The Final USF/ICC Reform Lightning Round: Reply Comments by the Kansas Corporation Commission

Reply comments were due September 6, 201 for the Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding (AKA USF Reform), where the industry was asked to respond to a variety of questions about several proposed alternative frameworks for USF and ICC, namely The Rural Associations’ RLEC Plan and the price cap carriers’ ABC Plan (which together forge the Consensus Framework), and the Federal-State Joint Board’s plan. This is it, people—the final chance for the industry to throw some hard punches at whomever they are so inclined to oppose, be it the FCC, the RLECs, the price cap ILECs, the Joint Board, or any number of commenters who may have said something irksome in any of the previous comments going back to April 1. To be honest, I’m not sure how much impact these final reply comments will have on the FCC—part of me suspects that the rules are already nearly completed and the FCC is just going to sit back and laugh while the stakeholders rip each other apart in comments. The Kansas Corporation Commission (KCC) definitely ripped into the ABC Plan, and given the state’s unique USF circumstances, it is easy to see why they are so heated about certain ABC Plan proposals.

Reply Comments of the Kansas Corporation Commission (KCC)

One of the main reasons why I decided to start summarizing USF/ICC reform comments earlier this year was so that I could personally learn more about USF from the perspectives of different stakeholders. USF was not covered heavily in any of my telecom policy classes, yet it is the area that I am trying to become an expert in, so much of my analysis is based on what I have taught myself, specifically from this proceeding. The intricacies of State USF programs are something that I am still learning about, and the KCC reply comments proved extremely helpful for me to gain an understanding of the challenges that certain states are facing. Kansas RLECs have also been very outspoken on USF issues, so in general I really appreciate the efforts that Kansas stakeholders have made throughout this proceeding because I have learned a lot from them. Seriously- Thank you, Kansas. 

On to the comments… Wow. The KCC is seriously not happy with the ABC Plan—“If the FCC proceeds with the ABC Plan without a longer transition period for early adopter states and/or further analysis of the impacts of the plan on existing state reform, it risks irreparable harm to these complementary state reform vehicles” (pg. ii). Kansas is an “early adopter” of state USF reform, and thus faces this presumed irreparable harm, which as you will see, is definitely a menacing possibility for this state, its consumers, its businesses, and its telecommunications providers.

On the Kansas Universal Service Fund (KUSF): Some of my readers may know these facts, but I thought the background information on the KUSF was helpful. KUSF was started in 1996 to provide support for Lifeline, dual part relay, telecom equipment for persons with special needs, and universal service/intercarrier compensation funding. When KUSF started, the assessment rate was 9%, one of the highest in the nation, but it has decreased over time to 6.18% currently. The total current funding obligation for the KUSF is $65.7m, and over its 14 years the KUSF has contributed $870m. The KUSF is now “at risk for becoming unsustainable under the ABC Plan,” because the size of the state fund may have to double as a result of specific Kansas state laws that require complete “make whole” access recovery for RLECs (and an opportunity for price cap carriers to seek full recovery as well). The KCC anticipates that the ABC Plan could result in total user contribution rates of 20-25% “not outside the realm of possibility” (pg. 10). Basically, with any significant loss in federal universal service funding and access revenue recovery, Kansas will burden an equal-sized increase in state contributions as per state laws. Kansas has 37 RLECs which are required to be made-whole through KUSF support (K.S.A. 66-2005(c)), and 2 price cap ILECs who legally could, and probably will, request to be made-whole especially if access revenues are significantly reduced (K.S.A. 66-2008(d)). KCC describes that the only recourse is to chance the state laws, and “such a dramatic change in state law requires legislation, and this is uncertain, will take time to accomplish, and cannot realistically be done until the contours of federal reform are known” (pg. 11).

On the “Train Wreck” ABC Plan: Yeah, they went there—KCC called the ABC Plan a “train wreck” for states like Kansas who have already adopted USF reforms. According to KCC, the ABC Plan would be a train wreck if hastily implemented, if VoIP is declared 100% interstate, if states are preempted, and if the highest-cost consumers are relegated to satellite service only. KCC argues that Kansas and other “early adopter” states should be treated differently than states who have not already implemented reforms (which are most states). KCC is very worried  that, “even if the FCC provides some FUSF support to recover some parts of the lost access charge revenue, the KUSF will likely be the easiest and most attractive ‘target’ for LECs seeking to make up losses in access revenue that result from reform”(pg. 8). Basically, the state fund will be overwhelmed, and KCC does not think the ABC Plan’s proposed ARM will be sufficient to cover the losses for price cap carriers, nor will the strict RLEC funding budget which “must cover not only access restricting losses, but also broadband build out and a reasonable opportunity to recover costs associated with existing investments in broadband capable plant” (pg. 8). To make matters worse, KCC acknowledges that all these negative consequences will have a direct economic impact on the state, for example, “a high-tech communications-centric company would find Kansas to be uncompetitive with other states that did not levy such a perceived ‘tax’ on their communications services,” if the total USF assessment rate does actually become 20-25%. Train wreck, indeed. 

On Not Declaring VoIP 100% Interstate: If you like reading comments that use the terms “interstate” and “intrastate” so much that you constantly keep typing the wrong term in your notes and articles, then you should read this section. Legalese aside, this section was really interesting and not a topic that has been covered considerably so far in what I have read. Basically, KCC is against the FCC declaring VoIP 100% interstate traffic, as it would reverse previous decisions and cause considerable havoc for states. KCC explains declaring VoIP 100% interstate “would be construed by providers as preempting State USF assessments of VoIP traffic, because State USFs very likely may only assess intrastate traffic under current law. As VoIP replaces circuit-switched technology, that reversal would reduce the State USF assessment base, thereby reducing the assistance that State USFs now provide to the FUSF in maintaining universal service. Thus, declaring VoIP traffic to be 100% interstate contravenes the Act’s admonition that ‘there should be specific, predictable and sufficient Federal and State mechanisms to preserve and advance universal service’” (pg. 15). 

Furthermore:  “For the FCC to ‘wave a magic wand’ and declare 100% of VoIP revenues to be from interstate calls, when consumers in fact clearly make considerable numbers of intrastate calls using VoIP telephones, and providers earn intrastate revenues from those calls, would be arbitrary and capricious. It would be inexplicable in light of the FCC’s treatment of wireless revenue, which the FCC for more than a decade has divided into an interstate portion assessable by the FUSF and an intrastate portion assessable by State USFs, using a ‘safe harbor’ approach very similar to that now used by the FCC for VoIP calls” (pg. 17). KCC anticipates that the KUSF could assess $500m in VoIP revenues in the next 5 years, which would clearly be an important contribution especially if the threats discussed above to the state fund come to fruition. KCC argues, “if that revenue is eliminated, the surcharge on remaining circuit-switched revenue will be increased, putting ever more pressure on the KUSF, and unfairly disadvantaging circuit-switched customers and providers as compared to VoIP customers and providers” (pg. 18). 

The final argument that I found really interesting regarding VoIP classification, (and I apologizing for taking such long blocks of text straight from the comments, but I really like KCC’s voice in some of their examples and arguments) described how the combination of changing technology standards and regulatory loopholes could spell disaster for the KUSF via new methods of arbitrage: “A trend in rural areas is to provide communications services via fixed wireless or WISP networks in lieu of landline networks. Placing an antenna on a grain silo or mountain top and providing wireless broadband service via technologies such as Motorola Canopy is done today in rural areas. In such a configuration, voice communications is provided via VoIP in lieu of a traditional landline. If VoIP providers are exempted from State USF contributions, then an enterprising ILEC with an aging landline network could deploy an inexpensive wireless network and avoid making USF payments because it was a VoIP provider. Yet, it could collect State USF support from make-whole state funds, such as KUSF, for its embedded costs of its unused landline network” (pg. 18). It should be noted that KCC is not against WISPs per se, just ILECs who pretend to still be landline providers but whose traffic is really traveling on a fixed wireless VoIP network while the landline infrastructure collects dust. KCC even suggests that fixed wireless service would be far superior to satellite in high-cost areas because fixed wireless service can facilitate a high quality of voice communication through VoIP, which satellite cannot. Just do not be a WISP by technical definition but a landline ILEC by regulatory definition—KCC is clearly anticipating such schemes already (perhaps something like this has already happened?). 

My Thoughts: KCC really hit on some tough issues, and unfortunately the ABC Plan authors will probably not have an opportunity to respond directly to some of these Kansas-specific arguments (maybe they did, I guess I will find out soon enough), which means it is now solely up to the FCC to figure out the appropriate balance between state and federal authority and responsibilities. Hopefully the FCC will take heed to some of KCC’s warnings about the dire consequences that will be inflicted upon the state if certain ABC Plan proposals are implemented. Clearly, Kansas is an exception and not the norm, so I wonder just how much attention the FCC will pay to the minority of states who have taken tremendous efforts in USF Reform (Nebraska is also in this category). KCC is really worried that the ABC Plan proposals could literally wash out all the progress the state has made in USF/ICC reform, and they are confused about how state-level responsibilities like audits, eligibility, etc. will be handled by the FCC if states are preempted. 

I really appreciated the depth of research that KCC invested in these comments, and the clear voice that they expressed. I hope all their work wasn’t in vain. I would have liked more direct commentary on the RLEC Plan, since; after all, Kansas has such a large number of RLECs and rural areas in comparison to other states. I didn’t really get much impression on their feelings about the RLEC Plan, other than they seem to think that the access revenue recovery is insufficient. 

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KCC was an early filer with their reply comments, but the others should be rolling in soon. I have yet to decide which comments I will feature here (although I think I did promise to cover the WISP perspective), but on the ILEC Advisor I am planning to look specifically at how the ABC Plan parties and the Rural Associations address some of the common critiques of their plans, so be sure and check there for new articles! 

Missed anything? Here’s what I have covered so far on Rural TeleCommentary: Alexicon Consulting, ITTA/Mid-Sized Carriers, Rural Broadband Alliance, Comcast, Cellular South, Gila River Telecommunications, Satellite Broadband Providers; and on JSI Capital Advisors:  American Cable Association, Nebraska Public Service Commission, Rural Telecommunications Group and Western State Telecommunications Associations.

Don’t hesitate to contact me with requests!

Cassandra Heyne

ruraltelecommentary@gmail.com

The Final USF/ICC Reform Lightning Round: Comments by the Satellite Broadband Providers

Comments were due August 24, 2011 for the Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding (AKA USF Reform), where the industry was asked to respond to a variety of questions about several proposed alternative frameworks for USF and ICC, namely The Rural Associations’ RLEC Plan and the price cap carriers’ ABC Plan (which together forge the Consensus Framework), and the Federal-State Joint Board’s plan. The FCC has graciously extended the reply comment deadline from August 31 to September 6, citing Hurricane Irene, the large number of initial comments, and the requests for an extension, as reasons for gifting us with an additional week. Thanks, FCC! I’ve managed to at least skim through the majority of the comments now, and one that really stood out to me was by the Satellite Broadband Providers.

Comments of the Satellite Broadband Providers (Dish Network, EchoStar, WildBlue, Hughes Network Systems, ViaSat and Spacenet):

Until now, I was under the impression that the Satellite Broadband Providers (“SBPs”) were fairly chummy with AT&T and the large price cap ILECs—I assumed that the SBPs would be fairly supportive of the ABC Plan because of AT&T’s previously expressed desire to “partner” with satellite providers in order to “efficiently” serve extremely high-cost areas. I’ve been very critical of this proposal, because I think the large ILECs are trying to weasel out of actually having to invest any time, effort or money into delivering broadband to very rural areas. They would rather dump the responsibility on satellite providers under some kind of agreement that would naturally benefit the ILEC financially in some way. I suspected that the ILECs would hope to keep a percentage of the USF funds as some kind of “finders’ fee” or to cover “administrative costs” or whatever, while the SBP would do all the work. So, when I read the SBP’s comments, I ended up being very surprised at how hostile they were towards the ABC Plan (and the RLEC Plan and Joint Board plan, which they call the Incumbent Wireline Proposals). 

Let’s get one thing straight: I do not enthusiastically support satellite broadband providers receiving CAF funds. I don’t think anyone actually wants satellite broadband unless they have absolutely no other options. Satellite broadband service is not reasonably comparable in terms of quality, speeds, capacity or cost. Therefore, I found it rather perplexing that the majority of the SBPs’ comments in opposition to the Incumbent Wireline Proposals revolved around ensuring reasonably comparable service and facilitating consumer choice, two areas where satellite providers fall very, very short: “Instead of adopting [the ILEC] proposals, the Commission should ensure reasonably comparable rates and services by implementing a suitable market-based mechanism, consistent with the Satellite Broadband Providers’ prior filings” (pg. i). They mean reverse auctions, naturally. Despite my low opinion of SBPs, I did find that many of their arguments against the ILEC plans were thought-provoking and hit hard on some of the controversial issues of the ABC Plan in particular. I can respect that. 

On the ILECs Putting Carriers before Consumers: The SBPs do not think that the 3 proposed plans are in the best interest of consumers, because “none of these proposals attempts to make any real public interest case, or to demonstrate that incumbent wireline carriers (as opposed to their competitors) are in the best position to extend high-quality broadband service to the unserved consumers quickly and at minimal cost” (pg. i). The SBPs believe that the ILEC proposals “would prop up incumbents using inefficient technologies and networks at the expense of consumers, and also at the expense of the priorities set forth in the NPRM” (pg. 4). Furthermore, they argue that DSL is not the most efficient technology, nor is it forward-looking, which they support by citing that one comment made by the CEO of AT&T that DSL is dead. They also seem to think that preventing satellite providers from receiving CAF funds will “increase the CAF funding burden by more than $20 billion,” and excluding all non-wireline competitors would be even more costly (pg. 6). Their main problem seems to be that if the Consensus Framework is adopted, 93% of the CAF support would go to incumbents—while I may not agree that satellite broadband should receive a large chunk of support, I can’t argue that this is an excessive amount of support reserved for companies that do not actually represent 93% of the broadband market currently. 

On the ILEC Plans’ Impact on Competition: The SBPs believe that the ILEC proposals are contrary to the fundamental USF principle of competitive neutrality, and the FCC should not exclude an entire class of carriers from CAF. They think the ILEC plans are anticompetitive, and “run contrary to the principles of competitive and technological neutrality, the requirements of the Act, and sound public policy. Instead, the Incumbent Wireline Proposals would create de facto regulatory monopolies by awarding funding preferences to incumbents, regardless of merit, and/or relegating competitive providers to separate, underfunded support mechanisms” (pg. 9-10). They insist, “High-Cost support should be earned through merit…and not viewed as a perpetual form of corporate welfare to which incumbents are entitled” (pg. 12).

On Reverse Auctions: The SBPs are still carrying a torch for reverse auctions, which makes me want to have a Mean Girls moment and scream “Stop trying to make reverse auctions happen!” Anyway, the SBPs  argue that reverse auctions protect the interests of consumers. Interestingly, they suggest that “the Commission’s goal should be to facilitate the deployment of fiber (instead of copper), and that fiber should be subsidized only where it is the most cost-effective technology” (pg. 16). The SBPs want a reverse auction methodology where any provider is eligible to participate, “including fiber, cable, wireless, satellite, broadband over power line (BPL), free-space optical links, and any new delivery mechanisms that may emerge in the future;” and “the absence of a funding guarantee to any service provider, the use of competitive bidding, and the use of market forces to encourage cost efficiency and quality are all hallmarks of this proposal” (pg. 17). Furthermore, the SBPs argue that there should not be separate funds established for wireline and wireless/other carriers.

On Restricting the ILECs’ Power: In addition to limiting the power of ILECs under the CAF, the SBPs want to see more than 7% of the funding available to competitive providers, and that the size of the fund for alternative technologies should not be capped because “it is not possible to predict which or how many households will be more efficiently served by competitive technologies in the coming years” (pg. 19). I actually agree with them here. The SBPs propose a number of restrictions for the ILEC’s Right of First Refusal desire, including not allowing ROFR in areas served by a competitive provider; only allowing ROFR if the incumbent already has 4/1 Mbps service to a majority of households (35% = not a majority); tying explicit COLR obligations to ROFR; and setting “well-defined milestones.” 

My (Many) Thoughts: I really have to commend the SBPs for the fact that their comments made me think deeply about a lot of the flaws in the ABC Plan. I enjoy reading, analyzing and writing about opposing views as much as I enjoy reading the perspectives of companies that I support, and the SBP comments definitely gave my brain a workout. I’ve been thinking critically about the ABC and RLEC Plans a lot lately. To clarify my opinions, I generally support the RLEC Plan for RLECs, but I think the ABC Plan for everyone else is far from the “industry consensus” that it pretends to be. These two plans have to be analyzed separately, but I’ve noticed that they are lumped together in many comments by opposing parties, and I find myself lumping them together sometimes too. I believe that there should be a separate fund for wireless, and I think the proposed $300m is insufficient. I think it is unreasonable that the 6 price cap ILECs have made themselves the gatekeepers for USF for the entire industry, minus the RLECs, who will presumably operate under the RLEC Plan. I acknowledge that the RLEC Plan is not perfect and the RLECs who are not in favor of this plan have presented valid and thoughtful arguments and alternative proposals throughout this comment cycle. However, the reality is that the clock is ticking and I don’t think the FCC has any patience for factions and industry infighting at this time, especially from the RLECs since they represent such a small portion of the overall industry. I’m just trying to be realistic.  

Back to the SBPs’ comments… I’ve never been of the impression that the price cap ILECs are willing to, or enthusiastic about, providing broadband in extremely rural areas. The problem is that sticking the rural consumers in the unserved price cap territories with satellite service is not really helping to reduce the urban/rural or rural/rural digital divides, despite what the SBPs may think. I don't think satellite broadband service is a viable permanent solution for rural broadband, so why invest USF money in this service, when it could better go to FTTH or 4G wireless broadband? I'm not saying that there is no place for satellite broadband, because there are definitely extremely rural areas where nothing else can be deployed. Satellite broadband should just not be used as the default service for a lot of rural areas where something better could be deployed with the help of USF subsidies.

I’m still unsure why the SBPs are trying to “bite the hand that feeds them” by complaining about the ABC Plan recommendation to have satellite providers serve the extremely rural areas, which may amount to hundreds of thousands of new consumers for satellite providers. The ABC Plan has even recommended a lower broadband definition (4 Mbps/768 kbps) which in my opinion would help the satellite providers. The SBPs preach about the importance of reasonably comparable service and consumer choice, but satellite broadband is not reasonably comparable to wireline broadband and consumers do not actively choose this service. The ABC Plan recommendations might be completely insufficient for wireless broadband, which is a service that hundreds of millions of people demand and use, but I think the ABC Plan is actually a pretty good deal for satellite providers. Sorry, SBPs. 

Of all the comments I have analyzed so far, this one was my biggest challenge to write about, and I have a lot of questions. Are SBPs trying to bust out of their “niche provider” role and become a real contender in rural broadband? How will they actually get consumers to see them as a serious contender? What’s the difference, from a satellite perspective, between partnering with an ILEC for CAF support versus winning CAF support through a reverse auction, if they get the money anyway? Do they think receiving CAF support on their own will help them compete with RLECs? Why do they need CAF support anyway, when they have been providing their niche service without it perfectly well all along?  Like I said above, I respect the SBPs for submitting thought-provoking comment despite what my personal opinions may be. 

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Catch up on all my comment analysis from this round on Rural TeleCommentary: Alexicon Consulting, ITTA/Mid-Sized Carriers, Rural Broadband Alliance, Comcast, Cellular South, and Gila River Telecommunications; and on JSI Capital Advisors:  American Cable Association, Nebraska Public Service Commission, Rural Telecommunications Group and Western State Telecommunications Associations. 

Have a great long weekend!

Cassandra Heyne

ruraltelecommentary@gmail.com

Today, U.S. v. AT&T Gets a New Meaning

August 31, 2011 is indeed a fine day for competition in the wireless telecommunications industry, and it is very reaffirming to see that AT&T’s lobbying power in DC has for once not worked to their advantage—no amount of lobbying dollars can conceal the fact that this merger would be a disaster for competition and consumers. The AT&T-Mobile Saga is not over yet, not by a long shot… However, AT&T’s stronghold over the outcome has been softening gradually over the last month and with the DOJ’s decision today, AT&T’s claims to T-Mobile, and therefore to a duopoly in the wireless industry, are becoming more of a pathetic whimper than a battle cry.

I have been trying to consistently cover the merger from a rural telecom perspective since it was announced, but I’ve been fairly selective about what I have written about since there is no shortage of good information available. Well, if this announcement doesn’t warrant me taking a short break from USF comments, then I don’t know what does!

I have honestly not been paying very much attention to the DOJ’s review of the merger-the DOJ is “out of my element,” so to speak, so I typical focus my attention on the FCC’s review. I actually haven’t been paying all that much attention to the merger in general for the last few weeks, as I have obviously been focused on USF. However, I have been pleased with the FCC’s merger review so far, including its ongoing search for more information from AT&T. To me, this has indicated that the FCC is not about to blindly accept the merger (which Commissioner Copps assured the world several months ago). Public opinion about the merger has continued to decline, despite what AT&T may be saying. AT&T continues to spin news reports and “facts” about alleged merger benefits in a way that attempts to draw attention away from the real issues. They say the merger will create 5,000 jobs, but negative 15,000 jobs do not a public benefit make (this is just one of the recent examples of AT&T’s delusional attempts to justify the merger). 

Anyway, I couldn’t believe my eyes when I saw earlier today, on Twitter of course, that the DOJ filed a suit to block the merger—apparently, AT&T did not even expect this monumental action by the DOJ. I thought the Telecom Gods had gifted us aplenty this week with the FCC’s decision to extend the reply comments on USF by an additional week, but I guess I was wrong! Basically, the DOJ thinks the merger will have detrimental effects on competition, which means that the DOJ is actually doing its job. Here is a rundown of some of the comments in the United States of America v. AT&T Inc., T-Mobile USA, Inc., and Deutsche Telekom  that I found interesting, with an emphasis on comments regarding smaller carriers:

•  “Vigorous competition is essential to ensuring continued innovation and maintaining low prices.” (pg.2). Nice shout-out to the Brick Phone of Yesteryear!
•  “None of the smaller carriers’ voice networks cover even one-third of the U.S. population, and the largest of these smaller carriers has less than one-third the number of wireless connections as T-Mobile. Similarly, regional competitors often lack a nationwide data network, nationally recognized brands, significant nationwide spectrum holdings, and timely access to the most popular handsets” (pg. 2-3).
• T-Mobile has, and continues to be a “challenger brand,” which is an important role in the market, and “places important competitive pressure on its three larger rivals, particularly in terms of pricing” (pg. 3)—a role which should not be eliminated from the marketplace.
• “There are no cost-effective alternatives to mobile wireless telecommunications services” (pg. 6)—not for regular consumers or business/enterprise/government consumers.
• “In the face of a small but significant price increase imposed by a hypothetical monopolist it is unlikely that a sufficient number of customers would switch some or all of their usage from mobile wireless telecommunications services to fixed wireline services such that the price increase or reduction in innovation would be unprofitable” (pg. 7).
• “Nationally, the proposed merger would result in an HHI of more than 3,100 for mobile wireless telecommunications services, an increase of nearly 700 points. These numbers substantially exceed the thresholds at which mergers are presumed to be likely to enhance market power“(pg. 12).
• T-Mobile is not only a value challenger, but a known innovator, “responsible for numerous ‘firsts’ in the U.S. mobile wireless industry:” first Android handset, BlackBerry, wireless e-mail, Sidekick, Wi-Fi hotspots, advanced HSPA+ technology, and unlimited plans (pg. 12). [But AT&T had the first iPhone, which is all that really matters now, right?]
• “Competition taking place across a variety of dimensions, including price, plan structure, network coverage, quality, speeds, devices, and operating systems would be negatively impacted if this merger were to proceed” (pg. 14).
• Smaller carriers would especially be impacted re: roaming agreements, ability to “constrain” the Big 4, obtaining good handsets and smartphones, and ability to increase their market shares.
• “Enhanced risk of anticompetitive coordination” = significant harm, for consumers “all across the nation, including those in rural areas with limited T-Mobile presence” (pg. 16)
• “By eliminating T-Mobile as an independent competitor, the proposed transaction will likely reduce the competitive incentive to invest in wireless networks to attract and retain customers” (pg. 17).
• The merger would increase entry barriers, and entry “would not be likely, timely and sufficient to thwart the competitive harm” that the merger would cause (pg. 19)

Naturally, the response from the industry has been colossal. Most merger opponents wasted no time in releasing statements declaring the DOJ’s decision a victory and “a triumph of facts over politics,” but AT&T has spit back that they will oppose this decision—I don’t know about you, but I can’t wait to see what “evidence” they provide in an effort to persuade the DOJ to reverse its findings. PCMag.com cautions that “the fight isn’t over until a federal court hands down an order to block the merger, or AT&T decides it will just be too much trouble.” However, other analysts are saying that the merger is basically dead in the water, which could end up being a bad thing for companies like Sprint who may wish for a shot at eating AT&T’s leftovers once the deal falls through.

The Wall Street Journal’s article asks, “who could oppose a deal supported by interest groups as varied as the Louisiana Ballooning Festival and the Association of New Jersey Orchestras?” Since I’ve found the insanely strange responses by rice farmers, balloon hobbyists, cattle ranchers and whatnot one of the most entertaining aspects of this merger, I can’t help but say this: “It’s a dark day for AT&T’s minions.” Next time, perhaps try gaining favor from constituents who are actually involved in the telecommunications industry. Most rational analysts saw though all the fluff submitted by these parties as nothing more than an attempt by AT&T to buy support and make the awful deal seam palatable. Anyway, who can argue with the Association of Retired and Disabled Minority Rare Orchid Farmers with Lupus when it comes to telecommunications mergers?  You don’t want to look like an insensitive jerk by saying “these people know nothing about the wireless market,” so you just let them have their duopoly—right? I think that was AT&T’s intention all along, because there definitely haven’t been any cold, hard facts proving that the merger will be a benefit to competition and consumers. 

Looking at the reactions… A statement by the Rural Telecommunications Group (a vocal opponent of the merger) explains that the DOJ’s decision “shows that there is no question that this merger would have been bad for rural America, rural consumers, and rural carriers.” Another vocal opponent, Public Knowledge, stated: “Fighting this job-killing merger is the best Labor Day present anyone can give the American People. AT&T’s effort to recreate ‘Ma Cell’ by holding rural broadband hostage and threatening American jobs deserves nothing by scorn. The FCC should move as quickly as possible to follow the lead of the Department of Justice and reject the merger.” JSI Capital Advisors analyst Richelle Elberg expressed little surprise about this decision and provided a great chart describing her reaction’s to AT&T’s alleged benefits of the merger. GigaOM mused on what might happen to T-Mobile if the deal fails, and considered options ranging from Sprint moving to merge with T-Mobile (again, but I honestly don’t expect this outcome to happen) to T-Mobile getting snatched up by a cable company or private equity firm. Members of Congress have weighed in too—Senator Al Franken (D-MN), yet another vocal opponent, stated “I have long believed that this merger would be a terrible deal for consumers, and I’m pleased the Department of Justice has taken the wise step of officially opposing it.” 

You get the idea—basically everyone is ecstatic about this decision, at least everyone who isn’t AT&T or T-Mobile or perhaps the International Rice Festival. Well, I am ecstatic too but I heed the warnings that the war is not won yet. I think the FCC will be more likely to block the merger now that the DOJ has filed this suit, but I definitely do not see AT&T letting up on the pressure. 

I think the DOJ has effectively paved the road for merger opponents, especially small wireless carriers, to feel confident that the government is not always against “the little guy.” The DOJ filing clearly describes the challenges that small carriers will face if the merger is approved, and these companies should continue to provide evidence illustrating this fact. Small rural carriers who are opposed to the merger need to keep in mind, "the battle may be won but the war is not over."

So far this merger has enough twists, turns, shocks and stabs to befit, well, an AT&T-sized merger. I can’t wait to see what happens next!

Tomorrow… Back to USF comments.

Cassandra Heyne

ruraltelecommentary@gmail.com

The Final USF/ICC Reform Lightning Round: Comments by Gila River Telecommunications, Inc.

Comments were due August 24, 2011 for the Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding (AKA USF Reform), where the industry was asked to respond to a variety of questions about several proposed alternative frameworks for USF and ICC, namely The Rural Associations’ RLEC Plan and the price cap carriers’ ABC Plan (which together forge the Consensus Framework), and the Federal-State Joint Board’s plan. In an effort to cover a broad range of stakeholders in a really short period of time, today I want to bring your attention to a rather depressing selection of comments by Gila River Telecommunications Inc. (GRTI). Tribal carriers face some absolutely daunting challenges in deploying broadband on tribal lands, and the proposed USF/ICC reforms have the potential to further devastate broadband progress in these economically, geographically and demographically challenged areas. 

Comments of Gila River Telecommunications (GRTI)

GRTI does not support the Joint Board plan, ABC Plan or RLEC Plan (referred to as “The Three Reform Plans”), but they do not offer much by way of evidence or arguments against these plans aside from claiming that tribal carriers would likely lose millions of dollars if any of these plans are adopted. According to GRTI, “The loss of revenues would cripple GRTI financially and would likely have a detrimental effect on telecommunications services and on broadband service in the Gila River Indian Community” (pg. iii). Furthermore, “any decrease in revenue would likely halt any progress” in increasing Tribal community broadband adoption rates or decreasing end-user prices. 

On the Unique Tribal Challenges: GRTI explains that only about 70% of households on tribal lands have basic telephone service, and the broadband adoption rate is absolutely dismal (like 10% dismal). GRTI actually has a fairly high adoption rate of around 20%. In addition to the adoption challenge, GRTI faces very high costs to deploy infrastructure, and the GRTI community has a high rate of unemployment and poverty. According to GRTI, “Costs of deploying fiber-to-the-home have been as high as $12,000 for a single residence. These costs leave little, if any, margin for profit. As a result, GRTI has been forced to deploy fiber-to-the-home in small increments” (pg. 5) Furthermore, GRTI cannot charge less than $52.90 per month for 1.5 Mbps DSL, over $20 more than the national average, and “few residents are able to afford this service” (pg. 5).

On Recognizing and Promoting Tribal Sovereignty: GRTI encourages the FCC to adopt USF/ICC reforms that uphold tribal sovereignty. GRTI’s recommendations include rules that reflect the following: “(1) any carrier seeking to provide communications services on tribal lands must receive approval from the appropriate tribal entity; (2) tribal governments should have the option to establish, monitor and enforce public interest obligations and deployment requirements; and (3) actions by states to reform state universal service systems and Intercarrier compensation mechanisms should have no bearing on the disbursement of federal funds to provide service on tribal lands” (pg. 11). Upholding such principles of tribal sovereignty in USF reform will allow Tribes to choose which carrier best serves their communities and allow them to have more control over service quality, costs and deployment schedules. 

On Adopting a Tribal Carve-Out: GRTI encourages the FCC to adopt a “Tribal Carve-Out” similar to General Communications Inc.’s proposal. The Tribal Carve-Out “should include the following characteristics: (1) a floor on the minimum amount of USF support; (2) cost recovery for middle mile costs; and (3) an exclusion for tribal lands from any cap on high-cost support” (pg. 14). GRTI thinks that a carve-out will “ensure that ILECs serving tribal lands would have a reliable flow of revenue to further broadband deployment and sustain local service…prevent net losses in revenue due to decreased ICC revenues…[and] ensure that GRTI realizes fair and expected returns on its investments” (pg. 15-16). In addition to the carve-out, GRTI thinks tribal carriers should be excluded from any caps on CAF support, “for the same reason a cap would not be appropriate in the context of high-cost USF support to tribal lands” (pg. 18).

My Thoughts: While I am deeply sympathetic to the trials and tribulations of Tribal carriers, I feel a need to be harshly critical on some of their proposals. First, I think there needs to be a demonstrated increase in adoption rates before the FCC “carves out” special treatment for these carriers. I don’t think a 20% adoption rate necessitates investments of $12,000 per household. I would rather see special funding programs going towards increasing adoption rates and digital literacy than going towards infrastructure investments that will never be recovered. I calculated that it would cost $1.2m to deploy FTTH to 100 households, based on GRTI’s $12k figure. If only 20 of these household subscribe, GRTI is only recovering about $12,500 per year at the $53 monthly rate, barely enough to cover the cost of deployment to one household. When you include regular operating expenses, there is literally no business case for deploying FTTH to these households—and I do not say that very often, as I am an avid FTTH supporter. Last week I wrote about the fundamental rural broadband conundrum: do you provide the service first and then reap the rewards from increased economic activity in the community, or do you wait for new businesses and education opportunities and improved health care to come to the community and then increase broadband capability? In the case of these tribal communities, I’m not sure if deploying FTTH first is the right answer, when 50% of the population is unemployed and 50% are below the poverty line.

However… broadband has the opportunity to facilitate jobs, education and health care for tribal communities, so it probably isn’t a good idea to hold off on deployment either. So, I would propose that Tribal communities take a hard look at wireless broadband, either fixed or mobile, preferably utilizing unlicensed spectrum. It would cost considerably less, and the benefits would be just as powerful as if the community had FTTH. It probably would not take 20 customers an entire year to cover the costs of deploying wireless to one customer. Wireless broadband would be a much more affordable solution for the members of the community, especially compared to the astronomical $53/month for 1.5 Mbps DSL. If the cost of broadband decreased to $20-30, more people could subscribe, and more people might be willing to try it out for a couple of months and boost their digital literacy skills in the process. Once the tribal carrier increased adoption and helped the community realize the benefits of broadband, it might be able to make a better business case for investing in FTTH. 

I hate that there are areas in this country where broadband only reaches 10-20% of the homes, but in these areas, I’m not sure if it is specifically the responsibility of the Universal Service Fund to fix what appears to largely be a demographic problem. I do however think that tribal carriers could benefit from a short-term separate fund, but a significant portion of the funding should go towards programs that increase adoption and digital literacy. Aside from this, I don’t especially think that tribal carriers should follow different USF rules than regular RLECs—there are also RLECs who provide service in tribal communities but are not specifically “tribal carriers,” so their interests need to be recognized as well, and there should be incentives for more companies—RLECs, ILECs, wireless, etc. to invest in tribal areas, which could be prevented by restricting special treatment only to tribal carriers. 

What other funding opportunities are available to tribal carriers through small business loans, special tribal business financing programs, and schools, libraries and health care broadband funding opportunities? I hope that there are ample funding opportunities outside of USF for these carriers, because there is clearly a need for extra, extra support in these communities. I definitely don’t think the tribal carriers should receive less USF support than they do currently, but I’m not sure if USF is the solution to the vast challenges these carriers face. 

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If anyone has any good information on Tribal broadband adoption, deployment and investment challenges, please feel free to share it with me, as I would like to learn more about this issue. 

Only 2 more days until reply comments are due! Where did the time go? 

Cassandra Heyne

ruraltelecommentary@gmail.com

The Final USF/ICC Reform Lightning Round (Hurricane Edition): Comments by Cellular South

Comments were due August 24, 2011 for the Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding (AKA USF Reform), where the industry was asked to respond to a variety of questions about several proposed alternative frameworks for USF and ICC, namely The Rural Associations’ RLEC Plan and the price cap carriers’ ABC Plan (which together forge the Consensus Framework), and the Federal-State Joint Board’s plan. Whilst stuck indoors for the next 2 days while Hurricane Irene does its thing, I’m going to try to get through as many comments as I can. I highly doubt I’ll get through all 130 by Wednesday, but Hurricane Irene definitely provided me with a nice excuse to do as much work as possible this weekend!

Comments of Cellular South

Since the ABC Plan was released, I have been very curious about the response by rural wireless carriers to the proposal that the Mobility Fund should be a mere $300m, in comparison to the $4.5b for wireline carriers. When wireless broadband appears to be “the wave of the future,” according to Cellular South and the broadband marketplace, it is hard to imagine that these companies would be satisfied with such a small piece of the pie. Well, they are not satisfied. You can read more about the rural wireless perspective from the Rural Telecommunications Group here, but I also thought Cellular South’s comments deserved some attention. I thought they had some great arguments, and then… They call for rate-of-return to be eliminated! With all due respect to Cellular South, I do not think one rural wireless provider is exactly in a position to decide the best course of policy for all the RLECs. 

Overall, Cellular South agrees with the Consensus Framework and Joint Board proposals to establish separate funds for fixed and mobile broadband, but the agreement stops there. Cellular South feels as though these alternative frameworks are the “wrong answer” because “allocating a substantial share of CAF support to wireline carriers would inevitably and significantly impair the extent and pace of mobile broadband deployment in rural America, and would also ignore the fact that carriers serving subscribers of wireless services are by far the largest category of contributors to the universal service fund” (pg. iii). Cellular South is understandably outraged by the fact that mobile broadband is placed at such low priority in the alternative proposals, when mobile broadband in such high demand—“in the face of these facts on the ground, it is stunning that the wireline broadband proponents have chosen to put forward plans for CAF funding mechanisms that are marked by a transparent imbalance in proposed funding levels” (pg. 4). 

On a Separate Fund for Wireless: Cellular South provides 3 sound arguments in favor of establishing separate funds for wireless broadband:

1.       Separate funds “would enable the Commission to give a focus and priority to mobile broadband commensurate with the role that mobile broadband has come to play in the communications marketplace” (pg. 8);

2.       Separate funds “would facilitate the use of a forward-looking economic cost model tailored to the costs associated with deploying and maintaining mobile broadband networks in rural and high-cost areas” (pg. 9); and

3.       Separate funds would help meet the aggressive mobile broadband goals set forth by the Obama Administration and the FCC.

On the $300m Mobility Fund Budget: Cellular South points out that $300m is only 6.7% of the overall ABC Plan budget and only 12% of the Joint Board plan’s budget (and just for build-out costs, not operational costs, which can make up a substantial portion of a wireless network’s expenses). With this in mind, “Cellular South encourages the Commission to compare these proposals to the widespread and accelerating demand for mobile broadband devices and services, to the fading demand for wireline services, to the costs associated with brining mobile broadband networks and services to rural areas, and to the level of contributions into the existing USF program received from carriers providing wireless services” (pg. 13). Rather than such an incredibly one-sided budget, Cellular South supports a balanced distribution of funding with support portability reflective of the actual broadband marketplace. Of many of the comments I’ve read, I found this to be reasonably consumer-oriented. I think some of the commenters have forgotten that consumers are the actual beneficiaries of USF support. Cellular South seems to keep this in mind, at least until their next recommendation…

On Kicking RoR to the Curb: I don’t know why, but Cellular South is very bitter about RoR. They find it anti-competitive and they do not think it is even worth the FCC’s time and effort to improve it, because “the embedded cost mechanism used to disburse support to rural incumbents is bankrupt and should have been discarded long ago” (pg. 16). They caution that if RoR is maintained (which it should not be), the rate should be reduced significantly: “If the Commission decides to retain a rate-of-return mechanism—based on what Cellular South considers to be the misguided view that this mechanism can somehow be overhauled to improve the incentives of rural incumbents to make rational investments and to avoid the temptation of pumping up costs as a means of inflating the amount of support they receive—then a prerequisite for the continued use of the rate-of-return mechanism should be a represcription of the stratospheric 11.25 percent rate of return that has remained in place since 1990” (pg. 17-18).

On NOT Capping CAF: Taking the polar opposite position as Comcast, Cellular South is opposed to capping CAF. Interestingly, Comcast argued that caps are the definition of fiscal responsibility; but Cellular South argued that there is nothing about the definition of fiscal responsibility that necessitates a cap on high-cost funding (I agree with Cellular South). They insist, “The Commission has at its disposal many tools for improving the efficient use of funds (e.g. through reliance on forward-looking cost mechanisms and portability of support) and for curbing waste, fraud and abuse perpetuated by CAF funding recipients (e.g. through meaningful penalties and audit requirements)” (pg. 18). I think they hit on a good point—that curbing waste, fraud and abuse should be through enforcement. Cellular South further argues that a cap on USF is “a repudiation of the Commission’s statutory duty to base its universal service policies on a principle that its support mechanisms should be sufficient to preserve and advance universal service” (pg. 18). 

My Thoughts: I don’t know where Cellular South’s hostility towards RoR came from, but I would like to know. One of my biggest sources of aggravation throughout the multiple comment cycles in this proceeding, starting with last summer’s CAF inquiry (when it still seemed like a threat that RoR would actually be eliminated), are the complaints that RoR companies are wasteful and inefficient without providing examples. Verizon and AT&T were the worst perpetrators, and it surprised me that another rural telecom provider like Cellular South would also blindly follow this train. I want someone to cite specific examples of RoR companies who meet a numerical definition of wasteful and inefficient utilization of USF because of RoR regulation specifically. Tell me the name of the company, and show me exactly how a forward-looking cost model would correct the so-called abuses and inefficiencies allegedly caused by RoR. RLECs have been more than willing to show quantitative examples of 1) how most of them never see 11.25% in the first place; and 2) how eliminating RoR would be financially catastrophic. So, RoR critics, step up your game and stop saying that RoR is the source of waste, abuse and inefficiency without backing up your claims. This just leads to the FCC and others in the government (like state regulators and Congress) perpetuating the “systemic prejudice” against RoR and RLECs that the Rural Broadband Alliance is so gallantly trying to fight.

 

Aside from this one issue, I basically agreed with everything else Cellular South said, and I thought their reasons for establishing separate wireless and fixed funds were well conceived. I’m not sure if I think CAF should be split evenly 3 ways between ILECs, RLECs and wireless, but I actually think an even distribution is more rational than wireless only getting 6.5% of the funding. I also thought they made an interesting recommendation that funding should be portable between the separate funds, but they didn’t go into much detail about this—hopefully they will in the reply comments.

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I’m going to enjoy the hurricane now, but tomorrow I’m going to take a hard look at the comments submitted by a variety of state regulators. Like the wireless carriers, I suspect many of them feel burned by the ABC Plan’s proposal to drastically reduce their role in the future of USF.

Have a request? Let me know! I’m definitely not going anywhere all weekend (contact me via e-mail or on Twitter @RuralTelComment). 

If you are also stuck indoors all weekend, you can catch up on all the comment summaries I have done so far: the Rural Broadband Alliance, Alexicon Consulting, ITTA, Comcast, Western State Telecom Associations, and the Rural Telecommunications Group (the last two are for The ILEC Advisor). 

Cassandra Heyne

ruraltelecommentary@gmail.com

The Final USF/ICC Reform Lightning Round (Hurricane Edition): Comments by Comcast

Comments were due August 24, 2011 for the Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding (AKA USF Reform), where the industry was asked to respond to a variety of questions about several proposed alternative frameworks for USF and ICC, namely The Rural Associations’ RLEC Plan and the price cap carriers’ ABC Plan (which together forge the Consensus Framework), and the Federal-State Joint Board’s plan. Whilst stuck indoors for the next 2 days while Hurricane Irene does its thing, I’m going to try to get through as many comments as I can. So far I’ve mostly looked at comments by parties that I generally support, so now it is time to look at the perspectives of stakeholders who are much less friendly to RLECs. Who better than Comcast, one of America’s most hated companies? As it turns out, I found most of their arguments rather hard to digest. 

Comments of Comcast

Cable companies were excluded from the “industry” negotiations, so I’ve expected them to be negative about the Consensus Framework and the ABC Plan. Cable companies are not very active in the rural broadband industry, as cable is typically associated with urban and suburban broadband only—where it is very popular, making the cable industry a front-running voice on broadband and Internet policy. So, I’m not sure how influential the cable industry will be in terms of the final rules for USF reform, but their comments on ICC reform and VoIP classification are likely to hold weight at the FCC. I definitely did not take their USF comments very seriously—they have what, 3 rural customers, tops? The day that I see Comcast trying to build broadband in rural Montana is the day I will respect their opinions about the high-cost fund.

Comcast basically colors inside the FCC’s lines in terms of the “4 Principles” for USF/ICC reform, and they cite a number of National Broadband Plan recommendations throughout their comments. They also rely on the Broadband Availability Gap Model for a lot of their “evidence.” Comcast naturally feels as though the Consensus Framework is “fundamentally inconsistent with the Commission’s guiding principles,” it doesn’t promote effective change for ICC, it could result in higher interconnection rates for CLECs, its biased towards ILECS/RLECs, and “the incumbent LEC’s principle concern with respect to USF reform appears to be maintaining their current revenue streams, rather than brining long-needed fiscal responsibility and accountability to high-cost support.”

On A Low Uniform Rate for ICC: Comcast wants the same rates paid by all originating voice carriers regardless of the terminating network’s technology, and they want it now. Comcast wants everyone on the $0.0007 rate in three years, with a very rapid glide path “for all rate elements including tandem switching and transport” (pg. 13). They argue that the current ICC regime discourages upgrades to IP technology and causes all of the arbitrage problems that plague the industry. According to Comcast; “In view of the well-documented disruptions, anomalies, and economic inefficiencies caused by the current ‘patchwork’ system of Intercarrier Compensation, the most desirable policy is to supplant the existing arrangements decisively and expeditiously. Comcast thus supports a brief transition to a uniform rate for all providers—price cap and rate-of-return incumbents as well as CMRS carriers and competitive LECs—that nonetheless is designed to avoid significant disruptions” (pg. 12). They believe that a 3 year transition to uniform 0007 is not a flash cut, and it will “[hasten] the demise of regulatory arbitrage,” and reduce “perverse incentives to invest in TDM technology” (pg. 13). 

On an Access Replacement Mechanism and Total Company Earnings Review: Comcast urges the FCC to reject the ABC Plan’s proposed transitional access replacement mechanism because, “there is simply no need to allow carriers, particularly price cap carriers, to recover lost revenues previously obtained from Intercarrier Compensation on a dollar-for-dollar basis” (pg. 14). Although I found humor in the “particularly price cap carriers” jab, I don’t think anyone has proposed a dollar-for-dollar recovery mechanism. Comcast argues that the proposed recovery mechanism undermines the FCC’s market-driven and fiscal responsibility policy goals, and “any such bailout would fundamentally distort the marketplace” (pg. 14). If a recovery mechanism is adopted, Comcast thinks the FCC should include non-regulated revenues “as well as technological advances and the efficiencies that companies realize when they provide multiple services over a single network” to determine the level of recovery support (pg. 15). They think arguments against a total company earnings review are “inappropriate,” and they provided several examples of why, which I did not find particularly convincing. They also argue, “Although Congress has prohibited carriers from using revenues from regulated services to subsidize services that are competitive, there is no Congressional or FCC prohibition against the Commission’s consideration of unregulated revenues when determining the appropriate level of subsidies for regulated services. To the contrary, taking revenues from unregulated services into account when calculating the need for and amount of subsidies would advance the Commission’s stated goal of fiscal responsibility by ensuring that support is targeted to the carriers and areas that actually need a subsidy” (pg. 17). 

On Capping the High-Cost Fund: Comcast supports a hard cap on the high-cost fund at 2010 levels and provides absolutely no evidence to support this claim, other than it was recommended in the National Broadband Plan. Comcast thinks that 2010 HC support levels are somehow the definition of fiscal responsibility, and “funding decisions should focus on maximizing consumer benefits, not on ensuring incumbent LEC revenue streams.” Basically, they just don’t want LECs to receive any more USF support than they did last year. Like I said, when Comcast announces plans to deploy broadband in extremely rural areas, I will respect their opinions about the size of the high-cost fund. 

On Reverse Auctions, “The Essence of Fiscal Responsibility:” In addition to claiming that a 2010 level cap is the meaning of fiscal responsibility, Comcast also thinks that reverse auctions are the “essence of fiscal responsibility,” but they provide no evidence to support this claim. They offer a vague, and slightly hilarious, roadmap for implementing reverse auctions:

·         Step 1: Determine unserved areas where market incentives are insufficient to encourage broadband deployment;

·         Step 2: Determine the size of the area for bidding purposes, which should be census blocks, which bidders should be able to combine. Furthermore, “the bid prices for the combination of census blocks would likely be lower than the sum of the bids for the individual census blocks” (pg. 26). Yay! A sale on unserved census blocks! Buy one, get one 50% off!

·         Step 3: Design the “protocols and practices to be used in the auction” (pg. 26) Oh really, that’s it? So basically they have no solution for the actual reverse auction methodology. That’s ok, nobody else does either. 

My Thoughts: I tried to read Comcast’s ICC-related comments through the eyes of someone who supports the proposal to eliminate the PSTN by 2018 and not someone who wants to prolong the current ineffective ICC regime. I do not agree that access rates should be reduced to 0007 in three years for everyone; I think that would cause anarchy in the access revenue world. Transitioning to IP networks does not eliminate the underlying purposes of access revenue—carriers still need to compensate one another for use of each other’s networks, and those compensation rates should at least somewhat reflect actual costs, which are significantly higher for small rural companies. There is a good reason why the Consensus Framework proposes different glide paths for price cap and RoR companies.

I agree with Comcast that there must be swift action to eliminate arbitrage, but I personally do not blame the broken system entirely for arbitrage schemes—I blame the companies who engage in this behavior. If I break a law that I personally find unnecessary, I’m the one who gets in trouble if caught, not the lawmakers, and there is no legal justification for “I should get away with it because the laws aren’t proper for today’s society.” Access rate arbitrage signifies a market failure whereby regulatory intervention is now necessary. Closing the loopholes that companies exploit is one part of the equation, and adequate enforcement to discourage arbitrage in the first place is another part of the equation. I do not see how imposing a uniform low rate for ICC in 3 years will specifically address these market failures, instead it will seriously disrupt revenue streams for RLECs in particular, which will even further delay upgrades to IP networks. So, I find considerable fault in Comcast’s reasoning that a rapid transition to 0007 will both eliminate arbitrage and push all carriers to transition to IP networks—many of the small carriers will not be able to afford it. 

Regarding Comcast’s USF arguments—they just aren’t very good. Comcast clearly just wants to see their ILEC/RLEC competitors receive less support, and this agenda is not well concealed in their comments. 

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Still up for review this weekend: wireless carriers and state PUCs. 

Have a request? Let me know! I’m definitely not going anywhere all weekend (contact me via e-mail or on Twitter @RuralTelComment). 

If you are also stuck indoors all weekend, you can catch up on all the comment summaries I have done so far: the Rural Broadband Alliance, Alexicon Consulting, ITTA, Western State Telecom Associations, and the Rural Telecommunications Group (the last two are for The ILEC Advisor). 

Cassandra Heyne

ruraltelecommentary@gmail.com