Rural Carriers Urge FCC Not To Tamper With Brokered Solution

In comments filed with the FCC this week,  organizations representing rural telcos urged the commission not to make changes to the brokered USF reform solution that they proposed in combination with six larger telcos.

Signing the comments were representatives of National Exchange Carrier Association, National Telecommunications Cooperative Association; Organization For The Promotion And Advancement Of Small Telecommunications Companies; and The Western Telecommunications Alliance. The comments were made in response to a recent FCC request for feedback on the brokered solution, which aims to transition today’s voice-focused Universal Service program to one focused instead on broadband.

“What may appear to be an immaterial change to policymakers or another party may in fact disrupt a delicate balance of interests and collapse a breakthrough compromise,” the rural associations wrote.

The rural telcos reminded regulators that they made several key concessions in order to achieve consensus with the larger telcos—including accepting a target rate of return of just 10% in place of the 11.25% in use today and accepting steeper reduction in access charges than they would otherwise have wanted.

An important component of the brokered solution was an agreement between the large and small telcos about how they would share broadband Universal Service funding based on the levels currently allocated to the high-cost fund. In the comments filed this week, however, the rural associations made a point of stating that “these funding targets should not be considered ‘caps’ to be adopted and implemented by rule.” Instead, they said the commission “can and should evaluate the proposed mechanisms to ensure they are calibrated to meet the desired funding targets during the budget period—but it should not and cannot adopt a rule that treats these funding targets as absolute caps that artificially constrain whatever funding is necessary under the support mechanisms that are adopted.”

The rural carriers’ comments were largely aimed at defending their previously proposed reforms and defending differences between reforms proposed for large and small telcos.

But there was one new proposal in the comments. The rural carriers are advocating a “Rural Transport Rule” aimed at addressing concerns raised about the potential impact of the brokered solution’s recommendation not to reduce originating access charges.

“If originating access rates are not reduced along with all other ICC rates, then the interexchange carriers upon which [rural carriers] rely to provide retail toll service will likely increase their wholesale rates,” the comments state. “This reaction would force [rural carriers] to either increase their retail toll rates to rural consumers or simply absorb the costs, . . If the latter is chosen, it may force some [rural carriers] to provide this service at a loss. . . Another likely outcome is that some IXCs may choose to simply exit rural markets and no longer provide wholesale services to RLECs.”

The Rural Transport Rule would provide that an RLEC would be responsible for transport “only to a non-rural carrier’s point-of presence when that POP is located within the RLEC’s service area.” The rule would also provide that “where the non-rural carrier’s POP is outside of the RLEC’s service area, the RLEC’s transport and provisioning obligation ends at its existing meet-point within the RLEC service area and the non-rural carrier is responsible for any remaining transport to its own POP.”

In addition, the rural carriers are requesting that the FCC issue a further notice of proposed rulemaking to promptly examine originating access charge reform.

The Rural Transport Rule seems to have been triggered by concerns expressed by a group of small rural telcos that opposed the rural associations’ participation in the brokered USF solution.