Entries in Advanced Mobility/Satellite Fund (1)

Sunday
Aug282011

$300m Mobility Fund is Arbitrary and Inadequate, Claims RTG

Rural Wireless Carriers Call RLEC-ILEC Consensus Framework for USF “Highly Flawed”

Comments on the FCC’s Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding were due on August 24, and the rural wireless industry did not hold back any criticism of the wireline ILEC’s ABC Plan or the Consensus Framework negotiated by the Rural Associations and the ABC Plan participants. I have been looking forward to hearing the wireless response to the ABC Plan’s proposed $300m Advanced Mobility/Satellite Fund (AMF), and the Rural Telecommunications Group (RTG) comments did not disappoint. RTG slams the $300m amount for mobility funding as arbitrary, insufficient, inadequate, meager and measly; and they argue that the Consensus Framework “shows that the landline authors of the RLEC and ABC Plans are oblivious to the rapid changes taking place in the marketplace or have chosen to ignore them.”

Wireless carriers had no part in the industry negotiations that led to the Consensus Framework, which I think seems rather irresponsible given the significant role that wireless plays in the broadband market. Wireless broadband critics may argue that mobile broadband is not equal to wired broadband in terms of speed, service quality and capacity; but the market speaks clearly that wireless broadband is both a compliment and a substitute for wired broadband, depending on an individual consumer’s needs. Wireless service critiques aside, I can’t help but agree with RTG’s assertion that “it is a given that mobile wireless will play the most important role in the country’s broadband future and any order resulting from this proceeding should ensure the continued growth of wireless broadband.” The question then comes down to this: how much USF support should be dedicated specifically to wireless broadband, especially when the FCC is intent on keeping the size of the fund at or near the current level?

RTG unfortunately does not offer a specific amount of ideal funding, rather they argue that the funding should be based on actual costs, and “the size of the mobility fund would have to be substantially larger than $300 million and should reflect specific, ongoing support in order to spur investment and ensure the availability of existing wireless services and the expansion of mobile broadband networks.” I wonder, what constitutes a “substantially larger” mobility fund: $600m? $1b? More? There are a lot of costs involved in building and maintaining a wireless network (especially when spectrum acquisition is factored in), and I think we have all learned a thing or two about this from watching the recent drama with the AT&T/T-Mobile merger unfold. AT&T allegedly could build out 4G wireless to nearly the entire country for an additional $3.9b—equal to 13 x’s the proposed annual budget for the AMF.  I certainly do not expect the AMF to cover all costs to deploy wireless broadband in rural areas, but when put in perspective, $300m indeed seems like a pittance.

In addition to the size of the AMF, RTG is concerned about the disproportionate amount of money that wireless carriers pay into the USF while proposals on the table call for shifting support away from competitive ETCs. According to RTG, “Competitive ETCs would lose approximately 75% of their current support. In contrast, incumbent wireline carriers would lose only one third of their current support.” RTG is worried about the outcome of this proposal on rural wireless carriers, and “the consequence of applying such a large reduction of support to competitive ETCs will be a shrinking or elimination of many rural wireless networks.” RTG further argues for a transitional phase-out of CETC support of at least 10 years and a sufficient recovery mechanism to offset the lost funding.

RTG also raises concerns about including satellite support in the $300m AMF. They believe that funding for satellite broadband should come from the ILEC’s slice of the USF pie, because “satellite carriers provide a fixed Internet access service, and should not receive support from a fund proposed for ensuring that consumers enjoy the benefits of mobility.” RTG points out that the ABC Plan participants wish to partner with satellite providers and “rely on satellite in order to avoid having to serve the highest-cost areas.”

I have been highly critical of this particular large-carrier proposal in the past, and I agree with RTG that if wireline ILECs want to hand off the responsibility for serving especially remote areas to satellite providers, then the funding should come from the ILEC portion of USF. I think it is also important to look at the difference in market demand for mobile broadband and satellite broadband as an indicator that perhaps grouping these two services in the AMF is not reflective of actual consumer trends. I rarely hear of anyone clamoring for satellite broadband service, but there are stories every day about the dire need for improving mobile broadband. Expanding wireless broadband to 98% of America is a key component of the Obama Administration’s goals for universal broadband, and it is interestingly also a major point of debate in the AT&T/T-Mobile merger controversy.

RTG definitely covered some of the most contentious issues in this proceeding, and it will be interesting to see if, or how, the FCC responds to the wireless industry’s demands for a larger Mobility Fund. I imagine that RLECs would be concerned that a larger Mobility Fund could mean a smaller RLEC fund, but what do rural telecom providers who have a stake in both wireless and wireline think?

Read RTG’s comments here.