Letter to FCC Requests Immediate Acknowledgement and Response

Nineteen Senators backed declarations by the RLEC industry about the unintended consequences of the FCC’s USF/ICC Transformation Order, scoring rural carriers some much-needed encouragement. The Senators sent a letter to FCC Chairman Julius Genachowski on April 3, 2012 stating, “Unintended consequences on all carriers serving in rural areas can and should be alleviated by a formal FCC clarification that the Order will not be implemented in a manner that perpetuates unintended consequences.” The Senators ask the FCC to “be continually mindful of the need to encourage rural communications network investment,”—investments which have been made “in accordance with standards established by the Rural Utilities Service and in line with national policy objectives established by Congress in the Communications Act.”

The Senators note the importance of balancing the costs of the fund with the need to support rural carriers, and they list five areas of particular concern. They request the FCC to clarify:

1. It will not implement additional reductions in USF and ICC support pursuant to the Further Notice until the implications of the reforms and reductions adopted in the recent Order can be properly evaluated and understood;
2. It will ensure that lawfully incurred investments and operating expenses are not jeopardized by retroactive rule changes;
3. It will not deem any investments or expenses unlawful, imprudent or not ‘used and useful’ when such investments have been made in accordance with federal agency standards and mandates;
4. It will adopt a clear-cut and non-burdensome waiver mechanism that will allow cost recovery for carrier investments made in line with federal standards and mandates;
5. It will adopt a sustainable and predictable broadband oriented Connect America Fund for rural areas served by smaller rural carriers as it did for those served by larger carriers.

At the conclusion of the letter, the Senators “ask that the FCC immediately acknowledge and appropriately respond to the outline above to ensure all rural consumers are able to fully participate in the universal communications network Congress has envisioned through a long history of statutory actions in this regard.”

The letter hits at the core of the RLEC industry’s concerns with the Order and especially the FNPRM. Of utmost importance is that the FCC takes the necessary time to evaluate the impacts of the Order before adopting additional cuts and caps to high-cost support—the Senators clearly get this. The added emphasis on wanting an immediate response from the FCC is certainly promising—I know many of us will be anxiously awaiting the FCC’s response, and hoping it will be more comprehensive than some FCC responses to Congressional members have been on USF reform and other issues (as an example, Genachowski recently responded to Congressional concerns about rural call termination issues by simply telling them to read the February 6 Declaratory Ruling).

NTCA members played a vital role in this letter, as these concerns were communicated to members of Congress at the Legislative and Policy Conference last month. NTCA ceo Shirley Bloomfield released a statement about the letter, stating: “We welcome the interest of these Congressional leaders in ensuring that the substantial changes to essential Universal Service Fund (USF) and intercarrier compensation (ICC) support mechanisms announced last fall by the FCC will be implemented correctly and well-understood, prior to adopting additional changes that may reduce such support even further for small rural carriers. We’re encouraged that these leaders understand the vital role that USF and ICC support mechanisms, together with Rural Utilities Service and other financing, play in making sure that consumers have access to affordable advanced communications services in hard-to-serve areas, and that rural networks can be upgraded over time, as federal law mandates.”

Bloomfield continued, “These letters to Chairman Genachowski demonstrate the clear support in Congress for ensuring that small, community-based telecommunications providers can continue to attract capital, make sound investments in sustainable broadband networks, and offer advanced services that create jobs and bring needed economic development to our nation’s rural communities.”

Senator John Tester (D-MT) signed the letter, and commented on his website, "Montana needs a broadband plan that offers our rural and frontier communities the same economic opportunities as urban areas. Access to broadband service means access to new and bigger markets for Main Street businesses and job opportunities. That's why I'm fighting to make sure any national plan doesn't discriminate against Montana and rural America." In addition to Sen. Tester, the bipartisan letter was signed by Senators Harkin (D-IA), Grassley (R-IA), Begich (D-AK), Thune (R-SD), Hatch (R-UT), Barasso (R-WY), Chambliss (R-GA), Hoeven (R-ND), Conrad (D-ND), Johnson (D-SD), Risch (R-ID), Crapo (R-ID), Baucus (D-MT), Merkley (D-OR), Levin (D-MI), Enzi (R-WY), Lee (R-UT), and Inhofe (R-OK).

And now we wait for the FCC to respond…

Commissioner McDowell and Representative Young Share Empathy, Encouragement

In D.C., March brings cherry blossoms, warm weather, and hundreds of representatives from rural independent telecommunications companies for their annual pilgrimage to Capitol Hill and NTCA’s Legislative and Policy Conference. This year, RLECs brought an urgent message to DC: the FCC made some errors in the USF/ICC Transformation Order, and the impact of the reforms must be analyzed before further cuts and caps are implemented.

FCC Commissioner Robert McDowell participated in a Q&A with NTCA ceo Shirley Bloomfield on Monday, March 19 where he empathized with RLEC concerns—“I understand the fear and anxiety,” he said. However, he also said that “there is a lot you should be appreciative of” regarding the new USF/ICC rules, for example there are no flash cuts and changes are phased in gradually. He also stressed, “If your company looks like it won’t survive, there is a clear waiver process.” McDowell encouraged RLECs to stay in touch with the FCC and share information, and “the more specific the data, the better.”

McDowell’s most notable comment was that the contributions side of USF should have been addressed in tandem with the other reforms—McDowell has made this clear numerous times, but he appears to be the only commissioner right now who is truly committed to contributions reform and he understands the urgency of this monumental task. McDowell explained that reforming USF and ICC is “like fixing a watch, each part touches all the others, so you have to fix them it all at the same time.”

Moving on from USF/ICC, Bloomfield asked McDowell several questions about the wireless and video markets. McDowell stated, “I think wireless is the future,” and “we certainly need more spectrum” but it will be years until meaningful auctions are ready. He also discussed how the 700 MHz auction was supposed to be structured so that rural carriers could have opportunities to participate, but in the end the high prices “undermined rural carriers in particular, all in the name of being pro-competition and pro-consumer.” In terms of video programming, Bloomfield commented that there appears to be an assumption at the FCC that rural carriers make a significant profit from video service, but in reality the increasing cost of programming prevents many RLECs from seeing much profit on video. McDowell responded that the prices indeed have been increasing, and sports programming in particular has become very expensive. However, he explained that the FCC’s authority over programming costs and retransmission fees is quite limited. He recommended that RLECs continue to bundle voice, video and broadband services.

In his final words of wisdom, McDowell talked about the transition to broadband and urged RLECs to “be nimble, [and] try to adapt.” He suggested that RLECs provide a versatile range of service offerings, and he made clear his stance on usage-based pricing. McDowell stated that telcos should have the “freedom to charge more for bandwidth,” and “the more you use, the more you pay.”

On Tuesday, March 20, Representative Don Young (R-AK) made a short, powerful, and inspirational speech before the RLEC representatives headed off to meet with their members of Congress. Rep. Young proclaimed, “I know what rural means and I know the importance of Universal Service.” He also said that Congress doesn’t widely understand the concept of Universal Service, which is simply to “serve everyone in America.” Rep. Young very poignantly argued that universal service progress may be lost as a result of the FCC’s actions.

One year ago, RLECs attending NTCA’s Legislative and Policy Conference brought an urgent message to the Hill: the FCC must ensure that RLECs’ Universal Service needs are met in the then-unwritten rules. Since last year, RLECs filed hundreds of comments and met with the FCC countless times to provide data and input, which the FCC largely ignored in the Order and FNPRM. The Order gives nothing to RLECs except cuts and caps, and there is no concrete Connect America Fund for RLECs. In one year, hopefully we will be able to look back and say that the RLEC message was finally heard and respected—both at the FCC and Congress.

It's About Time!

the FCC has finally released a Declaratory Ruling on February 6, 2012 addressing the much-maligned, pervasive, and highly damaging rural call termination problems. The Declaratory Ruling builds on pervious FCC actions that prohibit call blocking, chocking, restriction and degradation by clarifying that carriers who fail to ensure delivery of calls to high-cost rural areas, or fail to ensure that intermediate least-cost routers deliver calls, could be in violation of Sections 201, 202 or 217 of the Communications Act. Such actions constitute “unjust and unreasonable discrimination in practices, facilities or services.” The FCC adds, “This is particularly the case when the problems are brought to the carrier’s attention by customers, rate-of-return carriers serving rural areas, or others, and the carrier nevertheless fails to take corrective action that is within its power.”

The FCC acknowledges the ongoing complaints about rural call termination problems submitted by rural carriers, the rural associations, state commissions and NARUC; and the FCC “[takes] these reports very seriously, given the longstanding obligations of telephone carriers, and the significant economic and public safety concerns that these issues raise.” The FCC continues, “We are particularly concerned about problems that may adversely affect the availability of reliable telephone service to consumers, businesses, and public health and safety officials in rural America.”

The FCC clarifies and details how certain actions that prevent calls from reaching their rural destination constitute a violation of various sections of the Act, where a single violation could fetch a forfeiture penalty of $150k or up to $1.5m for a single act or failure to act:

• Section 201: Carriers who knowingly prevent calls from reaching rural areas (or should know the calls are not being completed) “may be liable for a violation of section 201 of the Act.” Furthermore, carriers may be in violation of Section 201(b) if they provide false or misleading information, such as a “your call cannot be completed as dialed” message when, indeed, the call can be completed as dialed.
• Section 202: The FCC explains, “Adopting or perpetuating routing practices that result in lower quality service to rural or high-cost localities than like services to urban or lower-cost localities (including other lower cost rural areas) may, in the absence of a persuasive explanation, constitute unjust or unreasonable discrimination in practices, facilities, or services and violate Section 202 of the Act.”
• Section 217: Carriers are responsible for actions of their employees and agents, and carriers are therefore liable for the actions of underlying providers, like least-cost routing services, engaged in a violation.
• Section 255: Failure to deliver calls to high-cost rural areas, and failure to remedy the situation, could constitute a violation of rules requiring access for individuals with disabilities.

RLECs have expressed concern that the FCC may just attempt to let the transition to bill-and-keep solve rural call termination problems without any additional intervention and enforcement, and it appears as though this will not be the case… at least, not entirely. The FCC does contend that rules adopted in the USF/ICC Transformation Order will address “the root cause of many rural call termination problems” by eventually eliminating “incentives for cost-saving practices that appear to be undermining the reliability of telephone service.” However, the FCC agrees with a NARUC argument that the ICC rules may not be enough, and it is therefore appropriate “to limit the adverse impacts of these rural call completion problems on consumers in the near term.”

NTCA has worked diligently to keep the FCC informed about rural call termination problems since last year; and the association is pleased with the FCC’s Declaratory Ruling. NTCA ceo Shirley Bloomfield commented, “Rural telecom companies and the customers they serve deserve to have quality service and consistently completed calls. We believe this is a terrific first step and indicates a great level of commitment by the FCC.” NTCA director of legal and industry Jill Canfield, who was also a panelist at the FCC’s Rural Call Termination Workshop in October where she called for stricter enforcement of call completion violations, added, “This ruling speaks to our concerns about practices that adversely affect the reliability of the communications network. There are public safety, commerce and public health implications when the system does not work.”

What do you think of the FCC’s Declaratory Ruling? Will it solve the rural call termination problems?