6 large telcos put broadband, USF reform proposals on the table

A coalition of the six largest U.S.-based wireline telcos submitted a proposal to the FCC today to provide a migration path to reform the current Universal Service Fund (USF) to focus on building and maintaining broadband networks and reforming the Intercarrier Compensation (ICC) process.

Taking a seat the coalition's table are AT&T (NYSE: T), CenturyLink (NYSE: CTL), FairPoint (Nasdaq: FRP), Frontier (NYSE: FTR), Verizon (NYSE: VZ) and Windstream (Nasdaq: WIN), which serve the vast majority of U.S. telecommunications customers, including those in rural areas.

Proponents of the America's Broadband Connectivity Plan hope to create a "glide path" to help transition funding for phone service in rural areas to broadband deployment and reform subsidies to deal with IP service delivery.

Under the new plan, "broadband" will be defined as being able to deliver speeds of 4 Mbps downstream and 768 Kbps upstream. The plan will also make funds available to bring broadband services where currently "there is no business case for companies to provide service."

From an ICC perspective, the proposal would transition terminating intercarrier compensation to a default rate of $0.0007 per minute over the course of five to eight years. It would also eliminate expensive arbitrage scams that the coalition says "exploit the outdated rules at the expense of broadband companies and consumers."

"This proposal modernizes the USF and ICC mechanisms as our industry migrates toward a broadband-oriented future," said Mike Rhoda, senior vice president, Windstream Government Affairs in a statement. "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."

Already, industry advocacy groups such as the Internet Innovation Alliance have already come out in support of the new reform proposal.

"From the Internet Innovation Alliance perspective it is a positive thing that industry and government leaders are looking to modernize the Universal Service Fund," said Bruce Mehlman, co-chair of the IIA in an interview with FierceTelecom. "A 21st century Universal Service Fund needs to fund broadband plain and simple."

Gaining consensus
Joining the six-member collation in support of this proposal are three organizations representing independent service providers: The National Telecommunications Cooperative Association, the Organization for the Promotion and Advancement of Small Telecommunications Companies and the Western Telecommunications Alliance.

These rural associations, however, are not singing onto the USTelecom member's plans, but rather are filing a joint letter with these players on how their plan and the Rural Associations' plan provide a complementary set of tenets to create a foundation for USF and ICC reform.

In April, the NTCA along with six others submitted its own comments with the FCC addressing near term intercarrier compensation reform issues.

"This joint letter is not a plan in and of itself, but rather it identifies America's Broadband Connectivity Plan and we had our plan back in April," said Mike Romano, SVP of policy for the NTCA in an interview with FierceTelecom. "The letter talks about how those two plans are complementary, and with some modifications as suggested in the letter, could work together to achieve a sustainable, comprehensive reform path."

Although it was not easy to come up with a framework that would satisfy the diversity of NTCA's members, most important to NTCA's members were two key issues.

First, the members wanted to ensure that any new plan would retain a lot of the cost recovery mechanisms that were in place, updated for broadband. Second, the proposal would need to ensure that any reduction in ICC rates would be replaced with a restructuring mechanism that provides support from another source.  

Romano cautions that any ICC rule change has be sensitive to the needs of its members. Unlike CenturyLink or even Frontier, which serves primarily rural markets, NTCA's members often operate just a few thousand phone lines or less in very remote areas.   

"Because most of our companies are rather small, it was really important to preserve the essential elements of the cost recovery mechanism that only operate in some of these very hard to reach areas," Romano said. "You do have to be very careful when in doing reform because a lot of these companies don't have big markets to make up for anything that goes awry."   

What about cable?
Of course, the other question is what the cable operators think. One of the cable industry's most prominent groups, the NCTA (National Cable & Telecommunications Association), said it was in the process of issuing its own statement about the plan but did not work on the plan with the other service providers.

Windstream's Rhoda said in a Broadcasting & Cable article that the group has been speaking with cable operators about getting the cable industry's support.

He added that there a number of things in their plan "for all areas" and that hopefully cable operators would get behind them but he did not specify a time when that would happen.

For more:
- see the providers' proposal
- and the NTCA letter
- Broadcasting & Cable has this article

Related articles:
Senators Kerry, Warner want USF to focus on broadband expansion
Julius Genachowski, FCC: Wireline's most powerful people
NTCA gets $6M in RUS funds reinstated into FY2012 budget
FCC to lay out USF reform plans

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