NECA Meets with FCC on Reform Implementation Details

Source: NECA Press Release

NECA announced that it met last week with FCC Wireline Competition Bureau staff to discuss implementation details associated with the intercarrier compensation portion of its Reform Order.

NECA said it discussed calculation of the composite rates for interstate and intrastate rate comparisons for the ICC rate transition, particularly the specific rate elements, revenues and demand units to be used. As a follow-up to its March 27 meeting with FCC staff, it reiterated the need for FCC clarification on the treatment of MAG-related adjustments to line port and transport interconnection charge costs, pursuant to Part 69 rules, resulting from the elimination of local switching support as of July 1, 2012.

The final discussion point was the reporting and use of ICC-related data in the NECA pool settlements process. 

NECA Files Average Schedule Modifications

Source: NECA Press Release

Last week NECA filed further modifications with the FCC to its 2012 interstate average schedule formulas, originally filed in December 2011. These changes are required to conform the December modifications to the Commission’s universal service/intercarrier compensation reform Order.

Since the December filing, NECA and its Industry Average Schedule Task Group have analyzed the Order and corresponding rules for potential impacts on the formulas. NECA determined several additional modifications to the formulas are required to assure that disbursements to average schedule companies will continue to “simulate” those received by a similarly-situated cost company, as required by Part 69 rules.

The April 4th filing reflects changes to switched traffic sensitive formula development methods to conform to the apparent requirement to freeze settlements under that formula. The Order establishes a baseline revenue requirement for each study area, subject to a five percent annual phase-down. Correspondingly, this filing provides a baseline table of revenue requirements for each average schedule study area and defines how those amounts will be used in average schedule settlements.

The filing also modifies calculations proposed in the December filing of Line Port and TIC shift components to common line settlements, and of TIC shift components to special access, to recognize the freeze of amounts in the underlying local switching and transport elements.

The modifications are scheduled to be effective from July 1, 2012 to June 30, 2013. 

Rural Groups Respond to ICC Foes in FNPRM Reply Comments

NRIC: “Maintaining Reasonable ICC Revenues is a Matter of Survival”

The USF/ICC Transformation Further Notice of Proposed Rulemaking covered a wide range of topics in sections L-R pertaining primarily to intercarrier compensation and IP-to-IP interconnection. In the initial comment round, the Rural Associations and the Nebraska Rural Independent Companies (NRIC) asserted that the FCC should refrain from imposing further drastic changes, such as reducing originating access to bill-and-keep and phasing-out the Recovery Mechanism, until the impact of the Order can be fully analyzed. Reply comments were due on March 30, 2012. The Rural Associations and NRIC held their ground on these issues and struck down comments from opposing parties—primarily cable, wireless, and large ILECs.

The Rural Associations (NTCA, OPASTCO, NECA, and WTA) insist that “substantial confusion and disputes already surround [the] interpretation and implementation” of the new USF and ICC reforms, and “It is essential that the FCC gather data and evaluate the impacts of the reforms just adopted prior to taking further steps.” The Rural Associations believe that “Consumers, lenders, investors, service providers, and the Commission itself would all be better served by a ‘data-driven’ reform process.” Furthermore, they argue that rural consumers could be left with “unaffordable and/or substandard services or, in some cases, with no services at all” if any additional ICC reductions are not matched with “a meaningful alternative for revenue replacement.”

The Rural Associations take a no-nonsense tone with their replies to commenters who argue that originating access and other rate elements should be transitioned to bill-and-keep along with terminating access. The Rural Associations name Time Warner, XO Communications, Leap and Cricket, T-Mobile, Bandwidth.com, CTIA, Google, VON, and MetroPCS as the “few parties supporting the hasty reduction of ICC rates beyond measures adopted in the Order.” The Rural Associations argue that these parties disregard the FCC’s commitment to a data-driven process; ignore the mandate of reasonably comparable services and rates; and prioritize their own policy needs over the needs of consumers in high-cost areas.

The Rural Associations likewise reject arguments from CTIA, NCTA, and T-Mobile that the Access Recovery Charge (ARC) and CAF ICC recovery mechanism should be phased out rapidly. The Rural Associations explain, “The few commenters that support a phase-out or accelerated reduction of the ARC and/or CAF ICC mechanism for RoR carriers advance a number of oft-repeated arguments regarding the alleged inefficiencies in the current ICC system or RoR carriers’ supposed above-cost rates. What none of these commenters consider, however, is the critical role that these revenues—which are derived from providing other carriers and their customers with access to ubiquitous and highly reliable COLR networks—have had on the deployment and affordability of basic and advanced service to rural consumers. Here again, such parties rely upon overly broad and self-serving policy pronouncements without pausing for even a moment to even consider the potential quantitative impacts of their proposals (other than the quantitative impact to their own budgets and profit margins).”

NRIC took a no-holds-barred approach with their foes in their reply comments as well. NRIC argued that the largest carriers will benefit the most from the transition to bill-and-keep, and “These same large carriers now seek to expand that windfall by urging the Commission to expand bill-and-keep to originating access, 8YY traffic, and transport.” NRIC explains that the supporters of bill-and-keep for originating access are “wireless carriers and other large carriers that may not have the same commitment as RoR ETCs to serve sparsely populated, rural areas.” NRIC adds, “Maintaining reasonable ICC revenues is a matter of survival” for small companies.

NRIC sees the debate over bill-and-keep for originating access and other rate elements falling on two “crystal clear” lines: on one side, there are companies who are committed to serving rural areas. These companies—which include both RoR and price cap carriers—call for the FCC to continue ICC compensation and evaluate the impacts of the Order before making further changes. On the other side are the companies who do not “have a business priority of serving rural areas.” These companies, NRIC argues, “line up behind elimination of…ICC fees.” NRIC categorizes the two sides as “rural network builders” versus “rural network users.”  

One of the more memorable quotes from the initial round of comments was Verizon’s claim that “there are no incumbent IP network providers.” NRIC disagrees, responding that “Verizon is simply wrong.” According to NRIC, “While the technology has changed, that change does not render their ILEC classification and attendant regulatory obligations obsolete, and Verizon cannot be exempted from such obligations.” Although the explicit topic of transitioning the PSTN to all-IP networks was not directly addressed in the FNPRM, it is directly intertwined with the ICC and IP-to-IP interconnection debates. NRIC weighed in on the PSTN-IP transition, arguing that it should be an evolutionary transition and “Efforts to eliminate existing TDM networks of RoR ETCs at a date certain and thereby eliminate cost recovery would create industry chaos and should be rejected.”

The overall theme of the comments by the Rural Associations and NRIC is that ICC is a critical revenue component that helps build and maintain telephone and broadband networks in rural America. RLECs use this revenue to be “rural network builders,” using NRIC’s terminology. RLEC infrastructure in rural areas is Congressionally-mandated and complies with the goals of the FCC and the National Broadband Plan. If the ICC base continues to shrink with no corresponding and equitable recovery mechanism, rural consumers will suffer and large telecom carriers will profit—but will they invest in rural areas, or will the fundamental principles of Universal Service be forsaken?

CenturyLink Says Proposed Colorado Bill Would Kill Hundreds of Jobs

Source: CenturyLink Press Release

Lawmakers introduced a bill in the Colorado State Senate on Thursday that would slash jobs statewide and risk hundreds of millions of dollars in investment in broadband, CenturyLink said in a press release. Sponsored by Sen. Mark Scheffel (R – District 4), SB-157 seeks dramatic telecommunications reform at the expense of the customers and employees of a single carrier, CenturyLink, the largest telecommunications provider in Colorado.

By preventing CenturyLink from recouping costs to serve rural and high-cost service areas, SB-157 could harm more than 400,000 customers in Colorado who will likely no longer be able to receive affordable service. The bill diverts more than $60 million per year with millions going to international long distance carriers, and creates a multi-million dollar fund within the Governor's Office of Information Technology.  That fund, which lacks any control mechanisms, would reach more than $300 million over the next ten years.

"The High Cost Fund exists to ensure reliable phone service to Coloradans in areas that are very expensive to serve," said Kenny Wyatt, mountain region president for CenturyLink. "Operating and maintaining a network in the most remote parts of our state come at a cost – one that has been funded by the High Cost fund for many years. We must also remember those customers include schools, libraries and health care institutions in those markets. This bill seeks to take support away from our customers and the dedicated employees who serve them."

"We disagree with the premise of this bill, that a massive new government bureaucracy is the best way to produce needed jobs in Colorado. Passage of SB-157 will eliminate good jobs in Colorado, period," said Jim Campbell, regional vice president for legislative affairs for CenturyLink. "That's bad public policy at a bad time."

The drastic change of the regulatory landscape introduced with SB-157 puts at risk Colorado's share of billions of dollars set aside by the Federal Communications Commission (FCC) for broadband development through the Connect America Fund.

ACA Calls on FCC to Reject Telco-Sought CAF Modifications

Source: ACA Press Release

The American Cable Association called on the FCC to retain balance in the new Connect American Fund (CAF) regime and reject modifications that seek to turn back the clock and maintain the old pro-incumbent system.  Instead, the ACA says the FCC should continue to ensure that the CAF delivers affordable broadband service to consumers and businesses located in some of the most difficult communities to reach efficiently and in a competitively neutral manner.

ACA, in an opposition filed yesterday with the FCC, raised objections to some of the proposed CAF modifications, including those proposed by the United States Telecom Association (USTA).  In ACA's view, many of these changes would, if adopted, misallocate resources, distort competition, and delay broadband investment by the private sector.

Following are some of ACA's concerns and proposed solutions:

• USTA requests that there should not be a flash cut withdrawal of Phase I legacy voice support when a reverse auction winner other than the price cap carrier begins to receive Phase II broadband support.  ACA agrees this flash cut may pose a problem for consumers if the recipient of CAF funding cannot immediately provide service to them.  However, USTA's proposal that the FCC reduce support for the price cap carrier over a five-year period would badly skew the competitive landscape in addition to causing the FCC to breach its budget.  Instead, ACA submits that price cap carriers should continue to receive Phase I legacy voice funding in a census block only until it is determined that the census block is served by unsupported competition, an auction winner begins providing service to a majority of the locations in the census block, or a Remote Areas Fund recipient begins to provide service in the very high-cost area.

• USTA urges the FCC to "clarify that delays resulting from circumstances beyond an [Eligible Telecommunications Carrier's] control will toll any CAF broadband build-out deadlines established in the [CAF] Order." Although ACA agrees that such unforeseen delays warrant waivers, USTA's proposal needs to be limited. Limited waivers of the penetration deadlines are not unreasonable if sufficient proof of the problem is provided, as well as evidence that the supported carrier exercised diligence to address the issue. However, such limited waivers should only apply to interim deployment coverage deadlines during the five-year term of support. The FCC should not grant a waiver or extension of the five-year term since this would undermine the potential to ensure support is awarded efficiently and performance requirements meet relevant market conditions. Instead, the FCC should determine at the end of the five-year term whether providing adequate broadband service to any locations not served by the support recipient will require further support (e.g. an unsubsidized competitor can offer service meeting the FCC's performance obligations), and, if so, what is the best competitive method to provide any additional needed support (e.g. auctions, vouchers).