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Nebraska PSC Advocates States' Role in USF

NPSC Argues State Commissions are “Valuable” and Should Not be Preempted

The Nebraska Public Service Commission (NPSC) submitted comments last week in response to the FCC’s Universal Service-Intercarrier Compensation Transformation Proceeding Public Notice, where it primarily focused on the price cap ILECs’ ABC Plan proposal to preempt state authority in the reformed USF/ICC system.  NPSC argued that parts of the ABC Plan should be rejected, while other parts could be modified.  NPSC refers favorably to the Federal-State Joint Board’s plan, and they do not comment specifically on the Rural Association’s RLEC Plan.

NPSC believes that the proposal to preempt state authority is inconstant with the current laws: “The legal framework of the ABC Plan which uses preemption of state rate setting authority, carrier designation and carrier of last resort obligations, contradicts the explicit federal-state partnership required by the Telecommunications Act.”  NPSC warns that since “many competitive carriers, cable providers, smaller wireless and wireline providers, state governments and consumer advocates” did not participate in the ABC Plan negotiations, the FCC should be wary about accepting the plan without modification.

NPSC urges the FCC not to disregard the Telecommunications Act or Congressional intent, and the Act “expressly reserves state jurisdiction over intrastate rates, terms and conditions.”  Furthermore, “the Commission has no power to act, let alone preempt validly enacted legislation of a sovereign state, unless and until Congress confers power upon it.”  NPSC also worries that states could abandon broadband programs, and preemption of state authority could discourage states from providing additional state-level universal service support.

A more appropriate framework, according to NPSC, would include a coordinated federal-state partnership, not unlike the current partnership between NPSC and the FCC.  NPSC explains that it has an effective partnership with the FCC, and Nebraska has already “implemented access reforms, rebalanced local rates, developed affordability benchmarks, and provides supplemental high-cost Telehealth and Lifeline support though its state universal service fund program.”  It should be noted, though, that Nebraska has been a much more active participant in state-level universal service initiatives and reforms than most states.

NPSC believes that state commissions “can be extremely valuable” to the FCC for the following responsibilities: identifying unserved and underserved areas, prioritizing areas for support, providing supplemental funding, and determining if support is being used efficiently and effectively.  Furthermore, “States have close knowledge of the extent to which broadband is being provided.  States are familiar with the obstacles impeding broadband deployment, [and]…many state commissions are familiar with the operating costs, investment levels, and revenue sources for the carriers.”  NPSC makes a valid point here, and states with a large number of RLECs and significant rural territory arguably have a big responsibility in terms of knowing specific geographic and demographic details as well as unique cost challenges for carriers as a result of local geographic and demographic particulars.  As a rural state with a large number of RLECs, NPSC probably has this point in mind when it recommends that states should determine provider eligibility for broadband support.

Although NPSC generally supports utilizing a forward-looking cost model to determine support in unserved areas, it is concerned that the ABC Plan’s CQBAT model has not been made available for analysis.  NPSC recommends that the FCC publish an open model as well as “results demonstrating support allocated to each state by census block or support area so that everyone may have the ability to quantify the level of universal service support which could be received by broadband services.”

Regarding ICC, NPSC agrees that “the Commission and states need to provide a sustainable framework which reduces the dependence upon an outdated Intercarrier compensation mechanism,” but it is skeptical of the ABC Plan’s methods to achieve this ICC reform goal.  First, NPSC believes that the ABC Plan could be modified “by providing state incentives to reform intrastate rates, increase artificially low local rates, and/or create universal service funds by requiring states to contribute a certain amount per line of recovery to offset intrastate rate reductions.”  Second, NPSC is not in favor of the proposed uniform $0.0007 rate, because “The ABC Plan proponents disregard the actual cost of providing access service and propose to establish a rate that appears to be non-compensatory for small carriers serving high-cost areas.”  NPSC calls the $0.0007 rate “an arbitrary rate for the convenience of the industry rather than one that reflects real costs.”  Third, NPSC believes the ABC Plan’s proposed Access Recovery Mechanism (ARM) is not addressed sufficiently, and the industry should provide more information about the impact on consumer rates.

Overall, NPSC provides a great deal of detailed information in response to many of the questions proposed in the FCC’s Public Notice.  NPSC clearly sees states as having an important role in the future of universal service and intercarrier compensation, contrary to the diminished state role that the ABC Plan parties are pushing.  NPSC provides some thoughtful comments about the need for state regulators for both consumers and carriers, and Nebraska is certainly a great example of a state that has worked very hard to implement its own universal service and intercarrier compensation reforms in the best interest of its constituents.  If adopted, it remains to be seen how the ABC Plan will impact those states like Nebraska which have been progressive in USF reform.  What do you think is the appropriate role of state regulators, and how can state and federal roles be balanced appropriately so that consumers in rural areas will have access to quality and affordable broadband?

NPSC’s full comments are available here.

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