Customs Duty

Fiber cable and contract construction services likely will "become much more expensive or unavailable" as industry deploys new broadband facilities in coming years under various FCC programs, warned WTA, lobbying the agency on the group's petition for reconsideration of a rate-of-return USF overhaul order (see 1605250068). Representatives of the RLEC group also said FCC guidance is needed on how transactions would be handled under a new broadband model and an updated rate-of-return mechanism. "Should actual build-out costs significantly exceed the estimated costs used by the Commission to set its 5-year build-out requirement for the Rate of Return Path and its 10-year build-out requirement for the Model Path, those build-out requirements will become onerous or impossible to achieve with the applicable high-cost support," said a WTA filing posted Tuesday in docket 10-90 summarizing a meeting with Wireline Bureau officials. "WTA has requested a streamlined process for revising build-out requirements for carriers on both Paths if substantial cost increases or other materially changed circumstances render the current build-out requirements unreasonable or impossible." The group said rural telcos increasingly are concerned that "digital subscriber line ('DSL') charges, middle mile costs and customer service expenses" are hindering their ability to certify that they satisfy the FCC's "reasonably comparable rate benchmarks for broadband service." Entities seeking a reduction in an ILEC's Connect America Fund support should be required to offer the same broadband speeds and comply with the same service duties, said WTA. It said members don't expect to receive support where cable companies offer equivalent service but have concerns about "questionable claims" by wireless ISPs.

Civil rights groups and others asked the FCC to do more to protect consumers as telecom carriers migrate from traditional phone services to IP-based, broadband technologies. The advocates said "high quality, affordable and reliable voice and high-speed broadband services" should be provided to all Americans and consumer protection maintained during the technology transitions. Separately, incumbent telcos pressed for streamlined regulatory treatment in tariffing and discontinuing legacy voice services. They were among the parties lobbying the commission last week as it plans, at its Thursday meeting, to consider a tech transitions item taking various actions (see 1606240069).

Revenue from contributions to state USFs has declined in multiple jurisdictions, we found last week from state USF financial documents and from interviewing state and industry officials. Those officials cited a variety of reasons for the falling revenue. Some cited outdated contribution methodology, while others said the drop is part of deliberate efforts to control the size of funds. Some states reported efforts to revamp USF contribution methodology, and one said its hands were tied by state legislation.

A House Democratic leadership aide told us Democrats are likely to rebel against the FY 2017 FCC funding bill and stand-alone legislation to curb the Lifeline program, both being brought to the House floor this week. Rep. Austin Scott, R-Ga., is attempting to get two different proposals addressing the Lifeline program through the floor, one as a Financial Services bill amendment (see 1606170060) and another as stand-alone legislation being considered Tuesday under suspension of the rules.

Prospects are “slim” for the Small Business Broadband Deployment Act (S-2283), said Senate Commerce Committee ranking member Bill Nelson, D-Fla., in an interview Wednesday after a Commerce Committee markup of the measure. The committee cleared the bill by voice vote but four Democrats voiced concerns, including Nelson.

Two bills moving through the California State Assembly could affect the state’s ability to regulate telecom. The head of the California Public Utilities Commission said last week the CPUC has clear authority over analog telephone service but not digital. But the State Assembly’s Appropriations Committee is expected on Friday to consider a controversial IP transition bill authorizing AT&T and other telcos to discontinue legacy telephone service in 2020 (see 1605180075). It also will consider a constitutional amendment to erase the text that established the CPUC.

The FCC approved a Connect America Fund Phase II subsidy auction plan to provide $215 million in annual broadband-oriented support to unsubsidized rural areas traditionally served by larger telcos. At their Wednesday meeting, commissioners voted almost unanimously to adopt an order setting the CAF II auction framework and a Further NPRM to flesh out certain auction specifics, including "weights" for bidders offering different broadband service levels. Commissioner Mike O'Rielly partially dissented on the FNPRM, but even he credited his colleagues with making a fiber-oriented draft item more balanced among technologies: "We are still a long way from home, but at least we're back on course for now."

Frontier Communications should disclose complete Connecticut network modernization plans to the state’s Office of Consumer Counsel, the OCC head told the state’s Public Utilities Regulatory Authority. OCC has access to that information under the 2014 PURA order approving Frontier’s acquisition of AT&T wireline customers, said Consumer Counsel Elin Swanson Katz in PURA oral argument on the access live-streamed Tuesday. The information will assist PURA in an investigation of whether Frontier is meeting transaction commitments on network upgrades. But Frontier has objected to sharing confidential parts of its business strategy with OCC because of the office’s role in municipal broadband procurement processes. A division called the Office of State Broadband (OSB) advises municipalities on broadband procurement, and if it knew Frontier's confidential business strategy -- but not that of other companies submitting proposals to municipalities -- it could advantage the other companies, testified Frontier outside counsel Daniel Venora. “It would be like giving our information to Cablevision or Comcast.” Frontier supports a May 12 ruling by PURA to restrict access to the confidential Frontier material only to OCC staffers who don't perform any OSB duties, he said. But the OCC believes the plan isn't practical, said Katz. The OCC has 12 staff members, and soon will have only 10 due to two planned retirements, she said. “Because of the size of our office, everyone works on everything,” including OSB matters, she said. “To wall off staff isn’t possible even if I were amenable to it.” Legally, the OCC head can’t delegate her authority to selected staff members and remove herself from the process, added OCC principal attorney Joseph Rosenthal. Katz said she felt personally offended by Frontier. “A new duty should not be interpreted to limit our rights,” said Katz. “This is nothing less than a personal attack on my integrity," she said: "This is saying I can't be trusted to handle confidential information, which is frankly offensive and unwarranted given OCC’s unblemished record in handling confidential information,” including major infrastructure plans and energy procurements. It “absolutely, 100 percent, is not” a personal attack on the OCC, said Venora. Since closing the AT&T deal in 2014, Frontier had major problems migrating customers from AT&T, an experience that Frontier CEO Daniel McCarthy described Monday as far worse than the transition issues in California, Florida and Texas (see 1605230046).

The FCC cited practical, procedural and statutory arguments in defending its order allowing interconnected VoIP providers to obtain phone numbers directly from numbering administrators, which NARUC said the commission couldn't do without classifying VoIP as a telecom service under the Communications Act (see 1604050013). "The FCC took a common-sense approach to telephone numbering, allowing VoIP providers direct access to phone numbers, thus eliminating a needless middleman and helping to drive down costs, promote competition, and improve service," the agency told the U.S. Court of Appeals for the D.C. Circuit in a response brief Thursday in NARUC v. FCC, No. 15-1497. The decision also maintained VoIP and telecom provider duties to facilitate number portability, allowing customers to keep their numbers when they switch providers. "Because NARUC does not challenge the actual outcome of the proceeding, it is not injured and lacks Article III standing" under the Constitution, the FCC said. "Even if NARUC had standing, it could not show that the agency's interpretation of its authority under the Act is unreasonable." Phone numbers are essential to telephone service providers, and consumer ability to keep those numbers when switching providers is essential to competition, the commission said. Congress thus delegated "exclusive jurisdiction" over phone numbers to the FCC, which relied on this "plenary authority" to allow VoIP providers direct access to phone numbers while maintaining number portability duties, the agency said. Nothing in the law forbids providing nontelecom carriers direct numbering access, said the agency, which found its decision "would lead to increased competition, lower prices, and improved service." A brief from intervenor Vonage in support of the FCC order is due next Thursday; NARUC's reply brief is due June 9.

The East Coast strike will likely dent Verizon’s bottom line in Q2, this year and possibly next year, even if an end to the strike is near, financial analysts said Friday. Wells Fargo Friday decreased revenue estimates for Verizon after the telco’s Chief Financial Officer Fran Shammo said Thursday that Verizon has largely stopped doing new Fios installations due to the nearly six-week-old East Coast strike (see 1605190011). A Standard & Poor’s analyst also predicted damage to Verizon’s bottom line, as experts have warned about before in this publication (see 1604270059). However, with federal mediation underway at the Labor Department, some analysts said they expect a quick recovery by the company, and a marketing expert said she doesn’t expect the labor battle to harm Verizon’s brand irreparably.