A group of small rural telcos is hoping to prevent the broader rural telecom industry from endorsing a Universal Service Fund and inter-carrier compensation reform proposal expected this week from the U.S. Telecom Association and large U.S. telcos including AT&T and Verizon.

“Our industry finds itself in an emergency situation where our trade associations will decide this week whether to endorse a USF/ICC deal that could irreparably harm small telephone companies nationwide and provide a windfall to AT&T and Verizon,” says a letter signed by 16 rural telcos and the Rural Broadband Alliance circulating among rural telcos yesterday.

The signatories urge their peers to join them in urging the industry not to back the USTA proposal. In a letter to be sent to key rural associations, opponents of the USTA proposal argue that fair USF/ICC reform must meet at least seven basic tenets:

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  1. Adequate, non-discriminatory access pricing for both originating and terminating traffic
  2. No pre-emption of state authority over intrastate rates, including intrastate access
  3. Shared sacrifice within the industry
  4. Compliance with the law
  5. Reasonable cost recovery of existing investment
  6. No unfunded mandates, explicit or implicit
  7. Cost recovery fairly allocated between interstate and intrastate jurisdictions

In a position paper titled “Why the USTA-Industry Deal is Bad for Rural America,” the opponents of the proposal detail why they believe the expected proposal will fail to meet each of these seven tenets.

Of particular concern are access charge reforms that are expected to be part of the proposal.

Those reforms are expected to involve only terminating access charges. But by not addressing originating access, the position paper argues that “Large companies will abandon retail long distance in rural markets or charge non-competitively high rates as underlying carriers for rural companies’ long distance service. Rural companies will thus lose originating access, without receiving replacement funding.”

On the other hand, the opponents argue that proposed reductions in terminating access charges will generate “billions of dollars of windfall cost reductions to large companies like AT&T and Verizon. Rural carriers, in contrast, would experience sweeping revenue reductions.”

Although the USTA proposal is expected to have a provision for a recovery mechanism, the position paper expresses concern that funding for that mechanism may be insufficient. And even if the FCC makes money available, the paper notes, “there is no guarantee of long term funding.”

The paper also argues that while rural carriers’ access revenues would be “drastically reduced” under the anticipated proposal, the proposal Is not expected to reduce the principal intercarrier revenue sources for large carriers, including tandem service, wholesale toll services and wireless roaming fees.

As for legal compliance, the position paper argues an anticipated recommendation to increase the subscriber line charge pre-empts state authority over local rates.

The USTA proposal is also expected to recommend various changes that would shift responsibility for administering the ICC and USF programs to the federal government, the position paper observes. Accordingly the position paper argues that by supporting the USTA plan, the rural telecom industry would be “abandoning state regulators” and could face “substantial fallout from such an action.”

In addition to the Rural Broadband Alliance, companies signing the letter urging other telcos to oppose the anticipated proposal include:

  • Great Plains Communications
  • Consolidated Telephone Company
  • Matanuska Telephone Association
  • Home Telephone Company
  • Farmers Mutual Cooperative Telephone Company
  • The Northeastern Pennsylvania Telephone Corp.
  • Pine Belt Telephone and Pine Belt Cellular
  • Farmers Telephone Cooperative
  • Lincolnville and Tidewater Telephone
  • Northeast Nebraska Telephone Company
  • EATEL
  • Poka Lambro Telephone Cooperative, Inc.
  • K&M Telephone Company, Inc.
  • Chickamauga Telephone Company, Mound Bayou Telephone Company, Bruce Telephone Company, and Fulton Telephone Company
  • Hargray Communications
  • American Broadband, NE & MO

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7 thoughts on “Rural Telecom Industry Consensus Difficult to Find Regarding USF-ICC Reform

  1. Could rural telcos survive with a racheted phased down pricing of originating and terminating access rates? It seems to me by having expensive long distance access rates, the rural guys are asking for originating bypass (Vonage, 8X8, Skype) and terminating bypass (phantom traffic). I believe some of the wireless guys are playing the "no long distance" card against the use of wireline which may further the rural telco's problems.

    It is like keeping buggy whips at $35 each, when the demand is fading into the world of none.

  2. Per E.D. – the problem is the investments and costs are still there. No one wants to address that. The costs aren’t going anywhere – how do they get paid for?

  3. Does the Rural Broadband Alliance and these signatory companies reasonably believe that the rural industry can get Congress or the FCC to adopt a plan that would include their seven basic tenets? Does their definition of "reasonable cost recovery on existing investment" mean "don't change my cost recovery for a long time?" Do they believe the size of USF will be substantially increased? Are they prepared to sue the FCC or do they believe that there is enough Congressional influence to increase spending so their tenets are met at the same time Universal broadband is deployed in a reasonable amount of time? I absolutely recognize why they are opposed to the plan. They are correct on many points from a fairness and Universal Service perspective. There does not seem to be an equal level of shared sacrifice. I'm afraid the influence of large corporations on our political processes is the world we live in. What's plan B?

  4. The legacy of the buggy whip continues. I can buy them still today.

    The issue is that when customers want service it may be difficult to purchase because of the changes that will be required under the new rules. Long Distance is goig to IP, thus fax machines do not work. So a customer wanting to us fax service will find it difficult. The idea of universal service at affordable rates is out the door. Universal service is gone because there is no legitimate proposal that sustains universal service. Affordable rates is always in the eyes of the payer, however, rates are going up and most companies will have to increase rates even higher to sustain even minimal operations.

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