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ACA Wants Federal Broadband Subsidies To Leverage Existing Plant, Stretching Taxpayer Dollars and Maximizing Network Reach

Cable Group Objects To Greenfield Approach As Demonstrably Inefficient

LAKE BUENA VISTA, FL., July 23, 2012 - The American Cable Association supports an allocation of federal broadband subsidies through the new Connect America Fund (CAF) that makes the most efficient use of billions of taxpayer dollars earmarked for ensuring broadband Internet access is both universal and affordable and accelerates the rollout of quality service to the greatest number of unserved and other high-cost locations.

"In determining how to allocate billions of dollars in subsidies to price cap phone carriers to offer broadband to millions of unserved and high-cost locations, the Federal Communications Commission should adopt a cost model that efficiently distributes support so that government money is used to subsidize broadband to the maximum number of homes at the least cost.  A brownfield model achieves this objective, reflecting what the price cap carriers will actually build and leveraging use of their existing facilities," ACA President and CEO Matthew M. Polka said.

ACA, setting forth its position in reply comments filed Monday with the FCC, is a participant in the process to convert the Universal Service Fund (USF) to a program primarily about underwriting broadband deployment in rural high-cost areas following decades in which federal support underwrote only local telephone service in rural areas.

ACA's reply comments focused exclusively on the cost model as applied to price cap phone companies and not to USF support provided to rate-of-return phone companies.  ACA has long supported continuing previous high-cost funding levels for rate-of-return phone companies during a deliberate transition period.

In its comments, ACA rejected a cost model proposed by price cap carriers that advocated a Digital Subscriber Line (DSL) greenfield approach.  Adjusting inputs and assumptions used in the cost model submitted by the ABC Coalition, ACA determined that a greenfield model would provide excessive support -- more than twice as much support per location as a brownfield build -- resulting in far fewer unserved and high-cost locations reached by broadband Internet facilities, dealing a blow to a national objective set by FCC Chairman Genachowski.

ACA noted that the overriding objective here is to ensure that as many high-cost locations as possible have access to broadband service.  ACA's analysis demonstrated that a brownfield model most accurately reflects the activities LECs will realistically undertake to meet the FCC's performance obligations of 4 Mbps downstream and 1 Mbps upstream.

"Adoption of a greenfield model would produce inefficient outcomes, providing excessive support per location, and would result in fewer locations receiving broadband service. Development of an accurate and realistic cost model is essential for distributing support efficiently to achieve the FCC's aims," Polka said.

ACA pointed out that the ABC Coalition agreed that most price cap carriers will use CAF money to build fiber to DSL access multiplexer (DSLAM) facilities, but the two groups disagreed on whether the FCC should repay on a greenfield or brownfield cost model. The greenfield cost model is four times more generous to price cap CAF recipients because it assumes that miles of copper facilities connecting DLAMs to homes and offices will be replaced.  Because price cap carriers have no intention of ripping out their copper plant - the most expensive component in their network - FCC reliance on a greenfield cost model would excessively overfund price cap carriers.

ACA endorsed an FCC data collection effort to pinpoint the most accurate level of support needed for a brownfield build, and it applauded an FCC proposal to hold workshops, if necessary, to estimate the quality of price cap carriers' copper plant.

Lastly, ACA reiterated its view that no CAF support whatsoever should be provided in areas where unsubsidized providers, such as ACA Members, are offering broadband service.

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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