NCTA, ACA Propose Changes To Telcos' USF Reform Plan

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The FCC should make changes to a telco-backed proposal for Universal Service Fund reform to make the plan "more competitively neutral," in the event the agency adopts a right-of-first-refusal provision for incumbent carriers, cable lobbying groups said in a joint filing Tuesday.

The National Cable & Telecommunications Association and the American Cable Association have already gone on record opposing the America's Broadband Connectivity (ABC) plan for USF reform, which was formulated by a coalition of the nation's largest phone companies. The USF program has been used to support rural phone service, but the FCC wants to transition the fund to be used for broadband deployments.

The NCTA and ACA specifically have taken exception to the ABC proposal to grant incumbent local exchange carriers a right of first refusal (ROFR) for funds.

Under the ROFR provision in the ABC plan, an incumbent local exchange carrier in any wire center where it provides broadband to at least 35% of households would receive a right of first refusal. That "plainly violates the principle of competitive neutrality and unnecessarily increases the size of the [USF's] High-Cost program," NCTA and ACA said.

Multichannel News this week reported that the Federal Communications Commission is preparing to resolve the USF debate, likely by next month. The NCTA and ACA said they "understand that the Commission wishes to move forward with a final order as soon as possible" and that they proposed three changes to the ROFR "in the interest of compromise."

The three changes NCTA and ACA proposed in the Oct. 4 ex parte filing are:

* The FCC should establish a threshold that ensures that no more than $600 million annually in support is awarded pursuant to a right of first refusal. The ABC plan, through the ROFR provision, would give price-capped carriers a right to twice that amount -- roughly 80% of $2.2 billion. That would leave only 20% of support to be awarded through competitive bidding.

* The agency should award a ROFR only in areas that fall below the 35% coverage threshold proposed in the ABC plan (or another threshold to be determined by the commission). "By prioritizing areas where broadband networks already have been deployed, the ABC Plan is at odds with the Commission's goal of expanding broadband to areas where it has not yet been deployed," the NCTA and ACA said.

* Support under right-of-first-refusal provisions should be awarded for a shorter period of time than the 10-year period proposed in the ABC plan -- no more than six years, the cable groups argued, which would provide the "appropriate incentive for immediate investment without precluding competitive and technological progress in the future."

"As compared to the ROFR proposal in the ABC Plan, the NCTA/ACA proposal better promotes the Commission's universal service reform principles because it will produce more immediate broadband deployment in areas where it is most needed and distribute support in a more competitively neutral and fiscally responsible manner while providing for an adequate transition from the current legacy fund," the cable groups said.

The filing was jointly signed by NCTA vice president and associate general counsel Steven Morris and ACA vice president of government affairs Ross Lieberman.

The ABC plan was proposed in late July by AT&T, Verizon Communications, CenturyLink, FairPoint Communications, Frontier Communications and Windstream.

-- John Eggerton contributed to this article.