Target: Billions for Broadband

4/25/2011 12:01 AM Eastern

The National Cable & Telecommunications
Association wants the Federal Communications Commission
to repurpose about $2 billion in support for rural
phone carriers through the Universal Service Fund for
broadband over a three-year period.

The FCC is overhauling the USF program and has solicited
industry input on creating a Connect America Fund to
subsidize broadband in unserved areas, and is also looking
to reform the intercarrier compensation regime.

The NCTA said the commission should first immediately
cap both the overall size of the Universal Service Fund and
the amount of annual high-cost support at 2010 levels, as
the FCC suggested in the proposed rule change.

In comments filed April 18, the NCTA said shifting $2
billion in funds from 2012 to 2014 from the USF High Cost
Program to a Connect America Fund would still leave
roughly $2.5 billion in existing high-cost support for the
three-year interim period.


The USF High Cost Program is designed to ensure that
rates paid by consumers in rural areas are comparable
to those in urban areas. In 2010, more than 1,800 eligible
carriers received approximately $4.3 billion through the
High Cost Program.

“Proceeding in this manner will allow the commission
to begin directing support to areas without
broadband, while preserving sufficient support under
existing mechanisms to ensure that consumers in rural
areas will continue to have access to supported services,”
the NCTA said.

During the initial three-year period, the Connect
America Fund should support deployment of broadband
services — capable of providing 4 Megabits per
second downstream and 1 Mbps upstream, which the
FCC has defined as the minimum speeds for broadband
— only in areas that currently lack such service,
the NCTA said.

In 2015, the FCC should repurpose legacy high-cost
model support (HCMS) funds, which are available to
cap the prices of regulated carriers, for the Connect
America Fund to also support broadband where it currently
exists but where ongoing support is required
(i.e., where there is no business case for an unsubsidized
competitor to provide service), according to the
cable group.

The NCTA agreed with the FCC’s proposal to limit Connect
America Fund subsidies to a maximum of $3,000
per line.

In addition, the NCTA said the commission should initiate
a proceeding to reduce the 11.25% authorized rate of
return for High Cost Program recipients — which was adopted
in 1990 — to levels that “more accurately reflect current
market conditions. While the interim legacy high-cost
support remains available, the commission also should
examine the amount of support being provided.”

The American Cable Association, which represents
smaller, independent cable operators, also urged the FCC
to “rebalance its proposals” to ensure that the new Connect
America Fund “will be fiscally responsible and competitively
neutral” in comments on the proposed changes
to the USF rules.


“ACA endorses the FCC’s effort to design Universal Service
Fund programs that embrace affordable and universal
broadband as the primary objective,” ACA president
and CEO Matt Polka said in a statement. “Because taxpayer
dollars support the USF program, it is critical for the
FCC to create a broadband fund that is efficient and does
not skew local markets by funding providers whose direct
competitors are unable to receive USF money.”

Among the ACA’s recommendations were to cap the
high-cost fund at the 2010 funding level and to eliminate
support in competitive markets.

ACA said reverse auctions should be used to award support
on a competitively neutral basis.

The group also said there is a need for an eight-year
transition for the smaller telcos, with fewer than 100,000
access lines, that are current USF recipients.

“These smaller providers are most reliant on current
High Cost funding to provide service to consumers and
will suffer most if funding is reduced significantly and precipitously,”
the ACA said.

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