Entries in American Cable Association (2)

Sunday
Oct092011

Response to USF/ICC Rules Varied, but Everyone Wants More Details

Genachowski’s Speech Prompts Industry-wide Reactions—to What, Exactly?

FCC Chairman Julius Genachowski presented a sneak-peek at the FCC’s highly anticipated USF/ICC reform rules on October 6, but many industry stakeholders are still scratching their heads trying to figure out specific details of the yet-unreleased draft rules. Genachowski made a point to say that the draft rules are not a carbon copy of the ABC Plan/RLEC Plan/Consensus Framework, but he did not specify exactly what parts of the industry plans would be included or rejected (see The ILEC Advisor: Finally – Genachowski’s Big Announcement on USF/ICC Reform for a summary of his full speech). I guess we will all just have to keep waiting…

Key USF/ICC stakeholders wasted no time in releasing statements about Genachowski’s speech. Although the reactions ranged from approval to frustration, one thing was clear: everyone wants more information as soon as possible.  Some statements were quite vague, and others seemed to make assumptions about the unseen rules inferred from Genachowski’s remarks. The ILEC Advisor has been covering different industry perspectives on USF reform over the last few months, and most of the reactions to today’s announcement were consistent with the mountain of comments and ex parte filings that have accumulated since February’s NPRM.

Here’s a rundown of reactions—good, bad and indifferent (in no particular order):

  • Shirley Bloomfield, NTCA ceo: “As this long-running process draws to a likely close in the coming weeks, we will continue to press for common-sense reforms that recognize the unique challenges faced by small carriers and the consumers they serve in rural areas across the country.”
  • Kelly Worthington, WTA executive director: “We look forward to seeing the details of the Chairman’s proposals. Only then will we be able to determine whether rural networks will be strengthened by the reforms.”
  • Matthew M. Polka, America Cable Association president and ceo: “The Chairman’s plan locks in a sole-source contract worth billions over 10 years to a handful of incumbent large telecom companies to deploy broadband at maximum speeds that are below average. It favors one small group of providers over others to the disadvantage of consumers. By excluding thousands of broadband providers willing, able, and eager to compete to provide service to consumers living in rural areas where government support is provided, it will deprive these communities of receiving the best possible service at the lowest possible price.”
  • Steven Berry, Rural Cellular Association president and ceo: “Chairman Genachowski delivered a fine policy speech highlighting the many reasons USF reform is imperative. I am glad to see he is focused on consumers and bringing broadband solutions to all Americans, but details remain elusive, and we must carefully review the proposal… I can only hope that wireless solutions have an opportunity to flourish in this new plan.”
  • Matt Wood, Free Press policy director: “We hope that Chairman Genachowski is sincere in his pledge to give the American people something better than the industry’s profit-padding wish list. But knowing how doggedly these companies pursue what they want, no matter how much it harms the public, we’re going to be vigilant and make sure that the Commission abides by that promise.”
  • Tony Clark, NARUC president, and John Burke, NARUC Telecommunications Committee chair: “We are very anxious to get additional details on the mechanisms for Intercarrier Compensation reform, including how Voice over Internet Protocol traffic will be integrated into the system to avoid arbitrage opportunities. Indeed, some elements of the speech raise a host of unanswered questions but also the specter of long term and serious unintended consequences for consumers.”
  • Bob Quinn, AT&T vp-federal regulatory & chief privacy officer: “FCC Chairman Genachowski deserves credit for bringing this important issue to this point. We and many others are committed to working with him and the entire Commission as it works to bring this opportunity for a fair, reasonable plan across the finish line.”

A common point of tension seems to be whether or not the FCC’s plan will be good for consumers. However, what is best for consumers—lower telephone rates, or expanded broadband availability?  More importantly, can both of these lofty goals be achieved in one fail swoop? If, for example, access rates were reduced significantly, would the big telcos pass the savings along to consumers directly, pocket the extra cash, or reinvest it in the network? I imagine these questions will not be answered until after the rules are implemented.

It is not just industry groups reacting to the FCC’s proposed rules (whatever they may be). Congress is weighing in as well. A bipartisan October 4 letter to Genachowski signed by Representatives Lee Terry (R-NE), Mike Ross (D-AR) and 33 mostly rural representatives states, “It’s our judgment that the FCC must act swiftly yet carefully to enact reforms that allow all Americans – particularly those in hard-to-serve rural communities – access to the burgeoning services and opportunities that are being created via innovation in broadband technology.” The Representatives “urge the FCC to maintain the key elements of the America’s Broadband Connectivity and Joint Rural Association proposals,” which “clearly [create] a path forward for comprehensive USF and intercarrier compensation reform.”

While it is admirable that so many Democratic and Republican Representatives came together in support of the Consensus Framework, the FCC’s final rules might not have a VIP pass in the Senate. On October 5, the Senate Commerce Committee announced an October 12 hearing on the FCC’s USF/ICC reform efforts. Apparently, “Congressional Democrats have expressed concerns that the plan won’t sufficiently protect consumers.” I wonder if the Senate Commerce Committee will actually see the plan before the hearing next week, or if they have already seen it? It seems premature to set a hearing about rules that have not even been approved or reviewed by the public, but there doesn’t seem to be much love between Congress and the FCC these days.  

The draft rules were supposedly circulated to FCC Commissioners, as the rest of us anxiously await more details. Let the speculation continue!

Monday
Aug292011

ACA: ABC Plan Inconsistent with FCC’s Goals for USF/ICC Reform

Cable Association Argues ILEC Proposals are “Salvageable,” Provides Recommendations

Comments on the FCC’s Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding were due on August 24. The American Cable Association (ACA) voiced its concerns with the price cap ILECs' ABC Plan and provided their recommendations about how the ABC Plan can be improved in order to meet the FCC’s goals of fiscally responsible and competitively neutral USF/ICC reform.  Although ACA was critical of the ABC Plan, it appeared to have a somewhat sympathetic position towards RLECs.  Cablecos were not involved in the industry negotiations that led to the ABC Plan and Consensus Framework with the RLEC Plan; therefore ACA warns the FCC that these proposals “are far from an industry consensus balancing diverse interests, a basic fact that the Commission should consider when determining whether these plans are in the public interest.”  

ACA believes that the ABC Plan is “deeply flawed: it would enable universal service funding to grow significantly and would tilt the competitive landscape in favor of the Price Cap incumbents.”  ACA argues that the ABC Plan is not competitively neutral, and it will not fix the myriad current problems with USF/ICC.  ACA states, “Rather than being ‘transformational,’ these proposals merely continue, if not exacerbate, current flaws in the universal service fund and intercarrier compensation regimes.  They also directly and materially harm ACA members, who provide telecommunications and broadband service in competition with these Price Cap carriers.”  Despite being peppered with problems, ACA is convinced that the ABC Plan’s proposals are “salvageable” with “targeted fixes.”

First of all, ACA believes that there needs to be a hard cap on the Connect America Fund (CAF) at the 2010 level.  Without a hard cap, ACA argues that the contributions burden on consumers will become unreasonable.  ACA further argues that the Consensus Framework proposal to limit the fund at $4.5b is actually “riddled with loopholes,” because it would allow rate-of-return carrier support to increase by $300m and the budget only remains in effect for 6 years.  As a result, “under the ABC and RLEC Plans, there is abundant opportunity for the fund to grow, which the Commission should not permit.”

ACA’s second recommendation is to distribute USF support in a “competitively neutral manner,” meaning reverse auctions.  ACA’s members believe that they could help extend broadband in rural areas with USF support, and they “are eager to see the Commission provide competitively neutral and efficient support for universal broadband so they can seek to serve these areas.”  ACA argues that the ABC Plan will effectively grant the price cap ILECs “a new government entitlement” to unserved areas, and the Rights of First Refusal proposal would especially give the ILECs an unfair competitive advantage.  ACA challenges the ILECs to accept reverse auctions, and “if they are in fact the most effective and efficient providers of broadband to unserved or underserved areas, the Price Cap incumbents would have nothing to fear from a competitively neutral distribution process.”

ACA’s next proposed fix for the ABC Plan’s flaws is a significantly limited access replacement mechanism (ARM), where carriers would only receive this support “where harm is demonstrable and severe.”  ACA ideally would like for there to be no ARM, but if the FCC decides to adopt a revenue recovery mechanism, then such funding should end after 3 years and the funding level should be less than 100% and reduced each year in the 3 year period.  ACA reasons that “transitional mechanisms like an ARM have a way of becoming permanent rights,” speculating that price cap carriers could ultimately end up collecting ARM support long past a reasonable timeframe.

When it comes to RLECs, ACA seemed understanding of the challenges that small rural companies will face if High Cost funding is reduced or eliminated: “These smaller providers are most reliant on current High-Cost funding to provide service to consumers and will suffer most if funding is reduced significantly and precipitously.  Further, these smaller telephone companies have generally demonstrated competence in providing service and have a deep commitment to their customers.”

ACA recommends that incumbent ETCs with less than 100,000 lines should have the option to continue receiving high cost support for 8 years, “so long as they agree to commit to provide broadband service in all their service areas,” at 4/1 Mbps initially and 16/4 Mbps within 6 years.  ACA’s recommendation to make funding for small companies somewhat contingent on broadband speeds provided is interesting, but the key here is that funding must be available, sufficient and predictable. Whether phasing out high-cost funding after 8 years will meet the sufficient and predictable principles, especially if large network investments must be made by year 6.

Overall, the ACA presented some interesting arguements, challenges to the proposed plans, and recommendations for USF reform.  There is growing opposition to the Consensus Framework by parties who were not directly involved with its development, but with $4.5b per year at stake, one can’t blame the dissenters for doing whatever they can to try to influence the FCC in this eleveth hour comment cycle.  Do you think the FCC will be accomodating to the parties who were not involved in the industry negotiations?

ACA’s full comments are available to read here.