justice150x150Small rural telecommunications service providers experienced a setback Friday when an appeals court upheld Federal Communications Commission authority to transition today’s voice-focused Universal Service program to a broadband-focused Connect America Fund (CAF) and to reform the inter-carrier compensation system.

Connect America Fund Challenges
Several parties including NTCA- The Rural Broadband Association had challenged the CAF order issued in 2011. The NTCA argued that three provisions of the CAF order were inconsistent with telecom law, including provisions that:

  • Mandate an ultimate price of zero for all switched access and reciprocal compensation services
  • Impose retroactive and dynamically changing caps on USF-supported costs
  • Blur the lines between regulated and non-regulated operations

According to a New York Times report, the U.S. Tenth Circuit Appeals Court rejected challengers’ arguments because those arguments were “either unpersuasive or barred from judicial review.”

One FCC commissioner – Mignon Clyburn – issued a statement praising the decision. “Voting to approve the comprehensive reform of universal service and inter-carrier compensation continues to be one of my proudest moments at the FCC,” said Clyburn. “The reforms are changing the lives of millions of Americans who will receive broadband for the first time.”

NTCA’s Response
NTCA Chief Executive Officer Shirley Bloomfield called the appeals court decision “disappointing.” She noted that “the court decision could have helped to address several still lingering concerns with respect to inter-carrier compensation changes and the establishment of more proper and sufficient universal service budgets.” She added, however, that the NTCA will now look to address those matters “through further engagement and potential course corrections in ongoing conversations with the FCC and Congress.”

Additionally, she said “certain of the court’s findings – such as the states’ retaining the authority to define network edges for interconnection and the need for the FCC to re-examine its budget in a few years – could be helpful in those conversations.”

Bloomfield pointed to the elimination of quantile regression analysis caps and the reinstatement of safety net additive support as examples of how NTCA has been able to achieve several key course corrections since the CAF order was adopted.