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ACA Seeks Fiscally Sound, Competitively Neutral USF Reforms

To update the Universal Service Fund for the broadband age, the Federal Communications Commission should adopt fiscally sound and competitively neutral reforms and reject backward, pro-incumbent formulations advanced by large telephone companies determined to maintain a firm grip on as much government financial support as possible, according to the American Cable Association.

"Universal Service Fund reform is too important to be left only to the big incumbent telcos," ACA President and CEO Matthew M. Polka said. "A new federal fund created to support broadband access and services will not be used efficiently and will not reflect new market conditions if AT&T, Verizon, and other large carriers are allowed to rig the game in their favor while having an obligation to provide rural consumers with only yesterday's technology."

ACA's views were presented in Sept. 6 comments filed with the FCC in connection with the agency's plan to channel USF funds to promote broadband deployment in rural markets for the first time in the agency's history. Traditionally, USF money has been dedicated to keeping local voice service rates affordable in rural and high-cost areas but that system, developed during the monopoly phone era, never contemplated the explosion in choice, service, and technology enjoyed by the vast majority of consumers today.

ACA is concerned that the large phone companies' USF reform plan, known as the ABC Plan, would give them preferential treatment and shut out cable operators and other entities that can serve as low-cost and high-performance providers in rural areas.  Under the ABC Plan, billions of dollars earmarked to subsidize advanced broadband services will not be spent efficiently.

"The USF money -- $4.5 billion for the high cost fund alone annually - is collected from voice customers every month and these taxpayers have every right to expect that their money is used in the most productive way. ACA's USF reform proposals would protect the interests of taxpayers, but the big telcos do not appear to share the same agenda," Polka said.

ACA's comments pointed out that the ABC Plan would deny funding to competitors that could serve high-cost areas by blocking ACA's call for awarding support through competitive bidding or reverse auctions. As a result, these large phone companies would skew funding in their direction, undermining key pillars of reform: fiscal responsibility and competitive neutrality. The large phone companies also want to maintain their eligibility for USF support by endorsing first generation broadband speed minimums that can barely support commonly used online video services.

"The effect of this policy is to relegate users in these areas to inadequate broadband service. ACA members are prepared today to receive USF support to offer broadband service at higher speeds and to increase those speeds over time," Polka said.

ACA repeated its view that the ABC Plan is fixable if the FCC supports a reform agenda advanced by ACA. Among other things, ACA has called for a permanent cap on support in high-cost areas; distribution of funding on a competitively neutral basis; elimination or limitation of any access replacement mechanism for the larger incumbent telcos; and acceleration of the phase-out of legacy price cap support mechanisms.

ACA also told the FCC that it believes that smaller, incumbent (rate-ofreturn) LECs should be given a longer transition period from current High-Cost support, which will have the added benefit of easing the administration of any transition by the Commission.  As such, ACA generally supports the RLEC proposals, although it is concerned that the plan does not impose a hard and permanent cap on funding.

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