The FCC appears serious about changing the rules of the Universal Service/ Connect America Fund to allow rural carriers to collect funding to support lines that are used only to deliver broadband service, rather than requiring voice to also be part of the offering. Stand-alone broadband and other USF reforms were the focus of an address made by FCC Commissioner Michael O’Rielly at the spring meeting of WTA – Advocates for Rural Broadband on Tuesday.
WTA was originally known as the Western Telecommunications Alliance but now represents 280 smaller rural telecom providers nationwide, as well as some manufacturers.
“It is absolutely critical to complete the Connect America Fund reforms,” said O’Rielly in prepared remarks for his WTA address, which he shared with Telecompetitor. He also noted that “you have my firm commitment . . . that I will work as hard as possible to deliver the remaining pieces of USF reform, especially as it pertains to CAF for rate-of-return carriers.”
Stand-alone broadband has become an important issue to smaller rural telcos who argue that today’s voice-centric system is becoming increasingly impractical at a time when many people are discontinuing traditional voice service.
The biggest issue with regard to stand-alone broadband, O’Rielly said is “the extent to which the new plan is forward looking.” He also noted that he would not like to see a new broadband subscriber line charge but if necessary would rather have any additional costs be part of consumers’ rates. “Either way consumers will pay, but we should be upfront about it,” he said.
He also noted that combining stand-alone broadband support with interstate common line support could be a way to simplify administration and he asked the audience for input about any obstacles they see to that approach. He added that “I am willing to discuss leaving certain aspects of the current structure in place if there are reasonable limits on both capital and operating expenses in return.”
ROR Program Reforms
The issue of whether to base CAF support on a cost model or on a modified version of the traditional embedded costs approach is a key one as the USF program transitions from a voice focus to a broadband focus. According to O’Rielly, the FCC is leaning toward letting individual rural carriers make the choice of how they want to proceed.
“By splitting rate-of-return into two paths, we have to come up with a fair way to divide the budget between the two, especially since some carriers would receive more funding under the model,” said O’Rielly.
He added, however, that “this differential may not be as large as some might fear because I do not expect that more than 50% of you that would do better under a model will actually opt in.” O’Rielly said he was at a loss as to “why more companies that may do better under the model reject it out of hand.”
For those who do opt in to the model-based approach, O’Rielly said he would like to see a full transition “within a reasonable period of time, preferably a short window.” A proposal made by the Independent Telephone & Telecommunications Alliance, which shaped many of the FCC’s current ideas about a CAF program for ROR carriers, calls for carriers transitioning to model-based support to do so through a phase-in program lasting four years.
To help enable carriers to quickly transition, O’Rielly said he was open to offering “some flexibility on the performance obligations that will apply, in recognition that these areas are higher-cost than most price cap areas.” He suggested that consumers in the highest-cost areas might be served “upon reasonable request and/or at the [4 Mbps downstream /1 Mbps upstream] standard rather than [the 10/1 Mbps standard].”
The CAF Budget
Regarding the CAF budget for ROR carriers, O’Rielly said he was “open to a discussion about a modest use of the reserves to ease this problem.” He added, though, that “it must truly be modest because we also need to ensure that a great portion of funding remains for the even higher-cost areas that will be part of the remote area fund. . . Let’s be clear, although some may think otherwise, the money being held in reserves was not intended as a piggy bank for rate of return carriers.”
O’Rielly touched briefly on the possibility of expanding the CAF contribution base, acknowledging that WTA has advocated that move. He said his concern is that “there are not sufficient controls in place to keep spending in check” and advocated establishing an overall cap that would apply to all Universal Service programs combined – including programs such as Lifeline and E-rate in addition to the high-cost program, which includes separate programs for price cap and ROR carriers.
The FCC has made considerably more progress on the price cap program than it has on the ROR program. Recently the nation’s price cap carriers were advised of the specific amount of CAF funding the FCC is offering them, and the carriers have until August to advise whether they plan to accept the money in exchange for committing to bringing broadband to unserved locations in their service territories.