The FCC appears poised to overhaul rural telco USF subsidies in coming days, given commissioner public statements and agency voting procedures confirmed by two staffers. Chairman Tom Wheeler said recently at a Senate hearing there are three votes -- a majority -- for a draft order that would revamp rate-of-return carrier high-cost USF support mechanisms for the broadband era. Under internal FCC rules, the remaining two commissioners have until Wednesday -- 12 days after March 4, which was three weeks after the draft circulated -- to vote on the item, though either one could obtain a one-week extension until March 23, an agency spokesman and an official told us Friday.
The FCC proposed an industry USF contribution factor for Q2 of 17.9 percent of end-user interstate and international telecom revenue, said an Office of Managing Director public notice Thursday in docket 96-45. Industry analyst Billy Jack Gregg had predicted the Q2 factor would fall to 17.9 percent from Q1's 18.2 percent (see 1603020012). Total USF program support is projected to be $2.2 billion in Q2, with the high-cost fund projected to require $1.125 billion of that, the PN said. The proposed contribution factor will be deemed approved if the agency doesn't act on it within 14 days, it said.
FCC reform of the USF high-cost program for rate-of-return carriers was based on an unusual level of collaboration (see 1602190056), FCC Commissioner Mike O’Rielly said at a Faegre Baker lunch Tuesday. “At my request, a number of Commissioners worked extensively with the requisite trade associations in order to fully understand their concerns and the impact of any changes,” O’Rielly said, according to his written remarks posted by the agency Wednesday. The event was closed to the news media. “I also traveled to a number of places around the country to hear firsthand from carriers," said O'Rielly. "After almost a year of discussions, I believe we have a solid framework that provides regulatory certainty for rate-of-return carriers for years to come.” Compared with some of the other areas tackled by the agency, rate-of-return reform was “one of the more inclusive procedural efforts that I have been part of at the Commission,” he said. The order addresses “antiquated rules” to allow reimbursement for stand-alone broadband, he said. The order also imposes build-out requirements and other strictures to ensure money is “wisely and efficiently spent, while providing transitions where appropriate,” he said. O’Rielly had less good to say about two items expected to get a vote at the agency’s March 31 open meeting. Lifeline program changes (see 1603080024) must include controls on the size of the program, O’Rielly said. “I have made clear that I’m willing to support expanding the program to cover broadband but, in return, the Commission must adopt a reasonable overall budget at the same time,” he said. “That is non-negotiable.” O’Rielly also raised concerns about an expected NPRM on privacy rules for ISPs (see 1603080067). The net neutrality order is still pending before the courts, he said, so FCC authority to act is in question. “The Commission doesn’t understand how its new burdens will impose unnecessary and costly compliance on broadband providers,” he said. “Who does the Commission think is going to pay for this? Additionally, by all measures the Commission is ill-prepared to address the complexity of privacy matters, lacking the history and necessary expertise.”
NARUC and TracFone voiced serious concerns about an FCC draft order to revamp the Lifeline low-income USF support program outlined Tuesday (see 1603080024 and 1603080054). NARUC said a proposal to bypass states in designating Lifeline broadband providers would invite abuses. TracFone said proposed minimum standards would effectively require co-pays that many low-income consumers couldn't afford. Others, including Comcast, welcomed the Lifeline proposals. The cable company applauded the commission’s effort to modernize the program to support broadband and streamline administration.
A proposed $2.25 billion Lifeline USF budget became an immediate flash point after an FCC draft order circulated Tuesday that would extend the program’s support for low-income phone service to broadband coverage and streamline consumer eligibility verification duties and provider participation requirements (see 1603080024). The draft order, which is expected to be considered at a March 31 meeting, would index the budget to inflation and require the Wireline Bureau to notify the FCC when program funding reaches 90 percent of the budget and analyze the causes of the spending growth, “followed by Commission action within 6 months,” said an agency fact sheet.
A new draft FCC reauthorization bill from Senate Commerce Committee Chairman John Thune, R-S.D., no longer includes some process overhaul provisions that he floated last year. Thune announced last week that he wants to mark up the FCC Reauthorization Act in the coming weeks, and a new nine-page draft bill text is circulating. A Commerce Committee aide told us the bill could be marked up as soon as next week. The tentative markup date is March 16, a telecom industry lobbyist confirmed.
The FCC circulated a draft order that would extend Lifeline USF support to broadband coverage and to streamline administration of the program that subsidizes low-income telecom service, as expected. The draft is expected to be considered at the agency's March 31 meeting, as Communications Daily first reported. The order would allow Lifeline support to be used for stand-alone broadband or bundled broadband/voice packages in addition to current voice service. The order would phase out the support for stand-alone mobile voice service and phase in broadband minimum standards over the next few years, said an FCC fact sheet.
The Benton Foundation urged the FCC to expand Lifeline USF support to broadband. It also asked the commission either to allow non-eligible telecom carriers to provide Lifeline service or to ease the ETC designation process by forbearing from certain eligibility requirements and establishing a national ETC process. The requests came in a letter posted Friday in docket 11-42 by the group's attorneys at the Georgetown Law Institute for Public Representation.
Sprint supports expanding the Lifeline program to pay for broadband, but the FCC shouldn't forget about voice-only subscribers, carrier representatives said in a meeting with Wireless Bureau Chief Jon Wilkins and others at the agency. “While recognizing the importance of Lifeline support for broadband services, Sprint emphasized the fundamental need to maintain a voice-only Lifeline service option and described the significant impact an end-user co-pay would have on participation rates by the most vulnerable consumers,” Sprint said in the filing posted filing posted Thursday in docket 09-197. Sprint also issued a warning on the cost of providing broadband service. “Given the financial constraints under which the federal Universal Service Fund operates and the economics of providing broadband service" a "broadband-centric Lifeline program which includes overly ambitious performance standards will almost certainly involve out-of-pocket payments by Lifeline subscribers, both for monthly service and for the purchase of a broadband-capable device,” the carrier said. “There is no support in the record that a monthly subsidy of $9.25 would cover the cost of providing broadband service.”
The FCC seems disinclined to cap or control Lifeline subsidies as part of an effort to modernize the USF program supporting low-income telecom service, Commissioner Mike O’Reilly said in a blog post Thursday. “Failing a major change in direction, the FCC is preparing to massively expand the size and scope of the Lifeline Program without the necessary inclusion of a hard budget or financial constraints,” he said. “Such irresponsible action will balloon a program plagued by waste, fraud, and abuse and result in higher phone bills for every American -- including those already struggling in the current economy. In sum, it’s a recipe for disaster, and I can’t and won’t be part of it.”