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Thursday
Sep152011

Rural Associations Urge FCC to Reject Last-Minute USF “Wish Lists”

The Consensus Framework is an Opportunity for Pragmatic and Meaningful Reform

In reply comments filed last week, NTCA, OPASTCO, WTA and NECA encouraged the FCC to adopt the RLEC Plan without modification, and reject various alternative plans filed in this last comment cycle on USF/ICC reform. The Rural Associations argue that the last-minute alternative plans “provide little, if anything, in the way of detail and even less in terms of how consumers would benefit by their enactment,” and are based mostly on “broad policy statements recast from earlier phases of these proceedings.” The Rural Associations believe that the FCC has in its hands a reasonable, realistic and practical framework for thorough reform with the Consensus Framework (RLEC and ABC Plans), and “The time for concepts and theories is long past. Reform will go nowhere if the industry continues to spiral around high-level policy debates and the grinding of ‘old axes’ in lieu of delving into the gritty details that are essential to complete the reform process.”

The Rural Associations explain that the RLEC Plan has received widespread support, and it presents a much less radical solution than some of the alternatives which propose hard caps on the fund, reverse auctions, and total elimination of access revenue. Furthermore, the Rural Associations explain that “The Consensus Framework represents a detailed, balanced and pragmatic approach to comprehensive reform that is capable of getting the Commission and industry beyond the seemingly endless stalemate.”

Although the Consensus Framework has been criticized by cable, wireless, and other industry sectors as being far from an industry consensus, the Rural Associations make the important distinction that “some of the largest contributors to the USF as well as those who depend the most upon the Fund” participated in the negotiations. In other words, the destiny of the Fund should probably be determined, to some degree anyway, by those companies who keep the fund in existence and use it successfully, like RLECs. At the very least, RLECs should have a primary say in how RLEC funding is distributed, and “The RLEC Plan seeks to preserve the past and present successes of RLECs in bringing quality, affordable voice and broadband services to their high-cost markets.” In addition to maintaining stability for RLECs, the Rural Associations also explain that the RLEC Plan abides by the FCC’s USF/ICC reform guiding principles of responsibility, modernization, fiscal accountability and market-driven policy.

The Rural Associations point to the National Cable and Telecommunications Association’s “Amended ABC Plan” and the Google, Skype, Sprint-Nextel and Vonage “Tech/User Plan” as two examples of late filed, “potentially dangerous” proposals.  The Rural Associations assert that NCTA’s proposal to reduce rate of return to 8.5% and eliminate it completely in 2019 “provides no analysis whatsoever of the impact of this proposal on consumers or the USF itself.”  Throughout this proceeding, the Rural Associations have advocated “methodical and surgical” reforms, and they warn the FCC that “A particular policy approach that may seem ‘visionary’ or ‘progressive’ could turn out to be disastrous if put into practice without a thorough understanding of its implications.”

By contrast, the Rural Associations submitted the RLEC Plan months ago, and the FCC and industry have had ample time to consider the benefits, consequences and estimated short- and long-term impacts of an entire suite of reforms, from the size of the fund to access rates to arbitrage.  The opportunity for heavy-duty analysis does not exist with the late-filed plans, nor do most of the alternative plans cover the entire range of USF/ICC reform topics in great detail.  The FCC’s Public Notice, which specifically asked questions about three alternatives plans (RLEC and ABC Plans, and the Joint Board Plan) should have been a fairly clear hint that the time was up presenting new, radical plans—some members of the industry are even speculating that the FCC had already begun writing the final rules before the Public Notice was released last month.  The Rural Associations recognize that at this stage in the game, it is time to focus on how the plans outlined in the Public Notice will work for the industry at large: “In lieu of leaping into the unknown based upon undeveloped proposals and last-minute plans for purportedly-groundbreaking (and equally damaging) policy shifts, the Commission should adopt the RLEC Plan, as modified by the Consensus Framework.”

The question now is will the FCC accept the Consensus Framework “as is,” or will it be modified in light of the opposition that has emerged in this comment cycle?  The Rural Associations believe that many of the suggested modifications are “unworkable” and would significantly threaten the “delicate balance” that was achieved through ILEC-RLEC negotiations.  One particular area where the Rural Associations are not willing to budge is the proposed $4.5b Fund budget.  Cable industry commenters are calling for a “hard and durable permanent cap” on the fund; but the Rural Associations insist that the $4.5b budget, which could be modified as needed in the future, is a “far more effective approach for driving and demanding efficiency in the reform and operation of these programs, while avoiding the legal quagmire that would arise in adopting a firm (and potentially permanent) cap notwithstanding the statutory mandates.”

The Rural Associations argue that a hard cap is contrary to the Telecommunications Act, it would discourage new investment, and challenge the ability of carriers to recover current investments in broadband networks.  They assert that Comcast provides no data or evidence to illustrate that a hard cap at today’s funding levels will be sufficient in the future, and imposing a hard cap would require a separate rulemaking proceeding which could take years.  Furthermore, a permanent cap may have “unintended and unforeseen consequences,” since nobody can predict with certainty what the future holds.  Rather, “All that anyone can know at this point is that budget targets are more flexible than permanent hard caps, and can be much more readily modified to address economic and industry changes (probably substantial) that are likely to take place at any given point in the future.”

Some critics of the RLEC and ABC Plans believe the Consensus Framework solutions are too focused on the wireline industry, despite the fact that the wireline industry market share is under constant attack from wireless and cable.  However, the Rural Associations insist that the RLEC Plan is not “backward-looking.” They explain, “It constitutes a pragmatic way to preserve and promote access to high-quality, affordable broadband services that many rural consumers enjoy only because the existing High Cost program for RLEC service areas has been so effective.”

While it may have been exciting for some members of the industry to draft radical and completely transformative proposals for USF/ICC reform—which we have definitely seen no shortage of—the fact remains that there must be specific and predictable universal service support going forward in accordance with statutory requirements.  If adopted, the Consensus Framework could help facilitate further, more dramatic changes down the road as the industry transforms to all-IP, as consumer broadband technology demands and trends become more predictable, and as ubiquitous broadband becomes a reality.  The Rural Associations make some very interesting points about the importance of flexibility and stability, because we definitely do not know for certain what the future holds.  This is only the first significant step in transforming USF for a broadband world, and it may be the best option for the FCC to err on the side of caution while still ensuring that outdated and insufficient policies are modernized.

The Rural Associations' reply comments are available here.

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