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ACA Calls On FCC To Lessen Burdens On Small Providers Imposed By Current USF Collection Mechanism

Trade Group Says Agency Must Proceed Cautiously With Design Of New Broadband Funding Mechanism

PITTSBURGH, July 9, 2012 - The American Cable Association called on the Federal Communications Commission to make improvements to the current Universal Service Fund collection system and avoid placing new burdens on small and mid-size cable operators under a planned new mechanism designed to collect USF support from new sources, such as end-user broadband revenue.

"There are a number of problems with the current USF collection system that should be corrected now to ensure that independent cable operators can go about their business without incurring heavy regulatory compliance costs," ACA President and CEO Matthew M. Polka said. "Once these have been addressed, the FCC can turn to creating a new contribution mechanism, bearing in mind that a one-size-fits-all approach will have a disproportionate financial impact on the smallest providers."

ACA's views were expressed in comments filed Monday with the FCC demonstrating that many ACA Members that provide voice service are concerned about the burdens imposed by the current USF collection system and the potential burdens any new contribution mechanism could impose on their broadband offerings.  In the comments, ACA focused on these concerns, urging the FCC to consider them as it seeks to reform the USF contribution mechanism.

In its comments, ACA highlighted the following:

Current policy that requires four or five traffic studies annually represents a significant administrative burden and legal cost.  The rules should instead allow small providers to rely on the prior year's traffic study and require only one traffic study filing per year.  The FCC should clarify that it is not necessary to file a traffic study when a VoIP provider determines its jurisdictional allocations by measuring 100 percent of its traffic for the reporting period, which is its actual interstate revenue.

The FCC should revisit the safe harbor rate of 64.9% for allocating revenues from interconnected VoIP services established in 2006.  The FCC's assumptions at the time about VoIP's use as a toll bypass long-distance service do not reflect the current provision and use of cable VoIP services by most ACA Members today.  Despite the fact that the interstate usage of cable operator voice services is usually far less than 64.9%, many small cable operators nonetheless use the safe harbor because it is administratively difficult and expensive to prepare traffic studies.

Given the relatively minor amounts contributed by smaller providers and the administrative burdens imposed on them, the FCC should increase the de minimis threshold at least back to its original de facto level of $200,000 in annual assessable revenues.

The FCC should not adopt a new rule making all bundled revenues assessable unless the provider allocates revenues based on prices for stand-alone service offerings.  If the FCC decides that a brighter line needs to be drawn with respect to bundles, ACA suggested that the FCC provide smaller operators with the option of either basing the allocation on stand-alone offerings or creating a safe harbor allocation based on average industry allocations for residential triple-play services.  Likewise, the FCC should not require cable operators to offer a transmission service for which there is little or no demand to avoid being assessed.

The FCC should not assess USF broadband Internet services based on speed or capacity tiers.  Adopting an assessment based solely on downstream speed provided under normal conditions or other metrics would not accurately reflect the nature of the service, and an assessment based on speed or capacity would interfere with the growth and development of the market.

The FCC should not adopt a requirement that a provider's advertised price include the USF contribution, claiming it would be a significant burden for providers -- especially with the contribution amount changing quarterly -- without any demonstrated material benefit.  ACA notes that it could be more confusing for consumers.

The FCC should not require service providers to segregate all USF collections from end users into dedicated trust accounts for the sole benefit of the Fund because so far the FCC has provided no indication that a sizeable number of service providers become insolvent each year or that the Fund has been deprived of a material amount of revenue as a result of such insolvencies. At most, the FCC could consider allowing the Universal Service Administrative Company (USAC) to impose this requirement only on contributors with a history of late payment or are in bankruptcy.

"ACA appreciates the FCC's efforts to reform the USF contribution mechanism.  We believe it would be most productive for the agency to focus first on the burdens imposed on providers by the current mechanism and then proceed cautiously with the design of its new funding mechanism so it does not unreasonably burden smaller contributors and deter consumers from subscribing to cutting-edge services," Polka said.

About the American Cable Association

Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 850 smaller and medium-sized, independent cable companies who provide broadband services for more than 7.4 million cable subscribers primarily located in rural and smaller suburban markets across America.  Through active participation in the regulatory and legislative process in Washington, D.C., ACA's members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business.  For more information, visit http://www.americancable.org/

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