NCTA has been a strong supporter of the major universal service reforms adopted by the FCC in November 2011. Reforming the universal service regime was an incredibly complex and difficult challenge and the Commission deserves great credit for establishing a long-term path to a modern program that supports broadband only where necessary and that relies on market-based mechanisms to the greatest extent possible.
As part of those reforms, a unanimous FCC brought needed fiscal discipline to the Universal Service Fund, while setting aside $300 million to support new broadband infrastructure in unserved areas (Phase I of the newly-created “Connect America Fund (“CAF”)). To the good, the FCC recognized that CAF Phase I support should be targeted to areas where no unsubsidized provider offered broadband service. But unfortunately to the bad, the FCC rules for the new money barred anyone other than incumbent phone companies from using those funds to bring broadband to unserved consumers.
The results have been somewhat predictable. With only one provider potentially eligible for support, some incumbent phone companies have balked at accepting the support arguing that funding levels provided are insufficient to justify new broadband builds in unserved areas. Specifically, of the $300 million set aside for CAF Phase I support, $185 million remains unclaimed and unspent as incumbent phone companies have lobbied for more generous support terms.
To address this poor showing, the Commission recently released a Further Notice of Proposed Rulemaking to examine concerns about low support levels and to consider proposals that might incent broadband providers to accept CAF Phase I funding and commit to additional broadband deployment.
From the cable industry’s perspective, we welcome this discussion but we have two concerns. First, we oppose proposals that would divert CAF Phase I support from its core purpose of bringing broadband to wholly unserved areas. The FCC should use this funding to ensure that unserved consumers receive broadband, rather than providing support to “underserved” areas. Expanding support to help bring service to the roughly 4 percent of US households that currently lack service is a targeted, but difficult, national problem that deserves careful attention.
Second, consistent with principles of competitive neutrality and fiscal restraint, it is incumbent on policymakers to abandon a “single-source contract” approach to this broadband support. Instead, the Commission should expand eligibility for CAF Phase I support to non-telco broadband providers (cable, wireless, satellite) that may be able to provide broadband service more efficiently. Such an approach would not only extend broadband more quickly, but would also ensure that taxpayer dollars are efficiently spent.
The Commission’s current myopia on this topic is particularly disappointing because it has already demonstrated that allowing multiple parties to engage in competitive bidding for support is a much more effective way to distribute support. Specifically, in 2012 the Commission developed and implemented a competitive bidding process for support from Phase I of the Mobility Fund that successfully awarded all of the available $300 million to 33 bidders who agreed to build facilities that will cover more than 83,000 miles.
In today’s competitive broadband marketplace, where incumbent LECs themselves concede that consumers have many other options available, the Commission’s proposal to direct hundreds of millions of dollars in new universal service funding exclusively to incumbent LECs should be a non-starter. As the Commission has demonstrated with the Mobility Fund, a process that relies on competitive bidding among all interested companies can be just as effective in delivering broadband to areas that need it, while staying true to the principles of efficiency, competitive neutrality, and fiscal control.