Entries in USF Reform (49)

Thursday
Oct132011

Senate Hearing on USF/ICC: What is Fair Reform?

Hard Questions Asked about RLEC/ABC Plans, Rights of First Refusal, and State USF Equality

On October 12, 2011 the Senate Commerce Committee held a hearing entitled “Universal Service Reform – Bringing Broadband to All Americans.” The purpose of this hearing was largely to flush out details about the ABC and RLEC Plans as well as address many other specific aspects of USF/ICC reform—especially how the plans-at-large will impact consumers. This hearing was nothing if not comprehensive, and the Senators certainly did their homework to prepare challenging, thoughtful and hard-hitting questions. However, without anyone having seen the FCC’s draft rules yet, it was a stretch for the witness panel to say anything new and groundbreaking.

The panelists in the spotlight at this hearing included Kathleen Abernathy (chief legal officer and vp, Frontier Communications), Mary Dillon (president and ceo, US Cellular), Michael Powell (president and ceo, NCTA), Shirley Bloomfield (ceo, NTCA), and Philip Jones (commissioner, Washington Utilities and Transportation Commission). In other words: wireline ILECs, wireless, cable, RLECs, and states/consumers.  

The opening remarks by Senator John Kerry (D-MA) were a close reiteration of Genachowski’s speech last week (The ILEC Advisor: Finally – Genachowski’s Big Announcement on USF/ICC Reform), and Kerry seemed to focus on the shock-value arguments about USF being wasteful, inefficient and unfair. Kerry also referenced a recent Boston Herald article about the inequality of USF distribution between rural and non-rural states. According to the article, Massachusetts customers paid $169m into the fund in 2009 but only received $46m for schools, hospitals and low-income support…and a mere $2.4m for rural networks. Naturally, some are crying unfair, and the issue of state inequality popped up several times throughout the hearing.

Senator Jay Rockefeller (D-WV) “wholeheartedly applauded” Genachowski’s efforts on USF/ICC reform, but noted that “it is huge and complicated” and some parties will be unhappy with the results no matter what happens. Rockefeller emphasized—by saying twice—that broadband is the “essential infrastructure of our day,” and it is “what this country requires to compete internationally, something we do rather poorly.” He also commented that broadband deployment is important, but “we would be remiss if we did not also consider efforts to promote adoption.”

Testimony from the panelists did not really deviate from the positions that their respective industries have been advocating all along. For the wireless perspective, Dillon insisted that $300m is simply not enough for the Mobility Fund, and that reforms must recognize the wireless industry is growing while the wireline industry is shrinking. Powell argued for the cable industry: “while companies get the money, its consumers who write the check,” and it will be a “travesty and a lost opportunity” if the reforms are not competitively and technologically neutral.  State commissioner Jones expressed concern about state preemption and subscriber line charge increases. Wireline panelists Abernathy and Bloomfield both described their respective commitments to rural America.

If I had to name a theme for this hearing, I would pick Equality and Fairness. Unfortunately, there isn’t a uniform theory on what constitutes equal and fair when it comes to USF and ICC. Rockefeller asked what the essential elements of a fair system would be, and the responses varied. Abernathy replied that it is fair for companies receiving USF to accept a level of regulatory oversight in exchange. Dillon responded that it is fair to recognize the role of wireless as much as wireline. Powell’s answer was to focus on consumers, not companies. Bloomfield said it is important that companies do not “cherry pick” the most profitable unserved areas and leave the rest behind. She also said that sustainability is fair, and “infrastructure is not something you throw into the ground and walk away,” it is a “living breathing network that needs continued investment.” Finally, Jones argued that it is fair for states to remain a viable forum for consumers, because telecom is “a very complained-about industry.”

Senator Mark Warner (D-VA) stepped up during the Q&A and really asked a wide variety of good and challenging questions about the ABC and RLEC Plans, specifically about the ABC Plan’s Rights of First Refusal  (RoFR) proposal (The ILEC Advisor: Six ILECs Defend Rights of First Refusal Proposal). Warner said he “gets the idea” behind RoFR, but it seems like a “blunt instrument” and contrary to the spirit of competition. Warner asked if there is some middle ground between the ABC Plan’s proposal and no RoFR at all, possibly by utilizing some type of “sliding scale” where previous investment would be acknowledged. Abernathy responded that nobody is serving these areas anyway, and any other framework would probably take too long. Bloomfield clarified that RoFR is not included in the RLEC Plan.

RoFR came up in several more questions. Senator Kelly Ayotte (R-NH) asked what might happen if the RoFR proposal was completely replaced with reverse auctions. Powell replied that it is an exaggeration to say that a reverse auction model would take too long to develop, and the FCC is “the best expert in the world on auctions.” Senator John Thune (R-SD) specifically asked Powell if there was a way to tailor the ABC Plan to permit RoFR but also address the cable industry’s concerns. Powell stated that the cable industry agrees with about 75% of the ABC Plan, but it did not sound like there would be much “middle ground” when it came to resolving differences about RoFR.

Keeping with the spirit of fairness, equality, compromise and level playing fields, Senator John Boozman (R-AR) asked Dillon if there is any chance of a compromise on the size of the Mobility Fund somewhere between $300m and $1b. Dillon replied that $1b actually is a compromise and even that amount “doesn’t really cut it.” Abernathy pointed out that $300m per year is actually 10 times more than the amount of money envisioned for mobility in the National Broadband Plan—the NBP called for a one-time $300m investment only.

Overall, this hearing was informative but predictably lacked surprises. With the FCC’s draft rules already in circulation, but yet unknown to the public, I wonder if this hearing will have much of an impact on the end result. It may have been better if it were held after the release of the rules, so that the panelists could have really predicted the impacts of reform on their companies and customers.

The Senators who asked questions and provided anecdotes and information seemed to be looking for ways to balance all of the conflicting interests, which is certainly a daunting task. They also wanted answers that do not yet exist. We don’t know if the FCC’s rules meet the myriad definitions of fair, equal, level playing field, and compromise; but Senator Rockefeller insisted that we cannot keep putting off reform until everyone is happy—the nature of reform is that not everyone will be happy.

A full recording of the hearing, as well as testimony from the participants, is available here.

Tuesday
Oct112011

Net Neutrality Fight Intensifies - In Washington Anyway

Seven Court Challenges Consolidated but not Akin

The digital ink is practically still drying on the September 23 Federal Register, where the infamous Open Internet Order (Net Neutrality) rules were finally published nearly 10 months after being narrowly approved at the FCC. As anticipated, Verizon wasted no time in filing an appeal, and the FCC likewise wasted no time in filing a motion to dismiss Verizon’s appeal. Challenges from six other organizations have quickly been consolidated with Verizon’s appeal, and the U.S. Appeals Court in Washington was chosen “randomly” as the venue for Verizon v. FCC. This very same court ruled in the Comcast case last year that the FCC lacked authority regulate the Internet, so things might get really interesting once this case gets rolling. All this action already, in less than 3 weeks!

Things also get really interesting when you look at where the opposition is coming from- Verizon was completely expected, but the first challenger was actually liberal media reform group Free Press who has been one of the most vocal advocates for strong Net Neutrality rules. Free Press contends that the rules do not go far enough to protect mobile consumers because mobile broadband providers are not subject to the same set of rules as wireline providers. Free Press policy director Matt Wood argued that the differentiation between wired and mobile broadband “[fails] to protect wireless users from discrimination, and they let mobile providers block innovative applications with impunity.” Free Press filed its Petition for Review in the U.S. Court of Appeals for the First Circuit in Boston.

Possibly in a coordinated effort to keep the case out of the D.C. Appeals Court, National Journal reports that Media Access Project, Media Mobilizing Project, Access Humboldt, and Mountain Area Information Network have filed similar petitions as Free Press in courts across the country, and “the groups could be looking to increase their odds of getting a sympathetic court…The more courts involved, the less likely it will end up in D.C., statistically speaking.” Well, it looks like the odds were against these groups, and the case will be heard in D.C. where Verizon filed. Yes, the liberal hard-line pro-Net Neutrality advocates’ petitions will be consolidated with Verizon’s decidedly anti-Net Neutrality appeal.

The crux of Verizon’s argument is that the Open Internet Order is “(1) in excess of the Commission’s statutory authority; (2) is arbitrary, capricious and an abuse of discretion within the meaning of the Administrative Procedure Act; (3) contrary to constitutional right, and (4) is otherwise contrary to law.” Verizon filed pursuant to 47 U.S.C. § 402(b)(5) which grants the DC Appeals Court “exclusive jurisdiction over FCC decisions that modify individual radio licenses.” However, in its Motion to Dismiss, the FCC contends that the Net Neutrality decision does not modify individual radio licenses, and “402(b)(5) applies only when this Court is asked to review an FCC order that modifies specific individual licenses, not generally applicable orders like this one.”

The FCC’s Motion to Dismiss outlines a long list of precedents and legislative history where 402(b)(5) has only applied to specific modifications of individual licenses, not general rulemakings like Net Neutrality. The FCC argues that the Net Neutrality rules are “basic rules to govern the conduct of all broadband Internet access service providers, both fixed and mobile…not directed at any specific broadband provider and [do] not purport to modify any specific license.” A point that I found interesting in the FCC’s Motion to Dismiss was that Verizon, as a wireline and wireless provider, “would be subject to the Order even if it did not hold a radio license.” Even though the rules for wireline broadband providers are more restrictive, Verizon is challenging the wireless rules specifically—just like Free Press et al, only from a vastly different perspective.

From my Washington perspective, this rapid, polarized activity is fascinating and dramatic; but what does this all mean for the rural providers beyond the Beltway? RLECs have remained fairly neutral in this whole ordeal (The ILEC Advisor: Brace Yourself for the Net Neutrality Rules), aside from some grumbling about extra paperwork and network management rights. It gets stickier when you start thinking about the long-term implications of the Net Neutrality rules for small ISPs, especially considering the growing bandwidth crunch and the possibility that small carriers may no longer be able to collect fair access revenue to help offset network investment costs.

While following both the Net Neutrality and USF/ICC reform debates, I can’t help but ask: is the Net Neutrality fiasco a foreboding of what lies ahead for the USF/ICC reforms? Will it take 10 months for the final USF/ICC rules to be published, only to be slammed with opposition and heavy-hitting court cases within weeks of publication? This is mere speculation, but it is definitely interesting to compare the similarities of these two groundbreaking and game-changing rulemakings…

First, one could argue that both sets of rules are to some extent Chairman Genachowski’s special babies. They are both controversial decisions with potentially widespread ramifications spearheaded primarily by the FCC Chairman. Genachowski seemed to be the only commissioner who actually approved of the Net Neutrality rules, with the other four commissioners falling firmly on the left and right of his position. The Commission votes on USF/ICC on October 27, and with one commissioner short it will be interesting to see if Genachowski’s rules slide through unopposed.

Moving on, both sets of rules have been in the making for many years and have hit significant roadblocks along the way—USF/ICC reform nearly happened a few years ago and was scrapped when Commissioners couldn’t agree; and the Net Neutrality rules stumbled hard on the Comcast decision. The two sets of rules are both stretching the FCC’s authority over the Internet, and both have instigated a significant amount of tension between the industry, Congress, the FCC and consumers. There are familiar battle lines in both rulemaking proceedings—consumers vs. industry, industry vs. FCC, FCC vs. Congress. For example, the argument that consumers feel taken advantage of by telecom corporations could be used interchangeably to describe tensions in either rulemaking.

There is also considerable polarization within the industry, especially with USF/ICC, where ILECs, wireless and cable have been facing off with very little agreement throughout the proceeding. The final Net Neutrality rules, and the likely final USF/ICC rules, are largely the result of a so-called “industry consensus,” but the actual level of consensus in both situations is debatable. In both proceedings, extreme arguments that the rules (or lack of rules) will destroy innovation, stifle investment, and prohibit broadband deployment and adoption have been cited with high frequency by most stakeholders.

So, will the USF/ICC reform follow the same bumpy road as Net Neutrality once the rules are approved at the FCC? Will the Net Neutrality and USF/ICC rules primarily just maintain the status quo, or will they each deliver radical changes to help bring telecommunications policy into the broadband era, as they both promise to do? And, what are the short- and long-term implications of these two rulemakings together for RLECs?

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!

Thursday
Oct062011

Finally - Genachowski’s Big Announcement on USF/ICC Reform

Chairman Urges Americans to “Seize this Opportunity” for Universal Broadband

I can only imagine that hundreds, if not thousands, of rural telecom folks were eagerly (and nervously) sitting in front of their computers at 10:30 AM EST this morning in anticipation of FCC Chairman Julius Genachowski’s big announcement about USF/ICC reform. Unfortunately, the FCC’s live video feed left a lot to be desired. Genachowski did not divulge many precise details of the plan, which will be voted on by the Commission on October 27, but he gave a fairly thorough taste of the reforms. Earlier this week, he announced that the FCC’s plan would not be a “rubber stamp” of the price cap ILECs' ABC Plan, and it definitely does not sound like it is. There was really no mention of the RLEC Plan in today’s announcement (unless I missed it due to “technical problems” with the FCC live feed).

Genachowski opened by reiterating statements about the current USF/ICC system that have been said time and again since the National Broadband Plan was released: the current system is inefficient, wasteful, broken, unfair to consumers, creates competitive distortions that “companies have exploited in devious ways,” and causes uncertainty and legal disputes. Genachowski did give some credit to the old system at least, saying “It’s hard to imagine America being as successful without the telephone system,” which became ubiquitous due in part to the success of the current USF system. Well, we are living in a broadband world now, and the old system just won’t cut it.

Genachowski touted the benefits of broadband- job creation, private investment, emergency lifeline, a “connection to a world of knowledge” for students, and “a platform for entrepreneurs in rural America to start and grow small businesses.” He emphasized that broadband is a necessity, not a luxury, which is “not just a theory, it’s a fact;” and “the cost of digital exclusion [grows] higher every day.”

So what about the reforms? One of the key elements will be establishing the Connect America Fund to ensure universal broadband availability in unserved areas. The CAF will potentially help deliver broadband to 18m people in 5 years. There will be a Mobility Fund, but Genachowski did not say how much money would be dedicated specifically to mobility—I’m sure the rural wireless stakeholders are very curious about this. He did say that “the Mobility Fund will provide significant ongoing support for rural mobile broadband.”

CAF support will not replace private investment, and it will be targeted exclusively at areas without an unsubsidized competitor. CAF support will be distributed via “competitive processes,” which means reverse auctions, and it “will be conditioned upon complying with rigorous obligations to serve the public and meet the goals of universal service.” It sounds like the FCC wants to hit the ground running with reverse auctions in the first phase of CAF in 2012, but it was unclear on how the auctions would be structured or if (and when) they would apply to non-price-cap areas.

As for rate-of-return companies, Genachowski said that the plan will ensure “appropriate incentives to invest efficiently and receive predictable support.” No word on whether the rate of return would be reduced to 10%, but he did mention that there would be new accountability requirements and “benchmarks to ensure reimbursable expenditures are reasonable.”

The FCC appears to be taking a very hard line on ICC reform. The plan will supposedly reduce hidden subsidies paid by consumers, eliminate arbitrage opportunities, and “close loopholes” that allow phantom traffic and traffic pumping schemes. The “Recovery Mechanism” for lost access charges will be “tightly controlled,” and only some companies will be permitted to access these funds. Which companies, I wonder?

The role of states in the new CAF has been hotly debated in the last few weeks, with ABC Plan participants wanting to preempt states, and states wanting to maintain their role. Genachowski said that states will continue to have a “vital and meaningful role,” and COLR obligations will not be eliminated.

Genachowski concluded the announcement by insisting that “the plan will extend broadband to millions of Americans;” “spur private investment, create jobs and drive our nation’s competitiveness;” and create “massive consumer benefits.” He added that “every day without reforms is a day millions of Americans suffer increased harms…and millions of dollars are spent wastefully.”

I am anxiously awaiting the release of the draft rules to fill in the gaps on the issues that Genachowski did not explain very clearly. What did you think of Genachowski’s speech? Will RLECs get a good deal, or is it time to panic? Genachowski said, “companies that invest and manage their businesses prudently will have the support they need to continue extending broadband, and will be on a path to a more incentive-based framework in the future.” To me, this sounds like a stern warning for some, and a reassuring message to the companies who have been investing “prudently” all along.

A transcript of Genachowski’s speech is available here.

Tuesday
Oct042011

State USF Reform Impact Studies Predict RLEC “Death Spiral”

At Least 4 Rural States in Big Trouble if USF Reform Goes Wrong for RLECs

Anxiety about the impending decision on USF/ICC reform is definitely reaching a boiling point, if the long list of ex parte filings in the last couple of weeks is any indication. In addition to industry pleas and gripes for or against particular plans, two more states have weighed in on the potential impact of reducing or eliminating high cost USF support for RLECs. Universities from Colorado and Missouri conducted economic model analysis to determine the impact of USF reform on state jobs, income and taxes, similar to previous studies performed by universities in New Mexico and Kansas (The ILEC Advisor: New Mexico Study Depicts Life Without USF; September 27, 2011)

The state USF and National Broadband Plan impact studies do not take a position on any proposed course of action; rather they analyze what might happen in the state’s economy if RLECs lose their current level of high cost USF support. It should be noted that the studies only look at the impact of reducing or eliminating USF, not ICC as well. The results of losing USF alone are pretty dire, and I can’t imagine any of these states would be better off after further RLEC revenue reductions due to dramatic drops in ICC. For states where access revenue makes up about 30% of total RLEC revenue, you could probably just double the losses shown in these studies, which were mostly calculated assuming that RLECs receive (and stand to lose) about 30% of their revenue from USF.

Like the New Mexico study, the study conducted by Missouri State University’s Bureau of Economic Research calculates potential losses based on the assumption that the state’s 35 RLECs would lose all of their USF support. According to the authors, “It is highly probable that many of the ILECs in Missouri will not be able to survive such a transition in the long run and would go bankrupt.” Furthermore, “Even if the ILECs would survive they would decrease their investment in new infrastructure and equipment by approximately 40%,” which may negatively impact the quality, availability and affordability of telephone and broadband service. The combination of more expensive and less available broadband and the possibility that customers would have to drop services are “two things the FCC has stated it does not want.”

The Missouri study explains two possible options that RLECs would have if USF were eliminated. The first option is to increase rates, but “for every 10% increase in price that the ILECs use to offset the decrease in universal service funds, they will lose 7.6% of their customers” to either wireless substitution or no telecommunications service at all. The authors explain that “this creates a death spiral. In order to regain revenues, prices are raised, customers lost, creating pressure to raise prices again, which will again result in more customer losses. The result could be that a significant number of the ILECs, unable to make up the lost revenue, will cease operations all together.” The second option would be to drastically cut costs, including firing employees and reducing investment, which would contribute to unemployment and slow down broadband deployment.

The Colorado State University study took the analysis a little further. This study modeled different scenarios—eliminating USF, reducing USF by 30%, raising rates to help recover lost USF, and not raising rates, where the cost of losing USF support would be “borne entirely by providers.” The Colorado study reiterated the findings in the Missouri study, and concluded, “With such dramatic losses providers would likely follow one of two courses, each with important ramifications for Colorado’s rural communities.” The two courses are going out of business or surviving but with a much lower level of service. Another “death spiral” would likely occur in Colorado: “Some rural providers indicated that it would be difficult for them to raise prices without losing substantial numbers of customers. There was some indication that the impact of losing customers would be the provider going out of business.”

The four studies published so far used similar input-output models to illustrate the impact of eliminating or reducing USF on jobs, income and local/state taxes. The results are summarized in the table below. Although some of the studies project losses over a period of 5-10 years, I felt that the immediate impact results (estimates for 2012) were most accurate and revealing, given the assumptions in the studies. Some of the longer-range projections appeared fuzzy to me, as the studies did not consider possible USF replacements, like CAF or new revenue sources. The Missouri study also added the cumulative losses over 5 years, which led me to believe that their longer-term results were over-estimated.

We won’t know for sure until the final rules are revealed (expected this week, with a vote at the Oct. 27 FCC Open Meeting) exactly what percentage of USF support RLECs stand to lose (or how quickly they will lose it), but it might be an interesting exercise for companies to run the numbers and see what the impact of reducing or eliminating USF would be for their specific communities in terms of direct and indirect job, income and tax losses. How do you plan to offset USF revenue losses in order to avoid a “death spiral?” Obviously, generating more revenue is the solution; but what specific operating strategies and new business opportunities have enough momentum to overcome such significant losses and ensure future growth and profitability?

The Missouri and Colorado studies are available at SaveRuralBroadband.org.

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