Although the nation’s largest and smallest telcos have reached agreement on how they would like to see the Universal Service system transformed into a broadband-focused program, cable operators do not share their enthusiasm for the brokered solution announced by the telcos a few weeks ago. In a joint letter sent to FCC Chairman Julius Genachowski today,  industry associations representing small and large cable companies protested the telcos’ proposals.

“We write to you jointly to highlight our shared concern that elements of the incumbent LEC proposals do not satisfy the four key principles that the Commission has established to guide this process,” wrote the CEOs of the National Cable & Telecommunications Association and the American Cable Association in their letter.

The “incumbent LEC proposals” include one from the nation’s six largest telcos, including AT&T and Verizon, and another from groups representing small U.S. telcos, including the NTCA, OPASTCO and the Western Telecommunications Alliance. The two proposals, which are largely complementary, outline a scenario in which the lion’s share of broadband USF funding likely would go to the incumbents.

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The ILEC proposals violate the FCC’s recommendation that USF funds should be awarded on a technologically neutral basis, the cable associations argue. In addition, the cable organizations say the proposals are not fiscally responsible, do not ensure sufficient accountability and are not based on market-driven policies.

With regard to their first point about technology neutrality, the cable associations argue that “competitive and technological neutrality means that support should be awarded to the most efficient provider in a supported area, not simply the one that has been there the longest.” The six large U.S. carriers have recommended that incumbents have a right of first refusal to provide broadband service to areas that cannot get broadband today, while the small telco proposal assumes that incumbents will be the broadband service providers.

It’s more difficult to find evidence to support the cable company’s second argument about fiscal responsibility. The large telco proposal, also known as the ABC Plan, recommends capping the broadband fund at today’s level, while the small telcos ask for an increase of $50 million per year for the next six years for areas where they are the incumbent.

The cable companies’ beef appears to be with the longer-term impact of the proposals. The incumbent LEC proposals, they say, are “explicitly designed to be temporary.”

As for the cable company’s third objection about accountability, the letter states that “any broadband support should be conditioned on clear, enforceable obligations to build and operate networks in supported areas.” The signatories also argue that any access charge replacement mechanism should be limited in size and duration, and that eligibility should be limited to smaller carriers and should require a clear demonstration of need.

The ILEC proposals about how funding should be awarded also come under attack in connection with the fourth objection from the cable companies—that the proposals are not market-driven. “The proposal to provide price cap LECs a right of first refusal, rather than distributing support through competitive bidding, is an unwarranted departure from market-driven policies,” the letter states. The cable companies also advocate a competitive bidding process for awarding funding to areas served by rate of return carriers.

The cable associations also advocate market driven policies to “preserve the core pro-competitive framework governing interconnection and traffic exchange among carriers which has enabled competition to flourish.”

The ACA and NCTA said they would each file comments in response to a recent FCC notice seeking comments about the incumbent carrier proposals.

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