Carriers Big and Small Weigh In on Broadband and Universal Service Reform

In comments filed at the Federal Communications Commission, a number of telephone company trade groups have weighed in how universal service policies can impact the national goal of universal broadband.

The United States Telecom Association (USTelecom), the trade association representing service providers and suppliers for the telecommunications industry, says a credible strategy for the deployment and adoption of broadband throughout the U.S. must include proposals for reforming the intercarrier compensation and universal service regimes by reinforcing the appropriate business fundamentals for network investment. USTelecom urges the FCC to adopt reforms recognizing that the evolution of both intercarrier compensation and universal service support to a broadband world must not ignore consumers who will continue to rely on today's network for vital services at reasonable rates for the foreseeable future because it is not financially viable for providers in some areas to build out broadband facilities.

The National Exchange Carrier Association (NECA), a not-for-profit association of incumbent local exchange carriers, provides the FCC with research indicating that high-cost funding paid under current programs has enabled the deployment of a single, multi-use, broadband-capable network to reach a substantial majority of customers in areas served by rate-of-return carriers ("RLECs"). (These carriers are allowed to recover their revenue requirement by setting rates on their various products and services so that it earns no more than the rate-of-return authorized by the FCC. FCC rules define the rate base (specified plant items) upon which a carrier is allowed to earn a return. These carriers must submit revenue data annually as well as line count data and certifications for various High Cost components.) But much work remains to be done as new services continue to impose greater and greater demands on RLEC broadband networks. NECA's comments outline a workable benchmark-based approach for a new end-to-end broadband funding mechanism, one that will help RLECs provide high-speed broadband services at reasonable prices throughout their service areas. NECA's proposal also provides for an administratively simple and efficient way to transition existing universal service funding mechanisms to the new broadband fund, without risking harm to customers who continue to subscribe to voice services. Further, as explained above, NECA's approach would not cause funding to be diverted to maintaining "legacy" circuit switched networks, as these facilities have already been upgraded in many areas to IP-based broadband systems.

COMPTEL, an industry association representing competitive communications service providers and their supplier partners, asks the FCC for comprehensive USF reform and reminds the FCC that the Government Accountability Office offered the Commission two recommendations, not yet acted upon: 1) To better ensure that the high-cost program supports the purpose it is intended to fill, FCC should first clearly define the specific long-term and short-term goals of the high-cost program and subsequently develop quantifiable measures that can be used by the Congress and FCC in determining the program's success in meeting its goals. 2) To ensure a robust internal control environment that supports performance-based management, FCC should identify areas of risk in its internal control environment and implement mechanisms that will help ensure compliance with program rules and produce cost-effective use of program funds.

The National Telecommunications Cooperative Association, the trade association representing rural telecommunications providers, said the FCC implement NTCA's national broadband plan, including provisions concerning USF and intercarrier compensation (ICC) reform. NTCA's 2009 Broadband/Internet Survey shows that NTCA members who receive high-cost funding under the USF program are deploying broadband services and any reduction or cap of the high-cost program will adversely affect traditional and broadband services in rural America. USF reform should include identification of Market Failure Areas to target new broadband support. That support should include middle-mile and second-mile transport services. A revenue-based contribution methodology that includes all broadband internet access providers as contributors is the optimal plan for funding broadband through the USF. The Commission should also explore requiring large bandwidth users to contribute to the new broadband USF funding mechanism.

The Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO) developed a broad outline for reforming the High Cost Universal
Service Fund (USF) program for rural incumbent local exchange carrier (ILEC) service
areas that would hasten progress toward the ubiquitous availability of affordable, highspeed
broadband services in these territories.

The components of the plan are as follows:

• Create a new Universal High Speed Broadband Fund, which would support all of the major network components of providing high-speed broadband service in rural service areas - last-mile loop costs, second-mile transport costs, middle-mile transport costs, and the cost of access to the Internet backbone. Both capital expenditures and ongoing operational expenses would be supported.
• The plan would support one fixed technology high-speed network provider in each rural service area. It also allows for one mobile wireless provider in each area to be supported. Support amounts are based on a demonstration of actual costs that exceed a qualifying threshold.
• Rural ILECs can "opt in" to the new Fund at any time during a seven-year transition period. Once a rural ILEC opts in, all high-cost support is received via the new Fund. At the time of opt in, a rural ILEC would immediately begin receiving the support amount that they were presently receiving from the existing mechanisms, as a starting point. Those ILECs choosing not to opt in immediately would continue to receive support through the existing mechanisms.
• All intercarrier compensation (ICC) rates transition down to zero over seven years, and the ICC revenues that rural ILECs are receiving at the time they opt in would gradually transition into the support received from the new Fund, as the ICC rates are reduced. Rural ILECs may also elect to immediately reduce their ICC rates to zero at the time they opt in.
• At the end of the seven-year transition period, the existing rural high-cost support mechanisms and ICC regime are eliminated, and carriers would recover their broadband network costs through a combination of affordable end-user rates and support from the new Fund. At that time, the public switched telephone network (PSTN) is fully converted to a broadband network.
• All fixed technology providers receiving support through the new Fund must commit to offering broadband throughout the service area at speeds that are at least equal to the national average broadband speed, and end-user rates that are reasonably comparable to the national average rate. Support recipients must also submit to quality of service oversight.
• The Low Income program is expanded to support broadband Internet access
• service for qualifying consumers.
• Contributions to all USF programs, including the new High Speed Broadband Fund, would be based on a combination of public network connections and working telephone numbers, including all broadband connections in service, regardless of technology.

The Coalition for Rational Universal Service and Intercarrier Reform (CRUSIR), a group of competitive service providers, told the Federal Communications Commission that Universal Service Fund support should not be limited to voice service or for that matter to plain old telephone service (POTS) providers, but we also see a need to continue funding in a manner that does not disadvantage smaller competitors. In a world of broadband services that are less and less like POTS, a funding mechanism based on telephone numbers makes even less sense than it may have in the past, and we continue to oppose it. We also stress that support should not be given for information services provided on a non-common-carrier basis, but for common carrier services that can support competitive provision of information services. Placing a "network neutrality" requirement on recipients so that they provide what might be called a "fair and balanced" information service is not a substitute for an open network that allows many ISPs to compete for service across the same physical facilities.

The Rural High Cost Carriers -- a cross-section of rural incumbent local exchange carriers who provide a full range of telecommunications services and facilities, including broadband, in rural, high cost areas of the U.S. -- are extremely concerned about the intersection of the Commission's Broadband policy and real revenue requirements, including intercarrier compensation and federal universal service fund receipts. Rural carriers are dependant upon such revenue requirements to continue to provide service at affordable prices in accordance with the Telecommunications Act of 1934, as amended in 1996. In order to ensure that the deployment of broadband across the United States does not create a negative impact on the provision of rural service, which includes not only voice but also broadband, the Rural High Cost carriers urge the Commission ensure four policies are reflected in the National Broadband Plan:

1. The size of any USF-related broadband fund, or related government directed revenues, should be driven by the Commission's public policy decision as to the desirable broadband speeds, and by eliminating wasteful spending on CETCs under the identical support rule.

2 Ideas such as USF portability and forward-looking pricing are unworkable in the real world because the deployment of high quality and sustainable IP-related services, such as email, VOIP and video, in rural areas, requires sustainable networks.

3. Reductions in current levels of high cost support and/or intercarrier compensation would jeopardize the ability of the Rural High Cost Carriers to continue to serve customers and deploy broadband capable networks.

4. The principle of cost-causation is paramount in designing a broadband-related contribution mechanism because upward pressure on the universal service fund will continue to exist as a result of broadband speed requirements and increases in demand. Those who profit from the network by driving increasing amounts of content and applications should be included in this calculus.