Frontier says it costs over $1B for carriers to provide rural voice services

Frontier, a telco that has a large rural presence, estimates that providing services in these hard-to-reach areas costs service providers over $1 billion.

In its December forbearance order on Universal Service Fund program, the FCC ruled that price cap carriers will still have to still provide voice services in hard-to-reach areas without any funding in about six percent of the census blocks where they serve as the incumbent service provider.

At that time, the USTelecom association proposed that the FCC could reallocate frozen support on a holding company basis across non-Connect America Fund-related, high-cost census blocks.

In June 2015, Frontier announced it would accept $283 million in CAF-II funding, which it said will enable it to build out broadband service to over 650,000 rural locations that it could not economically reach before due to their remote nature.

"The estimated costs of continuing to serve these areas are extensive -- more than $1 billion according to the model," Frontier said in a FCC filing. "Although the USTelecom proposal may not fully cover the costs, it represents a reasonable interim compromise while the Commission crafts long term rules for the auction."

Frontier said it could resolve the issue would be to allow service providers to make a decision on whether to accept the funding and the related obligations on an interim basis.  

"Implementing funding, particularly on an interim basis, preserves this essential service for the customers residing in rural America and does not undermine the FCC's ultimate goal of universal broadband availability," Frontier said.

According to the FCC's April 2014 FNPRM model, the regulator said that after a service provider accepts funds from the second phase of the Connect America Fund (CAF-II) Phase II, its funding would no longer be matched to its voice obligation.

After it sought comment on providing frozen support on an interim basis to fix this issue, the Commission explained that support would no longer be necessary if and when other providers are designated eligible telecommunications carrier (ETCs) in such areas.

In an earlier filing, Frontier told the FCC that it should clarify that service providers that have accepted Connect America Fund phase II (CAF-II) funding do not have to provide voice service in extremely high-cost census blocks outside of their service area.

Other service providers like AT&T have been critical of the FCC's move with one executive, likening it to someone shoveling a part of a snowy sidewalk. 

"At its December open meeting, the Commission acted on a petition for forbearance that was filed by USTelecom," said Hank Hultquist, VP of federal-regulatory for AT&T in a blog post. "While the FCC granted some of the relief that was sought, it denied USTelecom's request for forbearance from universal service obligations in places where price cap incumbent local exchange carriers (ILECs) receive no high-cost universal service support. In explaining this denial, the FCC sounds an awful lot like a kid explaining why he shoveled only part of the sidewalk."

For more:
- see this FCC filing (PDF)
- see this AT&T blog post

Special report: AT&T, Frontier, others accept $1.5B in CAF-II funding despite FCC's changing broadband definition

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