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ACA Urges FCC To Reject USF Reforms Proposed By Large Phone Carriers

The American Cable Association is urging the Federal Communications Commission to adopt fiscally sound and competitively neutral reforms to the Universal Service Fund program along lines suggested by ACA and other organizations to counter financially imprudent and economically outdated ideas advanced by incumbent phone carriers clinging to monopoly-era support mechanisms overtaken by technology and market forces.

"For the first time in our nation's history, the FCC has a real opportunity to rely on the USF to fund broadband facilities and services in rural communities, which the country must include in the Internet revolution," ACA President and CEO Matthew M. Polka said. "Without a doubt, the FCC will fall short of its mission if major phone companies insist on ballooning the size of the high-cost fund and receiving USF money in markets where they face competition or where competitors can offer service more efficiently."

ACA's position on USF policy was set forth in comments filed August 24 at the FCC in response to a series of USF reform proposals recently submitted to the FCC, including one by a phone company coalition that included AT&T and Verizon. The plan, called America's Broadband Connectivity or ABC, was billed as "transformational" but in reality was simply a blueprint to continue, if not exacerbate, current flaws in the USF and intercarrier compensation (ICC) regimes. The ABC plan would also directly and materially harm ACA members, who provide telecommunications and broadband services in competition with the creators of the ABC plan.

Despite many flaws in the ABC plan, ACA told the FCC that it was salvageable, and it provided key ACA recommendations.

"With the targeted fixes proposed by ACA, the FCC can correct significant flaws in the ABC plan and adopt an order that achieves the goal of fundamentally modernizing the USF to meet the nation's broadband availability challenge," Polka said.

For many decades, the USF program's purpose was to ensure affordable voice telephone service in rural America. With consumers today dependent on fast and reliable links to the Internet to learn, communicate and compete economically, the FCC has decided to channel USF money to broadband providers so that all households have a chance at gaining access to broadband services.

In its comments, ACA documented how the ABC plan would skew the USF reform process in favor of large phone carriers. In essence, the authors of the ABC plan have given themselves access to much more government support than they have today with minimal obligations.  Because that would result in a bad deal for consumers, competitors, and the FCC, ACA maintains that the ABC plan's core features must be rejected.

Earlier in the year, ACA provided the FCC with fiscally responsible and competitively neutral USF reform proposals. Since submitting its proposals, ACA has held discussions with providers and trade associations throughout the industry seeking consensus around four bedrock principles:

  • Ensure fiscal responsibility and efficiency in the distribution of support;
  • Do not skew market-driven competition by continuing support to only one or a select number of providers in a market;
  • Provide future support on a competitively and technology neutral basis using reverse auctions; and
  • Grant smaller incumbent providers sufficient time to transition while ensuring they act consistently with the universal broadband objective

Despite having a productive exchange of ideas, ACA determined that the ABC plan did not meet these criteria, meaning an industry consensus balancing diverse interests has not been reached, a basic fact the FCC should consider in determining whether various USF reform plans are in the public interest.

As the debate moves ahead, ACA plans to urge the FCC to anchor USF reforms to ACA proposals unveiled several months ago, including adoption of a permanent cap on the $4.5 billion high-cost fund; distribution of funding to broadband providers on a competitively neutral basis; and elimination of current high-cost funding support for large phone companies within two years.

Lastly, while ACA supports many of the FCC's proposals, it believes a balanced approach is needed in dealing with telephone companies with fewer than 100,000 lines, which are much more reliant on current high-cost funding to provide service to consumers and will suffer most if funding is reduced precipitously.

ACA proposes that the FCC offer eligible smaller phone carriers the ability to elect to continue to draw from the high-cost fund for eight years so long as they agree to commit to provide broadband service in all their service areas at verifiable minimum downstream and upstream speeds.


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