US telcos call for fundamental reform of broadband connectivity

US telcos call for fundamental reform of broadband connectivity

A proposal to the FCC, America’s Broadband Connectivity (ABC) Plan, by six major US telcos calls for significant broadband reforms.

The America’s Broadband Connectivity (ABC) plan, which has been submitted to the Federal Communications Commission (FCC) after five months in the making, brings together a significant alliance of US carriers: AT&T, CenturyLink, FairPoint, Frontier, Verizon and Windstream. The letter proposing the plan refers to “months of hard work, and significant concessions on the part of all signatories”, stating: “The time is now for meaningful, comprehensive reform.”

The alliance hopes to reform the intercarrier compensation (ICC) process, as well as easing the route – by providing what it terms a “glide path” – towards building rural broadband networks by reforming the universal service fund (USF).

The ABC plan

The proposals aim to speed broadband deployment to over 4 million rural homes and businesses in the US within the next five years, “two million of which will enjoy the benefits of broadband for the first time”. This is specifically engineered to tackle what the carriers involved have referred to as a rural-rural divide: “A rural-rural divide exists because the current system supports upgrades to the best rural networks in the nation but does not address the needs of millions of others in rural areas that receive insufficient support. Addressing these disparities in a fair and equitable way will make substantial progress in closing this divide.”

The FCC created the USF in 1997 to meet universal service goals set by Congress, but the FCC has openly criticised the fund in recent months, citing examples of the USF paying as much as $20,000 a year in support per line for some households, while other areas lack any support at all. The FCC went on to create the Connect America Fund (CAF) in March 2011, which aims to deploy broadband in underserved and rural areas. As Charice Wang, an analyst with Ovum, commented, “Modernising and streamlining the USF is crucial to get broadband to rural America.”

The ABC plan is particularly keen to ease the process of providing broadband services in “high-cost areas”, where telcos consider that “there is no business case for companies to provide services”. The proposals define broadband as being able to deliver speeds of 4Mbps downstream and 768Kbps upstream, which it considers the necessary levels to support robust education, healthcare and other applications.

Intercarrier compensation

The proposals aim to modernise intercarrier compensation, updating the rules that govern the billing of traffic over multiple carrier networks, claiming that the existing rules were not designed to support the deployment of broadband and “are no longer sustainable”.

Fundamental to this process is the proposal to gradually reduce termination rates, achieving a “low, uniform default rate of $0.0007 per minute” over the next five to eight years. The ABC plan claims that this will reduce the existing disincentives to deploy IP networks.

The telcos involved have also highlighted the need to eliminate “costly arbitrage scams that exploit today’s outdated rules” through new rules and lower access rates, claiming these have a negative impact on broadband companies, consumers and the FCC. The proposal states: “Without reform, the ongoing decline in intercarrier compensation revenue will be an impediment to broadband deployment and may jeopardise universal service.”

Universal service fund

The other major proposal is to change the focus of the USF over the next five years so that it concentrates exclusively on broadband networks, without increasing the current funding costs of the $4.5 billion per year USF. It calls for the USF to target support to broadband deployment in areas where there is no business case for companies to provide services; therefore, a corollary of its proposals are that the Connect America Fund should no longer support services in areas in which another provider offers the defined service without a subsidy. As well as focussing on high-cost areas, the proposals suggest that the USF should only support one provider in each area.

The telcos behind the ABC plan are keen to point out that they are technology neutral: “Providers could use any wireline or wireless technology that meets the Commission’s bandwidth and capacity requirements.”

The Information Technology and Innovation Foundation has praised these proposals: “The plan caps prices that will be paid to providers of rural broadband to sensible and sustainable levels, employs reverse auctions to leverage competition and alternative wireless technologies where they’re most appropriate. ABC represents a broad industry consensus that is technically savvy, consumer-friendly, and fiscally prudent. It’s the most significant step towards the full transformation of the USF into a broadband stimulus programme that we’ve seen.”

The Rural Associations

A number of US telecoms organisations that are known collectively as the Rural Associations – the National Telecommunications Co-operative Association (NTCA), the Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO) and the Western Telecommunications Alliance (WTA) – have also declared their support for these proposals, although they have expressed their approval in the form of a joint letter to the FCC rather than by jointly submitting the ABC proposals.

In a joint statement, the three bodies declared: “It should be noted that the Rural Associations are not signing onto any plan being filed by the US Telecom members. Instead, we are simply filing a joint letter explaining how their plan and the Rural Associations’ plan can work in tandem to create an effective framework for reasonable USF and ICC reform.”

Their letter went on: “We believe that this consensus framework represents the best available option for promoting sufficient and predictable cost recovery and sustainable, affordable broadband in the areas served by our members.” The NTCA, which describes itself as “the voice of rural telecoms”, is a not-for-profit association made up of 570 small and rural telephone co-operatives and commercial companies, some of which operate just a few thousand phone lines or less.

The Internet Innovation Alliance (IIA), which describes itself as a broad-based coalition supporting public policies that bring broadband to all Americans including rural areas, has labelled the proposal as “a major step forward in achieving universal broadband”. AT&T, one of the carriers which submitted the ABC plan, is itself a member of the IIA.

The plans have not met with universal approval, however. COMPTEL has issued a statement that it does support the recommendation to bring all transport and termination under Section 251(b)(5) of the Communications Act, so that a single regulatory regime and a single set of rates can apply. However, COMPTEL’s CEO Jerry James goes on: “The proposed $0.0007 rate violates the statute’s mandate that state commissions determine a cost-based rate by applying the FCC’s methodology.”

The six carriers which are involved in creating these proposals have continually stressed that the ABC plan represents a working compromise between the various needs of the telcos involved. “No doubt, some parties will complain that the plan goes too far; others will complain that it does not go far or fast enough. We ask you, however, not to let the perfect be the enemy of the good.”

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