NCTA Begs to Differ With Rural Telecom Industry in Letter to USDA

National Cable & Telecommunications Association (NCTA) CEO Michael Powell isn’t taking kindly to a letter recently sent by several rural telco associations to Agriculture Secretary Vilsack about impending Universal Service reforms.

In a reference to rural telcos in his letter, Powell wrote, “It is disappointing that these companies are encouraging your agency to interfere with the Commission’s implementation of this new regime. Rather than taking this adversarial approach, we encourage USDA to continue its past practice of engaging with the Commission in a collaborative manner.”

The letter that’s gotten Powell so riled up came from the National Telecommunications Cooperative Association (NTCA), the Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO) and the Western Telecommunications Alliance (WTA). In it, the associations asked Vilsack to ask the FCC to decline to act on several proposed Universal Service reforms, including reducing the rate of return, applying and extending new caps, eliminating the “last vestiges” of inter-carrier compensation (ICC) without a clear path for replacement or restructuring, and carving up RLEC serving areas in a way that will make it more difficult to justify new investments or recover existing investments.

Powell argues that Universal Service reforms adopted by the FCC late last year “explicitly recognizes the important role that rural telephone companies have played in bringing voice and broadband services to high-cost areas of the country and it provides those companies significant benefits not afforded to competitors.” These benefits, he said, include:

• $2 billion in high-cost support for rural telcos on an exclusive basis each year—support not available to any competitive provider in areas served by the rural telcos
• A long transition period for changes in inter-carrier compensation and access to a recovery mechanism that is not available to competitive providers
• A waiver process the rural telcos can use if reductions in Universal Service support and ICC would jeopardize continued availability of service to customers

It’s not difficult to see why Powell believes Universal Service reforms favor incumbent telcos. Cable companies had hoped for the opportunity to collect broadband Universal Service support for areas that cannot get broadband today through a reverse auction process. But in its reforms, the FCC gave cable companies that opportunity only in price cap areas where the incumbent carrier declines to provide broadband at a specific level of support. It’s also true that cable companies, unlike the incumbents, are not eligible to collect from an ICC replacement fund as per-minute ICC charges are phased out.

But I’ve got to disagree with Powell’s characterization of the rural telco associations’ letter as an attempt to “interfere” with Universal Service reforms. The purpose of the letter was to address open items related to Universal Service reforms that have not yet been resolved. The FCC specifically asked for industry input on these unresolved items in a notice of proposed rulemaking included with the Universal Service reform order.

In his role as overseer of the Rural Utilities Service, Vilsack is eminently qualified to weigh in on open items that could impact rural telcos—and as I see it, doing so hardly qualifies as an “adversarial” approach.