More than six weeks after passage, the text of the Connect America Fund order was released Tuesday (http://bit.ly/1pl9HHQ). Many of the changes to the CAF order (CD June 9 p7) were primarily focused on responding to Commissioner Ajit Pai’s dissent, FCC officials told us. An FCC spokesman declined to comment on the internal editing process or whether substantive changes were made, but said the fact sheet given to reporters at the April meeting “accurately reflects the final draft.”
The 10th U.S. Circuit Court of Appeals decision upholding the FCC 2011 USF/intercarrier compensation order (CD May 27 p1) (http://1.usa.gov/1r18uaa) won’t have an immediate impact on state utilities commissions that had been taking administrative steps to incorporate the order in rules, particularly reductions in intrastate access rates, said officials at NARUC and several regulatory commissions in interviews. Barring an appeal and a reversal, there could be long-term ramifications, they continued to caution, by weakening the authority of state regulators, while forcing the commissions to deal with the order’s ramifications. Ohio, where Middle Point Home Telephone Co. is seeking state permission to raise residential rates by nearly a half in response to the FCC order, is an early example, said David Bergmann, a National Association of State Utility Consumer Advocates attorney on its 10th Circuit petition for review of that order. State interests or perhaps other losers have indicated an appeal is all but certain (CD May 28 p3).
Rural telcos should be OK despite a possible FCC re-definition of “broadband,” said Guggenheim Partners analyst Paul Gallant in a research note Monday. The FCC recently proposed to redefine “broadband” as 10 Mbps, up from 4 Mbps, in order to be eligible for Connect America Fund money (CD April 8 p1). “Given the tone of the Democratic majority in announcing the proposed increase, we suspect the FCC is likely to raise minimum deployment speeds from 4 to 10 Mbps,” Gallant said. That could lead to higher projected costs and a risk carriers wouldn’t accept CAF Phase II money, but “the FCC is sensitive to this risk and is likely to explore adjustments to other buildout factors” that might make it more “economically attractive” for telcos to accept CAF II payments for broadband buildout, Gallant said. Telcos like CenturyLink, Frontier Communications and Windstream are likely to accept the money, he said. They would start getting those payments in lieu of USF support around July 2015, he said. (See separate report on broadband speeds above in this issue.)
Broadband download speeds of 10 Mbps, as a draft inquiry signals the FCC wants to be the new benchmark instead of 4 Mbps (CD June 4 p1), were described by experts in interviews as sufficient for most residential Internet uses. A notice of inquiry circulating at the FCC asks about raising the benchmark to 10 Mbps, which some called the new 1 Mbps, although others questioned if the threshold needs to increase.
An April 23 FCC-approved item making much-anticipated changes to the Connect America Fund (CAF) remains stuck inside the commission and has yet to be released. FCC officials tell us that commissioners approved the order six weeks ago, but they're still fighting over edits. The order was approved over a partial dissent by Commissioner Ajit Pai and partial concurrence by Commissioner Mike O'Rielly. The order does away with the much-criticized quantile regression analysis formula and makes other tweaks to the 2011 CAF order, which was aimed at part on refocusing USF on broadband deployment (CD April 24 p2).
The FCC would bolster its statutory authority to regulate net neutrality, and help undergird the ability to parcel out USF money for broadband, by deciding for another year that Web service isn’t being sufficiently deployed, said agency and industry officials. They said in interviews last week that a negative finding over reasonable and timely deployment of broadband service in the annual Communications Act Section 706 report wouldn’t likely be required for net neutrality and USF broadband authority. That’s under last month’s 10th U.S. Circuit Court of Appeals ruling upholding FCC authority over broadband USF (CD May 27 p1) and January’s D.C. Circuit remand of net neutrality rules.
Upping minimum download speeds the FCC deems fast enough to be called broadband, as a new notice of inquiry asks about doing in the next broadband deployment report, could have practical consequences for ISPs and commission measurement, said industry executives in interviews Tuesday. Chairman Tom Wheeler’s office on Friday circulated an NOI asking about increasing the minimum download transmission speed from 4 Mbps to 10 Mbps, said agency officials. The annual FCC report measuring the availability of broadband under Communications Act Section 706 appears headed in that direction, based on the justifications presented for such a speed-threshold increase in the draft inquiry, said an agency official. The draft NOI also asks about bigger increases, to as much as a more-than 600 percent increase from the current floor, said agency officials.
Using Title II of the Communications Act to ensure nondiscrimination on the Internet wouldn’t work, would lead to massive litigation and would be a “ticking time bomb” that would reverberate throughout the Internet ecosystem, said panelists at a Thursday FCBA event. It would also raise thorny USF issues as regulators try to determine which high-tech companies should pay into the fund if broadband becomes a telecom service and thus regulated under Title II, some said. But not everyone agreed that Title II classification would lead to the suggested parade of horribles.
The FCC got tremendous deference from an appeals court in response to a challenge of 2011 USF/intercarrier compensation rules, said attorneys in interviews Tuesday. That’s disappointing, some said, but not surprising given the complexity of the issues. The FCC won a sweeping victory Friday as the 10th U.S. Circuit Court of Appeals denied all challenges against the order (CD May 27 p1). As the 45-day clock counts down for motions for rehearing by the full court, at least one VoIP provider is considering a challenge. But because of the complexity of the case, and the deference often granted to the panel that heard the challenge, such requests for rehearing are unlikely to be successful, said attorneys.
The FCC scored a court victory Friday as a three-judge panel held unanimously that petitioners were “unpersuasive” in their “host of challenges” to the 2011 USF/intercarrier compensation order (http://1.usa.gov/1r18uaa). The 31 consolidated petitions for review were denied by the 10th U.S. Circuit Court of Appeals. It’s a validation of the agency’s power to condition the receipt of USF money on the promise of broadband buildout. The decision also affirms the agency’s authority over access charges on all telecom traffic. NARUC General Counsel Brad Ramsay told us he'd be “stunned” if no one appealed this to the Supreme Court, something others predicted (CD Nov 21 p6) after almost five hours of USF oral argument in November.