ensure competition isn't harmed. Clyburn also questioned certain USF funding for voice service that was included in the draft order, but an agency official said it was removed at the last moment.

While Commissioner Ajit Pai welcomed the relief, he said the FCC should have gone further, and he objected to continuing to require some price-cap ILECs to offer voice service in high-cost areas without USF support. The FCC staff said the agency was granting full or partial relief in most of the areas sought by USTelecom, but Commissioner Mike O’Rielly said it was “less than half a loaf” and added he would have “gone much further.” He also agreed with Clyburn’s desire to move quickly to provide USF support for remote areas.

USTelecom welcomed the FCC actions, saying the agency took a “positive step in removing outdated regulations." The group said it looked forward to working with regulators “to update other antiquated policies” through forbearance and its existing petition for ILEC wireline voice service to be declared “nondominant.” CenturyLink said the order was “a good first step, but more work needs to be done to remove all regulatory disparity between cable and other broadband and video providers and to provide sufficient funding for remaining obligations.”

The order gives the regional Bells and other ILECs relief from certain duties to provide competitors with wholesale access to their networks. It gives the Bells “substantial relief” from wholesale access duties under Section 271 of the Communications Act, said Wireline Bureau staffer Megan Capasso, who outlined the item. Pai said the “checklist obligations” encouraged regulatory arbitrage not investment, and Clyburn said the rules duplicated Section 251 requirements. Pai was also pleased the agency would no longer apply a “silly rule” that had required ILECs to provide competitors with wholesale access to a 64 kbps voice-grade channel over fiber where copper was retired, which he said imposed costs with little to no benefit. And the order gives ILECs relief from providing competitors regulated access to entrance conduits reaching business customers in “greenfield” (new) developments but not “brownfield” (existing) developments.

The order forbears from applying “equal access” and “dialing parity” ILEC rules to protect disappearing stand-alone long-distance residential services, officials said. It also gives the ILECs relief from “outmoded” 1980s and 1990s requirements to give network access to providers of enhanced services such as voice mail and faxes, a release said.

The FCC denied price-cap ILECs relief from an eligible telecom carrier obligation to provide affordable voice service to customers in high-cost areas where the carriers haven’t accepted broadband-oriented USF support under Connect America Fund Phase II. Clyburn said the FCC was going outside the “four corners” of the USTelecom petition by providing $200 million in additional USF voice support, including $100 million from a reserve fund, that she wasn’t convinced was needed. But Wireline Bureau Chief Matt DelNero said the proposed funding had been removed in “late-breaking” developments. Wheeler afterward told reporters there wasn’t sufficient commissioner backing for the funding.

Pai said the FCC was imposing an “unfunded mandate” on price-cap ILECs by requiring them to provide voice service to customers located where they would no longer be receiving USF support. He said the amount of additional support the draft order had proposed was insufficient for the high-cost task, leaving the carriers “in the lurch.” The FCC should either remove the voice obligation or provide sufficient USF support, he told us afterward.

Clyburn said she remained concerned the FCC wasn't moving quickly enough to spur broadband deployment in remote areas. DelNero said the bureau believed a currently circulating CAF II reverse auction order provided a good vehicle for addressing remote area funding issues, but the draft would have to be changed. Wheeler called the CAF II auction the “predicate” for the next phase, which would be the remote area funding aimed at particularly costly areas. He later told reporters he wanted commissioners to finalize the CAF II auction framework order. The reverse auction is intended to solicit bids for subsidies (low bids generally win, with some potential complexities) from parties interested in serving high-cost areas where price-cap ILECs declined to accept CAF II funding. Areas still not served after that auction could be targeted by the remote area fund.

Pai criticized the FCC’s decision not to forbear from applying Section 272(e)(3)’s long-distance imputation requirement. “That arcane accounting rule requires companies to train specialized accountants -- the costs of which are ultimately borne by consumers -- even though there is no corresponding public benefit,” he said. “The FCC itself targeted that provision as ripe for forbearance just last year. Our own staff cannot articulate any current use of that rule. Yet we retain it just because it may have once had value. That’s arbitrary and capricious."