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:
- Adequate, non-discriminatory access pricing for both originating and terminating traffic
- No pre-emption of state authority over intrastate rates, including intrastate access
- Shared sacrifice within the industry
- Compliance with the law
- Reasonable cost recovery of existing investment
- No unfunded mandates, explicit or implicit
- 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
- 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