Rural Telco Groups Call on Vilsack to Intervene in USF Reform

The NTCA, OPASTCO and the Western Telecommunications Alliance have joined forces once again, jointly sending a letter last week to Agriculture Secretary Thomas J. Vilsack asking him to escalate rural telco concerns about certain elements of the Connect America Fund order adopted by the FCC late last year.

In addition the groups asked Vilsack to help prevent the FCC from undertaking several additional reform measures.

“Through a combination of changes to existing USF and ICC programs, the FCC effectively reduced funding available to RLECs, implementing retroactively applicable limitations that ‘pull the rug’ from beneath RLECs that invested on the basis of then-existing federally administered programs, and imposed new requirements on rural carriers,” the letter says.

The letter also notes that “we are already hearing from members whose business plans for 2012 consist primarily of cutting back on operations and/or reducing staff to accommodate the constraints already ordered by the FCC.” It also notes that “few, if any, RLECs plan significant investment in 2012 as uncertainty gathers and lingers.” This “regulatory overhang” is undermining job creation and “the sustainable quality of broadband services in wide swaths of rural America,” the letter argues.

Certain actions proposed in the further notice of proposed rulemaking (FNPRM) included in the Connect America Fund order would “amplify uncertainty,” the rural associations said. These proposed actions include:

• Reducing the rate of return for rate-of-return telcos
• Further reducing Universal Service cost recovery for RLECs
• Eliminating inter-carrier payments without compensatory cost-replacement measures
• “Gerrymandering” RLEC service areas

An NTCA spokesperson said the concerns about gerrymandering pertain to the FCC’s plan to reduce Universal Service support in areas served by an unsubsidized competitor. The FCC should clarify how this plan will be implemented before adopting any further rules in this area, the spokesperson said.

In their letter, the rural telco associations ask Vilsack to provide written input to the FCC in his role as agriculture secretary and as chair of the White House Rural Council. They ask Vilsack to urge the FCC to decline to act on several aspects of the FNPRM at this time, including:

• Reducing the rate of return
• Applying and extending new caps beyond those already adopted in the order
• Eliminating the last vestiges of ICC payments without a clear path for replacement or restructuring
• Carving up RLEC serving areas in a way that will make it “even more difficult to justify new investments or recover existing investments”

The rural telco groups also urge Vilsack to ask the FCC to apply any caps or other limitations prospectively and to establish a firm plan for allocating broadband Universal Service support to rate of return carriers—something the commission declined to do in the CAF order. The FCC should either adopt reforms proposed by the rural carrier associations or, alternatively, should adopt measures that will provide “specific, sufficient and predictable funding” to support service for customers who choose to take only broadband and not voice services. Funding also should support middle mile facilities to connect rural areas with Internet exchange points, the letter states.

The Department of Agriculture oversees the Rural Utilities Service, which has made infrastructure loans to rural telcos for years and has been sympathetic to rural telco concerns. Several months ago the RUS argued that USF reforms had the potential to put the agency’s loan portfolio at risk of repayment.