Entries in OPASTCO (8)


The PSTN is Already in Transition… What is the PSTN, Anyway? 

Panelists Discuss Challenges for Public Safety, Disabled Individuals and Rural Networks

The FCC held two informative public workshops on December 6 and 14 to help itself and the industry better understand the recommendation that the PSTN ultimately be transitioned to an all-IP network. The FCC gathered around 50 experts to share insight on the transition from the perspective of ILECs, RLECs, mobile and fixed wireless, cable, consumer electronics, numbering, public safety, disability services, consumer protection, home security, VoIP, economics, engineering, academia, backhaul, and many more. If you think this sounds complicated with so many stakeholders—it was. But, it is necessary to understand how transitioning the PSTN will impact all of these industry sectors, because each one is deeply involved.

The first workshop, on December 6, included four sessions. The first two covered public safety and disability access issues, the third discussed rural network challenges, and the final session was focused on edge device functionality. This workshop set the stage for some of the broader, high-level issues that carriers and consumers will face if the PSTN is transitioned at a specific date—2018 was the popular target initially. Many of the panelists stated what their respective companies or organizations provide, what their customers or constituents need in terms of communications, and how their customers or constituents would be impacted if access to the PSTN vanished.

The public safety panelists seemed to agree that although many public safety networks are already transitioning to IP, many are still deeply entrenched on the PSTN. Allan Sadowski (North Carolina State Highway Patrol) explained that public safety is not necessarily about having the newest communication technology, it is about first response. Networks and communications equipment must be extremely reliable in every possible emergency situation, and public safety entities also face budget constraints as well as technical staff constraints. Challenges aside, the public safety panelists seemed excited about and interested in dynamic IP communications technologies that will benefit the public safety community. Brian Fontes (National Emergency Number Association) added that he approves of the 2018 PSTN sunset, but 911 services must continue to be available and reliable.

The disability services panelists were generally more concerned about how transitioning the PSTN to all-IP would impact their constituents—individuals who are blind, hearing impaired, physically challenged, elderly, etc., who might not willing or capable of adopting new technologies by a specific date.  Jenifer Simpson (Coalition of Organizations for Accessible Technology) explained that there are 15 million people who rely on disability communications services, and “most don’t know what the PSTN is.” There seemed to be some fear that the individuals in the disability community would be left behind in a PSTN-to-IP transition without proper consumer education coupled with easily available and affordable IP technologies. However, it was also acknowledged that there will be numerous new technologies for disability communications that are much better than today’s PSTN technology.

The third panel, “Technical Capacity, Capabilities and Challenges Facing Rural Networks” included representatives from ViaSat, Rural Cellular Association, Wireless Internet Service Providers Association, Vantage Point Solutions, Midcontinent Communications and OPASTCO; and it was moderated by Commissioner Anne Boyle from the Nebraska Public Service Commission. Although the panelists covered a wide range of rural communications perspectives, a few did not dig very deep into the issue at hand—transitioning the PSTN to IP networks. Rather, some focused more on promoting their respective services. Steven Berry (Rural Cellular Association) discussed the importance of ensuring basic interconnection “regardless of technology.” Berry added that “The PSTN as we know it is probably going away;” and “The future is coming faster than we otherwise may think.” He is also concerned about how such a transition would impact competition, because “some may view this as an opportunity…to essentially eliminate competition.”

Larry Thompson (Vantage Point Solutions) provided some interesting input about the engineering challenges and opportunities for small rural providers. He asserted that the transition will not work if narrowband POTS service is still the only option in some areas, and broadband IP networks must be completely deployed end-to-end. Tom Simmons from northern midwest rural cable provider Midcontinent also added that broadband adoption is “a big part of the equation,” especially in very rural areas that have a high population of low-income and Native American households.

John McHugh (OPASTCO) argued that it is not really important to set a “date certain” to end the PSTN because the transition of technology is natural and “occurs on an orderly fashion.” He described how many rural carriers already have softswitches and extensive fiber networks, over 90% of OPASTCO’s members provide broadband, and RLECs “have gone above and beyond the call of duty to provide their customers with the latest technologies.” McHugh noted that some challenges in the transition include public safety, ensuring all consumer devices are IP-enabled, and converting the customers who simply don’t want broadband. He also added that it is financially and strategically challenging for RLECs to build broadband to everyone and then the consumer decides to get VoIP service from a 3rd party instead of the traditional telephone company.

The final panel focused on transitioning edge functionalities and consumer devices.  One question that was asked repeatedly throughout both workshops—and was never fully answered—was “What is the definition of the PSTN?” Brian Daly (AT&T) insisted that this is a fundamental question that must be addressed before the transition can occur. Once this is determined, we can look at all of the other aspects on the user end, like devices. Daly explained that many alarm systems, ATM machines, faxes, credit card transactions, pay phones, and other devices still rely on the PSTN and will continue to do so for many years, even if their numbers are low. Harold Feld (Public Knowledge) argued, “There will always be surprises” and “you have to design any transition mechanism to handle surprises,” such as the wireless microphone debacle in the digital TV transition.

Overall, this first workshop was a good introduction to the myriad issues at hand, and an insightful look at where certain industry sectors stand on the debate over whether or not the PSTN should be transitioned at a specific date. At an industry workshop I attended back in July, I got the impression that most of the participants were in favor of sunsetting the PSTN in 2018. However, I got a slightly different impression from both of the FCC’s workshops (the second workshop will be recapped tomorrow). The bottom line is that there needs to be a specific definition of the PSTN before the PSTN can be killed, and the longer this fundamental question goes unanswered, the longer the transition will take. On the other hand, if the transition to IP is indeed well underway already, do we really need a specific end date? What do you think? How do you define the PSTN?

You can watch this FCC workshop here.


FCC Finally Gets the Message about Rural Call Termination Problems  

After Months of Pleading by Rural Industry, FCC Announces Workshop and Task Force

On September 26, 2011, the FCC announced plans to hold a workshop on October 18 and launch a Rural Call Completion Task Force “to investigate and address the spreading problem of calls to rural areas that are being delayed or fail to connect.” The FCC’s announcement comes after months of letters, filings, and state efforts to catch the FCC’s attention on this growing problem. NTCA, OPASTCO, WTA and NECA have all been persistent about informing the FCC of call termination problems, and it looks like the FCC has finally gotten the message loud and clear—unlike many rural consumers who are not getting their calls and faxes.

In the September 26 press release, the FCC acknowledged that there has been a reported 2000% increase in call termination complaints between April 2010 and March 2011, and “Failed or degraded calls not only undermine the integrity of the nation’s telephone networks and frustrate customers, but they also pose a serious risk to public safety and harm the rural economy.”

A September 20 “Request for Public Workshop and Policy Statement on Call Routing and Termination Problems in Rural America” by NTCA ceo Shirley Bloomfield may have been the kick that the FCC needed. Bloomfield’s letter to FCC Chairman Julius Genachowski urges the FCC to “issue a clear and unequivocal policy statement” and conduct a public workshop. Bloomfield argues, “Consumers in rural communities deserve at least the same level of network reliability as urban consumers, and failures to deliver calls to rural America are just as worthy of examination in a public forum.” Bloomfield is referring to a recent FCC workshop on network reliability which resulted from network reliability issues being thrust in the spotlight after the recent East Coast earthquake and Hurricane Irene.

Bloomfield also explained that RLECs cannot handle the myriad call termination problems alone, and “Consideration and resolution of these issues can no longer be left to linger in endless debate, or in one-on-one operational discussions, or in behind the scenes industry workgroups, or in sporadic policy deliberations in small conference rooms” because these issues create “substantial risk for public tragedy and financial distress.”

In preparation for the October 18 Workshop, I thought it would be interesting to research recent association, carrier and state efforts to battle this pervasive, nationwide problem. I turned up a considerable amount of interesting information, summarized in the following timeline:

March 11, 2011 Rural Representatives meet with FCC: In this ex parte meeting, the Rural Representatives presented an overview of the rapidly increasing call termination problems experienced in a variety of states. 80% of respondents to an NTCA survey reported experiencing call termination problems. The Rural Representatives described the consequences of call termination problems for RLECs, businesses, consumers and public safety. Apparently, one business “invoiced its rural LEC for more than $50,000, citing lost sales from potential customers” when customers were repeatedly unable to reach the business by telephone.

April 4, 2011- Letter to Genachowski from Representative Robert Latta (R-OH): Rep. Latta explained that he represents the largest agricultural district in Ohio, which is served by 18 RLECs. Latta writes, “I am asking that you investigate the problem of incoming calls being terminated in rural areas and if unjust and unreasonable discrimination is occurring, if there is a violation of common carrier requirements, or if calls are being blocked.” Latta expresses concern that blocked or incomplete calls result in missed opportunities for small businesses. On August 2, FCC Chairman Genachowski responded saying that the FCC needs specific information, and “it is not clear if these calls are being dropped intentionally, or if there is a technical issue that prevents their completion.”

June 13, 2011- Rural Representatives send letter to FCC: This letter described in detail the call termination problems experienced by rural consumers, and hinted that magicJack and other Least Cost Routing (LCR) carriers may be at fault for some of the problems. The Rural Representatives described how difficult it is to identify the source of call termination problems, and that RLECs are often blamed even if they are not at fault (The ILEC Advisor: RLECs to FCC: Please Investigate Call Termination Problems, June 20, 2011).  

June 24, 2011- Oregon Public Utilities Commission Call Termination Workshop: This workshop included presentations by the Oregon Telephone Association RLEC members. Canby Telephone vp of network operations Brandon Zupancic presented a very interesting analysis of least cost routing. He argued, “Least cost routing, if implemented right, would benefit everyone. However, there are many unintended consequences of LCR!” Zupancic explains, “Some originating carriers route calls to LCR providers and those contracts stipulate that they will not complete calls to certain NPA-NXXs (due to costs to terminate in those areas)—but the originating carrier may not know that and keeps sending calls to that LCR provider destined for that terminating location.”

Zupancic also explains that rural customers and businesses are seeing significant problems with receiving faxes; and Canby has tested lines, tested inside wiring, verified filters, sent faxes to the afflicted customers from local lines, and even replaced customer fax machines with the company’s own devices only to see continued delivery failure. According to Zupancic, VoIP compression “creates excessive packet loss that fax machines cannot correct, so fax transmissions consistently fail at a high rate whenever they originate, transit, or terminate a VoIP/SIP network.”  To learn more about LCR, Zupancic's presentation is definitely worth a read (available here). The Oregon Public Utilities Commission announced a formal investigation into call termination problems on July 5, 2011. 

July 21, 2011- New Mexico Exchange Carriers Group presentation to NM Science Technology & Telecommunications Committee: Jeremy Graves, coo of Valley Telephone Cooperative, presented information about LCR and rural call termination problems in response to a request from the NM Science Technology & Telecommunications Committee. He stressed that RLECs cannot help customers resolve many of these problems, and the livelihood of rural residents and businesses is at stake. He explains that businesses, “in most cases, are solely dependent on their ability to receive calls. Calls to these businesses, when not completed, give the impression that they are closed and revenue is lost.” Graves presented the following chart which illustrates the nature of LCR:

September 7, 2011- Montana Telecommunications Association letter to FCC: MTA general manager Geoffrey Feiss writes, “It seems to me that a virus that has been afflicting telecommunications traffic nationwide for more than a year, which the FCC has been made aware of repeatedly, warrants at least as much attention as the also-important issue of intermittent loss of signal during natural disasters,” also referring to the recent East Coast earthquake and hurricane. Feiss includes letters from customers that highlight increasing problems in call quality, missed business opportunities, and concern about family members who cannot be reached by telephone.

September 20, 2011- Oklahoma Corporation Commission, “Making a Connection:” OCC announced that it sent a letter to the FCC supporting a July 20 National Association of Regulatory Utility Commissioners (NARUC) resolution to investigate call termination problems. NARUC determined that call termination problems “create negative public interest,” and “are antithetical to the public interest by creating confusion, isolation and frustration on the part of called parties and calling parties.” OCC is also conducting an inquiry.

These examples clearly illustrate that call termination problems are serious, substantial, and persistent. They are not a result of a technological defect in the RLECs’ networks, they are a result of regulatory loopholes and access charge avoidance schemes. Even though the FCC intends to reform the Intercarrier Compensation system soon, RLECs cannot afford any more delay on resolving call termination problems.

The failure to complete calls to rural customers on such a large scale weakens America’s entire telecommunications industry and creates inexcusable public safety risks in addition to lost business opportunities. The problems prevent family and friends from communicating with each other, and reflect poorly on an RLEC’s reputation. It is not only difficult for RLECs to troubleshoot these problems, but it is difficult to even explain to consumers what is happening when they cannot be reached by telephone or fax. How many everyday consumers would actually assume that a call isn’t completed because of least cost routing, much less understand it? More importantly, how many failed calls are not reported every day?

I, for one, am happy that the “call” to the FCC to address these problems went through. What do you think is the best course of resolution for rural call termination problems? Is ICC reform the solution, or should the FCC do more?


Former Commissioner Questions FCC’s Desire for RLEC Mergers

FCC has no Authority to Encourage Consolidation, Says Harold Furchtgott-Roth

On September 23, NTCA, OPASTCO and WTA (the Rural Associations) filed an ex parte notice in the USF reform proceeding which included a paper written by former FCC commissioner Harold Furchtgott-Roth entitled “Why the FCC Should Not Hold a Position with Respect to Consolidation Within the Rural Telephone Industry.” This paper addressed a critical issue that has largely been passed over in the most recent round of comments on USF/ICC reform, but is still very much a hot topic within the rural telecom industry: RLEC consolidation. The FCC raised the issue in the February 2011 USF reform NPRM, and Furchtgott-Roth “found troubling the apparent unprecedented discussion of ‘consolidation’ of small telephone companies in the NPRM.”

In his paper, Furchtgott-Roth generally avoids taking a specific position for or against RLEC consolidation (at least organically-grown consolidation); rather he challenges the fact that the FCC is trying to encourage consolidation in the first place. He refers to the following passage, paragraph 217 of the NPRM, as particularly troubling:

“Our current universal service rules may have the unintended consequence of discouraging beneficial consolidation of small carriers by subsidizing inefficient operating structures and limiting the ability of small companies to acquire and upgrade lines from other providers that have little interest in the rural market…. Although we recognize the benefits of local firms serving local markets, it may not serve the public interest for consumers across the country to subsidize the cost of operations for so many very small companies, when those companies could realize cost savings through implementation of efficiencies of scale in corporate operations that would have little impact on the customer experience.”

Furchtgott-Roth explains that this section of the NPRM conveys that the FCC thinks it has authority “to hold a view and perhaps even promulgate regulation” regarding consolidation; signals that the FCC believes small companies are less efficient than large companies and have “insufficient operating structures;” implies that there are too many small companies; and suggests that consolidation would be beneficial. He interprets that, “The FCC believes that the American consumer is punished by the very existence of at least some of the small rural telephone companies.”

Furchtgott-Roth provides nine main arguments about why the FCC should not attempt to take a pro-consolidation position regarding the RLEC industry. Most convincing is that the FCC has no evidence by way of economic studies covering the entire RLEC industry that consolidation would result in economies of scale and scope “for every possible combination of telecommunications companies across every geographic market.” Furthermore, “The FCC does not explain a compelling need to address consolidation in the rural telephone industry;” and, “Other than vague assertions that the operation of small companies is insufficient, the FCC offers no reason for its involvement. Nor does the FCC offer, as an example, evidence of even one rural telephone company where a possible merger would be efficient, let alone for each of the hundreds of small rural companies in existence.”

In addition to a lack of evidence concluding that consolidation would be the best outcome for most RLECs; the FCC has no authority to specify what size company should be.  Taking a pro-merger position also contradicts FCC precedents and the overall Federal government’s attitude towards small businesses. Furchtgott-Roth asserts, “There are no statutory thresholds of what constitutes a telecommunications company that is too large or one that is too small; no statutory thresholds determine what constitutes too few telecommunications companies or too many. “He argues that any decisions to consolidate and the size of companies “will be determined by market forces, not government diktat.”

The conversation about RLEC industry consolidation is scary, controversial, emotional…and yes, necessary to have right now as the industry faces some of its greatest challenges ever. It may very well be the case that USF/ICC reform will naturally nudge some companies towards consolidation if they indeed find it an attractive option after thorough, meticulous market studies and planning. However, Furchtgott-Roth warns that a specific  pro-consolidation tone the final rules could have unintended negative consequences: “If rules reduce cost recovery, there will be less incentive for consolidation ‘as such companies become less profitable and less attractive acquisition targets.’” Additionally, “Government encouragement of consolidation could lead to a misallocation of resources as businesses make investments in consolidation artificially to meet government expectations.” Basically, decisions to consolidate should be for the right reasons, and the right reasons are market and competitive forces and real, proven economic efficiencies.

No matter how you feel personally about RLEC industry consolidation, this paper is an excellent description of why it is not the FCC’s place to say that small telephone companies should consolidate. If widespread consolidation is to occur in the rural telephone industry as a result of USF/ICC reform, it should be organic and a result of recognizable market efficiencies –not a result of FCC pressure or vague rules that attempt to encourage it. I think it is possible that FCC encouragement of consolidation could even produce some ill-matched mergers hastily thrown together for the wrong reasons.

What do you think—should the FCC take a position on RLEC consolidation or should consolidation come purely from market forces?  How would a specific pro-consolidation position by the FCC impact the decision-making process when small companies study merger or acquisition possibilities?

Furchtgott-Roth’s paper is available to read here.


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.


Price Cap Carriers Release “ABC Plan” for USF with Rural Support

… But Not Everyone had a Seat at the Negotiations Table

On Friday, July 29, the long-awaited industry consensus plan, America’s Broadband Connectivity Plan (ABC Plan) for Universal Service Fund reform was filed by a group of large- and mid-sized ILECs including AT&T, CenturyLink, FairPoint Communications, Frontier, Verizon and Windstream. The proposal is supported by USTelecom and approved by rural associations NTCA, OPASTCO and WTA. However, the point must be emphasized that the rural associations have not “signed on” to the plan; rather they were involved in the negotiations and believe that the ABC Plan will be an appropriate framework for price-cap companies if it is used in tandem with the Rural Associations’ RLEC Plan for rate-of-return carriers filed back in April.

The ILECs explain the ABC Plan as “three inextricably-linked components that work together to ensure that all Americans have access to broadband service.” The three components include a new USF specifically for broadband in high-cost areas comprised of a Connect America Fund (CAF) and an Advanced Mobility/Satellite Fund (AMF); intercarrier compensation reform with an eventual transition to a uniform $.0007 access rate; and the elimination of “obsolete regulations that are no longer necessary as carriers transition from POTS to IP-based broadband networks.” The CAF would provide $2.2b per year for ILECs, and the entire high-cost program is designed to operate within a budget of $4.5b. The AMF would be relatively small, in line with the $300m proposed for the Mobility Fund in last year’s Mobility Fund NPRM. RLECs would receive around $2b of the high-cost funds, presumably to be distributed via the Rural Associations’ RLEC Plan methodology.  

The ILECs propose that CAF support distributions begin on July 1, 2012, and “because the start dates for CAF disbursements will be staggered, and because the plan reduces legacy high-cost support each year, the overall level of universal service support will remain within the $4.5b per year constraint.” As for the terms of support, “broadband providers that elect to receive support from the CAF will receive a fixed level of support for a term of ten years from the date on which the support is awarded.” The recipients will be subject to service obligations “only to the extent they agree to perform them in explicit agreements with the Commission.”

One of the ongoing debates throughout the CAF and USF Reform proceeding has been which broadband speed should be supported—in the ABC Plan, the ILECs propose a minimum speed of 4 Mbps downstream and 768 kbps upstream. Additionally, “the supported broadband service must provide access to voice service, but voice service is not supported by the CAF and CAF recipients are not required to offer voice service.” I believe this may open the door for allowing lower-cost broadband providers to partner with voice carriers, in line with AT&T’s proposal to partner with satellite companies for very high-cost areas.

The ABC Plan proposes that CAF support will only be available in “those high-cost areas in which there is no private sector business case to offer broadband,” and “CAF support is not available in any census block in which at least one unsupported [facilities-based] competitor is already offering broadband service.” The ABC Plan calls for the FCC to utilize a forward-looking cost model to determine levels of support per census block. After support levels and areas are determined, ILECs can apply for CAF support. If the ILEC has made a substantial investment in the area (defined as serving more than 35% of the service area), “the [ILEC] is given an opportunity to accept or decline the baseline support and the associated broadband service obligations.” The ILECs believe that this will “accelerate the deployment of broadband and avoid inefficient duplication of facilities.”

 If the ILEC declines the offer or has not made a substantial investment in the area, wireless and satellite providers can apply. If multiple providers want to serve the area, the FCC will utilize a competitive bidding—or reverse auction—process to select a provider. This represents a significant departure from the FCC’s initial goal of utilizing reverse auctions as the primary means of distributing CAF support, and I imagine that many RLECs are pleased about this proposal. With reverse auctions as a last resort, it may even be possible for some RLECs to participate if the support levels and service areas are appropriate.

As for ICC, “the ABC Plan creates a glide path to phase down per-minute charges to a low uniform rate while providing carriers with a meaningful opportunity for revenue recovery, and includes interim solutions to address arbitrage.” All price-cap carriers would be required to phase down to a $0.0007 per-minute rate by July 1, 2017; RLECs would presumably have a longer transition period of eight years.

In a joint letter filed by the ABC Plan ILECs, USTelecom and the three Rural Associations, it is noted that there was a tremendous amount of compromise on some of the more contentious issues of USF, and “outside of this framework…the rate-of-return associations would be unlikely to support in other contexts any reductions to their authorized interstate rate-of-return or the Intercarrier compensation reforms included in this framework.” The letter follows with, “the parties to this consensus made substantial concessions in the interest of obtaining an industry consensus that would enable regulatory certainty and the unimpeded business of building broadband.”

The industry overcame tremendous challenges to come to a consensus on some of these issues.  If the FCC decides to adopt the ABC Plan for ILECs in conjunction with the RLEC Plan, I think RLECs will have a fairly solid foundation to continue investing in broadband in rural areas, and they will have sufficient time to plan for the more detrimental changes like the $0.0007 access rate. Regulatory certainty of any breed will definitely help ease some of the suffering in the rural industry at the current time.  The USF reform proceedings have now been ongoing for years and the lack of action has generated a considerable amount of fear and anxiety in a time when RLECs should be focused on broadband deployment strategies.  The Rural Associations do note, however, “This is just another step—but a very important step—in a process with much work still ahead.”

Included in the work ahead may be broadening the industry consensus to include other important stakeholders who did not participate in the ILEC-RLEC negotiations, such as rural wireless carriers, cable providers and consumer groups. Consumers may not be very happy to hear that the ABC Plan framework allows for carriers to increase the Subscriber Line Charge (SLC), and several other rural groups have already expressed concern with the ABC Plan. For example, the Rural Telecommunications Group (RTG), which represents the interests of small rural wireless carriers with less than 100,000 subscribers, argues that the $300m AMF is “an inadequate long term solution to the high-cost needs of America’s rural carriers and their customers.” RTG also noted that “the [ABC Plan] framework should not be interpreted as reflecting any overall wireless industry consensus.” Another group of 16 RLECs and the Rural Broadband Alliance have expressed concern in a position paper, arguing “The now-proposed ‘Industry deal’ will be a windfall to AT&T and Verizon, and will be a disaster for rural America. The risk to small telephone companies, our communities, and our customers is unacceptable.”

What are your thoughts on the ABC Plan, and how the ABC Plan and RLEC Plan (or other options) can be implemented together in order to ensure a reasonable transition for large and small carriers to a broadband-centric USF? The FCC will release a Public Notice, likely soon, to solicit comments on the ABC Plan. It is likely we will see a mixed bag of support and opposition from a diverse array of stakeholders, and I hope that the parties who did not participate in the ABC Plan negotiations take this opportunity to present their arguments—just be sure and submit new data. At the OPASTCO summer convention in Minneapolis last week, FCC Wireline Competition Bureau Deputy Chief Carol Mattey said that the FCC did not want to see a “general rehashing” of the arguments already filed in the comment-and-reply cycle. I take that as a firm warning that stakeholders need to speak up now or risk dealing with an unfavorable outcome once the final rules are released.

The ABC Plan framework is available here, and the joint letter explaining the industry consensus efforts is available here.