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ACA: FCC Should Stay The Course On First Phase Of CAF Support

The American Cable Association called on the Federal Communications Commission to stay the course with regard to rules associated with the first round of Connect America Fund (CAF) money accepted by large telecommunications carriers because the program's goal of jump-starting broadband deployment in unserved areas achieves the FCC's goals.

"The FCC designed Phase I of the CAF program to reach a significant number of relatively low-cost locations with up to $300 million in federal support.  With the funding allocated last year, the program's stated objective is in the process of being achieved.  Until that is no longer the case, the FCC need not substantially alter the program," ACA President and CEO Matthew M. Polka said.

ACA's views came in comments filed Jan. 28 in connection with the FCC effort to close the gap that finds nearly 100 million Americans without broadband Internet access in the home.  With broadband viewed as the central platform for future economic growth, information, and opportunity, the FCC decided to develop the CAF program to channel funds to broadband providers willing to deploy facilities in rural and other areas on the wrong side of the digital divide.

In its comments, ACA noted that price cap LECs (Local Exchange Carriers) have provided myriad reasons for rejecting Phase I CAF support, some of which have nothing to do with the need to expand the number of areas eligible to be served, to obtain additional support beyond $775 per location, or to use support to deploy second-mile fiber.  As a result, making changes to the CAF Phase I based on concerns raised by some carriers would likely have the unfortunate effect of providing additional and excessive support to others where in fact none is needed.

To assist the FCC, ACA examined the pool of eligible lower cost unserved locations in price cap LEC territories to determine whether price cap LECs in fact need changes in the rules to use incremental support to deploy broadband to unserved locations.  Relying on geographic and performance data in the National Broadband Map and the CQBAT cost model submitted by the ABC Coalition (price cap LECs), ACA found for several price cap LECs there are more than a sufficient number of lower cost locations that are not served with broadband service at speeds of 768/200 kbps for which they would have a sound commercial rationale to use their allocation of incremental support of $775 per location.  For these LECs, there is no basis for the FCC to alter its rules.

For several other price cap LECs, ACA determined they appear to have an insufficient number of lower cost locations that are not served with broadband service at speeds of 768/200 kbps.  ACA proposed that these price cap LECs be able to use Phase I incremental support to deploy broadband to locations in areas that do not currently receive 4/1 Mbps broadband service but only after the LEC uses its support to deploy broadband to its remaining lower cost unserved locations with at most 768/200 kbps service.

"This will ensure that these price cap LECs achieve the program's objective of providing service to their unserved locations most in need of broadband service.  ACA's proposed expansion of the eligible locations also will further the FCC's objective of providing an immediate spur to broadband deployment without establishing new and more complex rules," Polka said.  "By requiring lower cost unserved locations with 768/200 kbps to be served first, ACA's approach helps ensure that support is distributed efficiently to each price cap LEC."

By adopting ACA's limited fix, the FCC does not need to increase the amount of support per location nor does it need to establish a new second-mile fiber component to the program, given that each price cap LEC will now have more than a sufficient number of lower cost unserved locations.

As for distribution of "leftover" 2012 Phase I incremental support, the FCC should not add these funds to any 2013 distribution.  Rather, the FCC should adopt one of its alternative proposals:  Either add the amount to Phase II distribution or return the money by lowering the contribution rate.  ACA's rationale is premised primarily on the fact that under Phase II, support will be distributed more efficiently through use of a cost model and a competitive bidding regime.

Finally, regardless of whether the FCC amends its Phase I rules, it should clarify in this proceeding the interplay between Phase I incremental support, the Phase I obligation to use frozen legacy support to deploy broadband-capable networks, and Phase II "five-year" support to ensure that price cap LECs cannot "double-dip" in utilizing support for unserved locations from more than one program.

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