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ACA's Polka Troubled By FCC Chairman's USF Reform Proposals

In response to a major speech on Universal Service Fund (USF) reform by Federal Communications Commission Chairman Julius Genachowski, American Cable Association President and CEO Matthew M. Polka issued a statement on Oct. 6 outlining the trade group's concerns with the Chairman's proposals, highlighting the absence of competitively neutrality and fiscal responsibility.

"Because any plan to reform the USF regime will have a significant impact on consumers and competition in the broadband marketplace for the next 20 years, it must be forward looking, recognizing and taking advantage of today's competitive marketplace and the hundreds of broadband providers across the country, including many offering a robust service over cable television infrastructure that is a preferred choice by most consumers.  Unfortunately, the Chairman's plan does not achieve this critical objective," Polka said.

Chairman Genachowski used the speech to announce that the FCC will create the Connect American Fund (CAF) to direct USF money to broadband providers for the first time so that all households can access broadband service and have every chance to benefit from the broadband economy as they did from affordable access to dial-up telephone service. The FCC's emphasis on broadband is a major shift, given that USF traditionally awarded support to carriers for the purpose of ensuring affordable telephone service in rural America.

In his statement, Polka expressed concern that Chairman Genachowski's proposals improperly tilt CAF funding in favor of large phone carriers that will not provide broadband speeds equivalent to cable's DOCSIS 3.0 standard. Many of Genachowski's proposals reflected the recommendations of the America's Broadband Connectivity Plan (ABC Plan) submitted by large phone carriers, including AT&T and Verizon, a few months ago, such as providing these carriers a right-of-first-refusal (ROFR) to receive support to build out broadband in high-cost areas that are unserved.

"The Chairman's plan locks in a sole-source contract worth billions of dollars for years to a handful of incumbent large telecom companies to deploy broadband at maximum speeds that are below average.  It favors one small group of providers over others to the disadvantage of consumers.  By excluding hundreds of broadband providers willing, able, and eager to compete to provide service to consumers living in rural areas where government support is provided, it will deprive these consumers of receiving the best possible service at the lowest possible price," Polka added.

ACA officials --  at times joined by representatives of ACA member companies -- took their concerns directly to the FCC, Congress and the media, offering counterproposals intended to deny large phone companies preferential treatment and expand opportunities for cable operators and other entities that can serve as low-cost and high-performance providers in rural areas. 

On October 3, ACA Vice President of Government Affairs Ross Lieberman and ACA outside counsel Thomas Cohen of Kelley Drye & Warren, participated in a USF meeting with Zac Katz, Chief Counsel and Senior Legal Advisor to Chairman Genachowski; Wireline Competition Bureau Chief Sharon Gillett; Wireline Competition Bureau Deputy Chief Carol Mattey; and Michael Steffen, Office of General Counsel.

In the session, ACA officials voiced opposition to new rules that would give large phone companies a ROFR for CAF money earmarked to subsidize broadband deployment in rural locations with above average costs.

ACA officials outlined an alternative proposal, prepared in cooperation with the National Cable & Telecommunications Association, that would ensure that any distribution of CAF support is consistent with the objective of deploying broadband in unserved areas in a manner that is effective, efficient, and competitively neutral.

The ACA-NCTC plan -- outlined in detail in a letter to the FCC on Oct. 4 -- would cut from approximately $1.8 billion to $600 million annually the amount money available to phone companies that elect the ROFR.  ACA-NCTA also proposed denying funding to ROFR carriers unless they had deployed broadband in less than 35% of their service areas.  Lastly, ACA-NCTA said that funding for ROFR carriers should terminate after six years rather than 10 years as proposed in the ABC Plan.

"In the days ahead, ACA will continue to work with the FCC, and hopes to see the needed fixes in the final plan," Polka said.  The FCC is scheduled to vote on Oct. 27.

On Oct. 5, Polka led an ACA team in meetings with Gillett and other staff members of Wireline Competition Bureau, again to advocate for the ACA-NCTA alternative to the ABC Plan's ROFR conditions. Seven representatives of ACA member companies attended the meeting. There were ACA Treasurer Martin Brophy, Shen-Heights TV Associates; Paul Butcher, Big Sandy Broadband; Rick Ferrall, MetroCast; John Higginbotham, Frankfort Plant Board; Chris Hilliard, USA Communications; Ben Hooks, Buford Media, Alliance Communications; and Craig Martin, WOW! Internet, Phone and Cable.

On the same day, Polka sent a letter to Senate Commerce Committee Chairman John D. (Jay) Rockefeller to stress the need for USF reforms that accurately reflect the competitive market for broadband service and that do not give money to large phone carrier that are permitted to deploy previous-generation broadband technology.

"It is most vital that the FCC not disregard the competitive landscape and award price cap companies a multi-year entitlement worth billions annually and deny consumers the benefit of a competitive process that ensures the best service at the lowest price," Polka said.

Taking their case to the media, ACA conducted on Oct. 11 a telephone conference call with reporters to enumerate independent cable's concerns with Genachowski's USF reforms. Joining Polka, Lieberman, and Cohen on the call were Higginbotham of the Frankfort Plant Board, Chris Hilliard of USA Communications, and Craig Martin of WOW! Internet, Phone and Cable.

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