Price Cap Carriers Reject $185 million in CAF Money
Rural carriers now have more fodder with which to criticize the FCC’s strategy for expanding broadband access, after the largest price cap carriers turned down more than half the available Connect American Fund (CAF) Phase I money.
Smaller carriers have argued that CAF gives preferential treatment to large incumbent local exchange carriers (ILECs). This sentiment was reiterated in a blog post by National Telecommunications Cooperative Association (NTCA) CEO Shirley Bloomfield. In reaction to the money being turned down, she wrote it “is an indication that the FCC created a problem where they took money away from the companies who wanted to serve rural America and tried to give it to companies who don’t want to.”
Phase I originally set aside $300 million in funding, but eligible price cap carriers turned down $185 million. Verizon turned down $19.7 million; AT&T turned down $47.8 million.
In a letter declining the grant, AT&T wrote it cannot commit to the program while the company is completing its own rural broadband strategy. The letter also expressed concern over the uncertainty of how CAF participation could affect the company’s efforts to be relieved of outdated legacy obligations.
Verizon did not give a reason for declining, other than saying it was a relatively small amount of money.
As a result, the Competitive Carriers Association, formerly known as the Rural Cellular Association, has asked the FCC to reduce high-cost support to ILECs and increase the amount of support available to wireless Eligible Telecommunications Carriers (ETCs).
Who Took the Money
New broadband will be deployed in 37 states as the result of seven price cap carriers accepting CAF Phase I money. Those companies are:
- Hawaiian Telecom, $403,171
- Consolidated, $421,247
- Windstream, $653,325
- ACS, $1,676,325
- FairPoint, $2,025,075
- CenturyLink, $35,098,975
- Frontier, $71,979,104
Windstream has submitted a Petition for Waiver to accept an additional $59.8 million in Phase I support, if the FCC waives the requirement to deploy broadband to one unserved location for every $775 in incremental support.
ACS, which initially accepted the FCC’s full amount of $4.2 million, also seeks a waiver from the incremental support rule.
Century Link will accept an additional $46 million, if the Commission allows the company to offer broadband in areas currently served by wireless Internet service providers (WISPs).
Funding is restricted to areas not served by an unsubsidized competitor. Participants must meet interim buildout requirements within three years and final requirements in five years. Broadband speeds must reach at least 4 Mbps downstream and 1 Mbps upstream.
The FCC estimates within three years, nearly 400,000 people will have high speed Internet access; and within six years, seven million rural Americans will have access due to CAF.
The FCC has created a map showing where the new broadband buildout will occur.
The second phase of CAF will distribute up to $1.8 billion annually in support for areas with no unsubsidized broadband competitor. The Commission expects to adopt the model and competitive bidding mechanism by December 2012.
Carriers Await Next Step in Special Access Order
The FCC is planning to release a mandatory data collection order for its impending market analysis of special access services.
This process is part of the most recent special access order adopted by the Commission August 15, 2012. The order temporarily suspends any new grants of special access pricing flexibility. Previously, a petition not denied within 90 days after the pleading cycle was automatically granted.
The order indicated a data collection request would be issued within 60 days, which puts the release date around mid-November. An official date has not yet been announced.
Special access refers to the dedicated wireline service that provides physical voice and data connections between an interexchange carrier (IXC) and its customer locations. These services give mobile providers a way to link cell towers to wireline networks, supplies Internet access to small businesses and fulfills communication infrastructure needs for banks, along with medical, school and government institutions.
These lines are typically owned by the incumbent local exchange carrier (ILEC), which leases the lines to the IXC at regulated, preset prices. However, the 1999 Pricing Flexibility Order allows an ILEC to negotiate unregulated prices through a contract tariff, if it demonstrates the existence of competition in the marketplace.
FCC Chairman Julius Genachowski believes the current rules used to determine competition are flawed, because they allow competitive showings in a small portion of a large area to establish competition throughout the area for de-regulation purposes. For example, the rules would say that because competition exists in Washington, D.C., small businesses 40 miles away in Leesburg, Virginia are adequately protected.
Competitive carrier tw telecom released a statement supporting the FCC’s decision. “By suspending the flawed triggers that were based on incorrect predictive judgment, prematurely allowing the incumbent local exchange companies to obtain pricing flexibility, the FCC has prevented future rate increases in markets where the incumbents have market power,” said tw’s CEO Larissa Herda.
Those who disagree with the decision quickly criticized Commissioners for taking action without having the necessary data. Critics include fellow Commissioners Robert McDowell and Ajit Pai, who both dissented.
Pai made a scathing prediction about the implications of this Order: that fiber could end up being re-regulated. Such a result, said Pai, is likely to impede infrastructure investment and hinder next-generation network deployment.
USTelecom CEO Walter McCormick, Jr. agreed. In a statement released after the Order was made public, McCormick said it “is perplexing why the Commission continues to contemplate changes in policy that serve only to prop up outdated technologies in a manner that will discourage the deployment of new, higher capacity facilities.”
The FCC had planned to deregulate the special access market for price cap LECs when it adopted the 2000 CALLS plan. The proposed deregulation did not occur, because in 2005, the Commission released the Special Access Notice of Proposed Rulemaking (NPRM) in response to AT&T’s request to revoke the pricing flexibility rules and revisit the CALLS plan.
Dissenting remarks have not swayed Genachowski, who maintains the recent order fulfills the Commission’s fundamental commitment to competition.
ILECs Address Issues in ARC Order
The FCC is reviewing more than 50 cases submitted by incumbent local exchange carriers (ILECs) and the National Exchange Carrier Association (NECA) regarding their Access Recovery Charge (ARC) rates. Those carriers and NECA were ordered in August to respond to the following issues:
- Whether each LEC reasonably determined the amount of its Base Period Revenue, reasonably calculated its required intrastate rate reductions and reasonably estimated its projected interstate and intrastate switched access demand.
- Whether NECA’s allocation of projected pool interstate switched access revenues based on projected switched access billed revenues was reasonable.
- Whether the suspended ARC rates are just and reasonable and, if not, the process for requiring refunds.
The USF/ICC Reform Order allows carriers to impose an ARC on subscribers, as a way to offset declining access charge revenue during the transition to a bill-and-keep regime.
A carrier’s Eligible Recovery determines the ARC rate, as well as any recovery available through the Connect America Fund. Eligible Recovery is based on a percentage of the reduction in revenue each year resulting from the ICC reform transition.
The Order states that LECs miscalculated intrastate rate reductions and overestimated the loss projection from interstate and intrastate revenue; thus arriving at inaccurate Eligible Recovery amounts.
The investigation began in July, when the Commission suspended for one day ARC rates submitted by almost all carriers in their annual access tariff filing.
A month later, the Commission ended the investigation for several price cap LECs, after it was determined those carriers either correctly calculated their Eligible Recovery or made subsequent corrections.
Remaining LECs and NECA must now justify their calculations. In NECA’s case, the FCC has offered an alternative methodology for determining Eligible Recovery.
Oppositions to Direct Cases are due by October 18; rebuttals by October 25.
NANPA Q3 Recap
- Exhaust projection for Kentucky 270 NPA revised from 3Q2014 to 1Q2014
- Three more NPA 639 Saskatchewan, Canada test numbers added for carrier SaskTel; Uranium City added to list of Exchange Areas
- Assignment of NPA 737 to provide relief for the 512 NPA Austin, Texas; effective June 01, 2013
MTA IQ Delivery Date Change
As of September 1, 2012, the delivery date for MTA IQ updates from Tele-Tech Services has changed from the 28th day of the month to the 30th.
MTA IQ allows you to operate with a true view of access-billable and non-access-billable wireless traffic. By associating each NPA-NXX with the correct Major Trading area (MTA), MTA IQ provides accurate wireless jurisdiction information per the FCC’s rules.
Contact Customer Service if you have questions, email@example.com or 800-433-6181.