Late last week, six of the country’s leading broadband providers sent a plan to the Federal Communications Commission (FCC) aimed at speeding broadband deployment to more than 4 million Americans living in rural areas. They also announced what they call “an unprecedented agreement” with three groups that represent small carriers on a framework for complementary reform.

The six companies, which have been meeting since last February, are AT&T, CenturyLink, FairPoint, Frontier, Verizon and Windstream (see related Windstream story in this issue). Joining these carriers in support of reform are the National Telecommunications Cooperative Association, the Organization for the Promotion and Advancement of Small Telecommunications Companies and the Western Telecommunications Alliance.

The two complementary plans share key goals: modernizing the federal Universal Service Fund (USF) so that it is focused on building and sustaining broadband networks without increasing the size of the fund, and fundamentally reforming the Intercarrier Compensation (ICC) system that governs how communications companies bill each other for handling traffic, gradually phasing down these charges.

Together, the parties say the proposals “will benefit consumers and promote the goals of the National Broadband Plan, which called for overhauling these two complex systems to address the modern-day mission of supporting broadband deployment as cost-efficiently as possible.”

Note: the proponents define broadband as a minimum of 4 Mbps downstream and 768 Kbps upstream (supporting robust education, health care and other applications).

Core components of the proposal, called “America’s Broadband Connectivity Plan,” include focusing the USF on broadband deployment; and the creation of a new Connect America Fund (CAF) that would transition the USF during a five-year period to an exclusive focus on broadband deployment. This plan would:

>> Connect virtually all Americans to broadband access within five years without growing the $4.5 billion high-cost USF.
>> Target support to broadband deployment in areas where there is no business case for companies to provide service.

In addition, the plan would promote efficiency by targeting support more precisely to identified high-cost areas, and supporting only one provider in each area.
Also consistent with the parameters outlined in the National Broadband Plan, the companies’ proposal would modernize intercarrier compensation to provide certainty, stability and a healthy foundation for growth to meet the needs of consumers. Key aspects of this part of the plan would:

>> Transition terminating intercarrier compensation to a low, uniform default rate of $0.0007 per minute over a five- to eight-year timeframe.
>> Eliminate, through new rules and lower access rates, costly arbitrage scams that exploit today’s outdated rules at the expense of broadband companies and consumers as well as FCC resources as the commission chases after these fast-proliferating schemes.

What The Players Say

>> Hank Hultquist, vice president, AT&T Federal Regulatory: "After years of debating and discussing how to update the universal service and intercarrier compensation programs for the broadband era, a workable framework has emerged. To truly bring broadband services to all Americans, the rules of the road for the black rotary phone desperately needed to be updated for today’s competitive, high-speed communications networks.”

>> Melissa Newman, vice president, CenturyLink Federal Regulatory Affairs: "This plan recommends significant federal regulatory reforms to achieve the goal of connecting more Americans to broadband. The policy changes offered in this proposal also are necessary for bringing long-term stability and predictability to the nation’s universal
service program.”

>> Mike Skrivan, vice president, FairPoint Communications Regulatory Affairs: "This plan clears the way for the industry to move forward in an orderly and predictable manner toward the goal of universal broadband service offerings. It has been structured to balance the needs of all industry participants and consumers. It will provide real benefits to companies and consumers alike by resolving longstanding contentious issues and allowing companies to focus instead on investments needed to provide ubiquitous affordable broadband services that will provide incredible customer value."

>> Kathleen Q. Abernathy, chief legal officer and executive vice president, Frontier
Regulatory and Government Affairs: "Frontier’s focused mission is to deploy broadband service to rural America. We believe that universal broadband is critical to the future
of our country’s economic strength and well-being…This proposal reflects a careful
balancing of the need to embrace our nation’s broadband future while ensuring that carriers serving high-cost rural markets continue to receive adequate support for essential communications services.”

>> Kathleen Grillo, senior vice president, Verizon Federal Regulatory Affairs: "We worked hard to reach consensus on a workable framework, and each of our companies was dedicated to producing a sound proposal that will benefit consumers and the industry. We are hopeful that this framework will gain even more industry support. Our goal was a strong, detailed and thoughtful plan, and we are confident that we deliver that."

>> Mike Rhoda, senior vice president, Windstream Government Affairs: "This proposal modernizes the USF and ICC mechanisms as our industry migrates toward a broadband-oriented future. Importantly, the proposal provides an adequate transition period for carriers to move from the current structure to one that will meet the changing needs of
telecommunications consumers and help close the rural-rural divide that has persisted under the existing flawed framework."

Immediate Industry Reactions

>> Matthew M. Polka, president/CEO, American Cable Association: "ACA is pleased that the plan submitted by AT&T, Verizon and a number of mid-size telephone companies appears to seek to ensure that the Universal Service Fund regime is fiscally responsible, particularly by curbing its runaway growth, and by limiting, if not prohibiting, funding in areas where competing systems provide broadband service. These two positions along with ensuring that ACA’s members that fall within the smaller telco category are given sufficient time to adjust to changes in the system have been our association’s main pillars throughout this process. 

"But, as we all know, the specific terms and conditions of both proposals are critical.  Until ACA has reviewed them in detail and discussed them with the ACA Board, ACA is reserving final judgment. ACA intends to file comments with the Federal Communications Commission on the new proposals, providing feedback from the perspective of ACA’s nearly 900 independent video, telephone and broadband providers serving smaller markets and rural areas, more than half of whom do so without any government assistance."

>> Chris Guttman-McCabe, vice president/Regulatory Affairs, CTIA-The Wireless Association: “CTIA has called for reform of both of the outdated intercarrier compensation and universal service mechanisms for several years. While we look forward to reviewing the final details of the plan, it appears to advance several key goals, particularly in the areas of intercarrier compensation, and moves the ball forward on a number of important issues.

“We will work with the parties and Commission on these issues and on the creation of a robust, ongoing mobility fund that will facilitate the wireless broadband goals of the President and the commission. Consumers are rapidly migrating to mobile broadband, and a sufficient mobility fund that ensures that Americans have access to those services not only makes sense, but also is good policy.”

>> Debra Berlyn, president, Consumer Policy Solutions and director, Consumer Awareness Project: “The Connect America Fund (CAF) implements two important and complementary goals:  extending broadband to unserved areas, particularly millions of rural households, within five years; and maintaining broadband service in currently served, high-cost areas.

“This plan will help to close what’s been termed the ‘rural/rural divide,’ by ensuring that consumers throughout rural America in need of high-speed broadband have the opportunity to obtain that service, rather than limiting access just to those areas that are currently eligible for support under the existing regulatory structure…It will ensure that all consumers, and particularly those in rural areas, participate fully in the extraordinary economic and social benefits of broadband."

>> Steve Pociask, president, American Consumer Institute Center for Citizen Research: “For years, we have known that the USF has been broken. This proposal would cap the fund at current levels so consumers don’t continue to see rising fees on their bills and has the goal of connecting all Americans to broadband in the next five years. It is also encouraging to see that the current arcane Intercarrier Compensation system would be phased out so that all companies would pay a standard rate. If implemented, this proposal would bring simplification and, hopefully, curbed costs to rural telephone service. All of these items, in the end, would benefit consumers.”

>> The Information Technology and Innovation Foundation: "The ‘America’s Broadband Connectivity’ (ABC) Plan is a bold and significant step forward in the ongoing quest to improve our nation’s rural communication networks. The ABC Plan lays out a precise timeline for the phasing-out of the subsidies for the rural telephone network and for the simultaneous phasing-in of broadband service in its place. Upon completion, the plan will provide robust broadband service throughout rural America of sufficient quality to support Voice over IP (VoIP) as a substitute for ‘plain old telephone service’ (POTS) as well as advanced applications for commerce, health care, and education.
“The plan is built on a sound economic model that normalizes intercarrier compensation fees and ends current practices that artificially inflate both costs and prices of rural telephony, such as ‘traffic pumping’ and ‘phantom traffic.’ At a time when urban consumers are shifting their interpersonal communication from the legacy telephone network to broadband-enabled VoIP, the plan ensures that rural consumers will not be left behind. ITIF applauds the plan and endorses the principles and timelines it articulates."
>> The Telecommunications Industry Association (TIA): "TIA has long-advocated for the transition of the Universal Service Fund to broadband, in an effort to ensure that all Americans have access to next-generation broadband, even in the rural and the most hard-to-reach places. (This) proposal by USTelecom could bring us one step closer to that goal. Consumers benefit from balanced efforts to reform USF, and this compromise offers a promising way forward."

>> Michael Powell, president/CEO, NCTA: “We commend USTelecom and the incumbent telephone companies for offering a proposal designed to extend broadband to communities where it is not available today and to provide certainty in transforming intercarrier compensation to a low, uniform rate. While we recognize some positive elements in the proposed framework, we have important questions regarding how these principles would be fairly applied during the transition period.  

“We believe these issues deserve to be aired and considered, but more than anything, we hope that our collective interest in change will serve as a springboard to reform that will establish meaningful controls on the size of the high-cost fund, expand broadband to those without access today, and create a new mechanism more attuned to the realities of modern technology and fair competition.”

Debra Baker

The Daily


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