The intended goal of a Federal Communications Commission USF reform workshop last Wednesday was to explore how the federal and state governments might split up the task of implementing Universal Service program reforms and what each entity’s long-term Universal Service responsibilities should be. But since those reforms are still being resolved, some of the discussion drifted off the intended topic and less seemed to get accomplished than at two previous workshops the FCC has held recently about Universal Service reform.

Nevertheless, there was some useful discussion on at least three important topics—what form inter-carrier compensation (ICC) reform should take, what–if any–carrier-of-last-resort (COLR) obligations should be imposed and what form the long-term broadband support plan should take. Although the latter topic has received little attention, it could have more impact on small telcos than any other element of the reform agenda, considering that most small telcos already have deployed broadband throughout most of their serving area.

Since that topic is so important, let’s start with it.

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Ongoing broadband support

Although the FCC appears set on using a reverse auction to award funding to areas that can’t get broadband today,  state and federal officials appear to be open to using a different method to award ongoing support for areas that already have broadband, including some type of cost model.

Several people noted that low population density is the best, or one of the best ways of determining which areas will require ongoing support. At least two people pointed to Nebraska as one state that has done a good job of reforming Universal Service and ICC at the state level—and they said Nebraska determines which serving areas are entitled to support based on population density. Even a non-traditional carrier representative–Lisa Scalpone, general counsel for ViaSat/Wild Blue–advocated a population density-based approach.

Scalpone also suggested that rather than focusing on the cost of delivering a specific broadband speed, regulators should focus on what applications should be supported and then determine what is needed to support those applications.

The idea of providing support to an individual rather than a carrier also came up, but regulators don’t seem receptive to that idea, perhaps because, as someone pointed out, a service provider’s costs don’t go away just because someone switches to a different type of broadband service.

COLR obligations

With today’s voice-focused Universal Service plan, service providers are required to serve everyone in their territories.  But one of the topics up for discussion is whether that requirement should be extended to broadband.

If that requirement is carried over “it can’t be an unfunded mandate,” argued Edward Krachmer, director and regulatory counsel for Windstream.

One idea that was discussed in a previous workshop is to impose COLR obligations only up to a certain cost level, beyond which the customer would be required to pay an installation charge.

Peter Bluhm, principal of the National Regulatory Research Institute, argued that COLR obligations are no longer appropriate. He pointed to the example of a real estate developer who brings in a competitive carrier to serve customers in a new development and does not want the incumbent to provide service there.

ICC reform

Methods for phasing out the per-minute access charges that carriers pay for terminating calls to one another’s customers were debated at a previous USF workshop. But because the ICC system is administered at the federal and state level, it was on the agenda again for Wednesday’s meeting.

Once again, small telcos expressed concern over the idea that the FCC might consider a separate per-minute termination fee for VoIP providers that might be as low as $.0007 per minute.

“Triple-o seven will devastate broadband for companies such as ourselves,” said Ken Pfister, vice president of strategic policy for Great Plains Communications. Pfister argued that if the FCC makes that move, non-VOIP carriers will claim their traffic is VoIP so that they can get the lower rate. In comparison, Pfister said his current rate (I believe he was talking about his intrastate rate) is 2.08 cents per minute.

Everyone “will declare all their traffic to be zero rate,” said Pfister. “It will lead to a flash cut.”

Here, too, some participants pointed to Nebraska as a state that did a good job of reforming its Universal Service and inter-carrier compensation system. In order to reduce small telcos’ reliance on ICC revenues, the state raised local rates to $20 or $22—a move that drew few protests, Pfister said.

Kathleen Abernathy, a former FCC commissioner who is now chief legal officer and executive vice president of regulatory and government affairs and public affairs for Frontier Communications, pointed to Georgia as an example of another state that did a good job of reforming its inter-carrier compensation system. One of the moves that state made was to create an access charge replacement fund, Abernathy said.

 

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