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ACA Urges FCC To Reject Unsupported Efforts Of Price Cap Carriers To Modify Connect America Fund Rules

Cable Group Says CAF Must Remain Focused On Unserved Areas Most In Need

PITTSBURGH, February 14, 2013 - The American Cable Association urged the Federal Communications Commission to reject efforts of large telephone companies (Price Cap Local Exchange Carriers) to modify the Connect America Fund (CAF) rules because their proposals would most likely fail to advance the program's goal of deploying broadband networks in areas most in need.  At the same time, their proposals would provide them with excess support, which they could use in areas served by competitors.

"ACA combed through the Price Cap LEC comments searching for data providing sufficient support for their proposals to expand the areas eligible for Phase I incremental support or use of support for second-mile fiber and found none, "ACA President and CEO Matthew M. Polka said.  "Their proposed wholesale expansion of eligible areas from 768/200 Mbps broadband service to those lacking 4/1 Mbps is not supported by the data."

 ACA expressed its views in comments filed Feb 11 as part of the FCC effort to ensure that all Americans have broadband Internet access in response to reports showing that approximately 100 million Americans go without a high-speed connection. Given that broadband is central to the country's economic growth and future prosperity on a number of important levels, the FCC opted to create the CAF program to allocate broadband funds to providers willing to deploy facilities in rural and remote areas.

ACA's comments did not address any issues that impact smaller telephone companies (Rate of Return Local Exchange Carriers) who did not participate in the CAF Phase I program as per FCC rules.

In its reply comments, ACA explained that some Price Cap LECs offered proposals that would frustrate the goal of delivering broadband access to those who need it most. ACA gathered location data for each of the major domestic Price Cap LECs to estimate whether they have a sufficient number of lower cost unserved locations where they could use incremental support at the level established in the FCC's rules - namely, $775 per location.

From this data, ACA determined that AT&T, Fairpoint, and Verizon appear to have more than a sufficient number of lower cost unserved locations with broadband service at speeds of 768/200 kbps for which they would have a sufficient commercial incentive to use their allocation of incremental support of $775 per location; hence, there is no basis for the FCC to alter its rules. 

As for CenturyLink, Frontier, and Windstream, ACA found that the number of locations where these LECs could use incremental support of $775 per location exceeded the number of lower cost unserved locations without 768/200 kbps broadband service. For these three price cap LECs, there is a rationale for expanding the pool of eligible unserved locations to those without 4/1 Mbps broadband service.  However, to ensure that the FCC's original objective of bringing service to those "most in need" locations will be achieved, any expansion needs to be conditioned on a price cap LEC first deploying broadband to virtually all of its lower cost unserved locations not receiving 768/200 kbps broadband service.

Regarding the proposal to use incremental support for second-mile fiber, the Price Cap LECs submitted a declaration estimating the average cost of fiber feeder deployment on a per-mile basis and the cost of electronics needed to connect a location.   However, they did not address at all the FCC's inquiry about variance in cost.  As ACA demonstrated in its initial comments filed Jan. 28, there is, in fact, a great variance in the cost of second-mile fiber builds, which, if support is based only on the average cost for a build, would result in the price cap LECs having easy opportunities to reap a windfall by deploying second-mile fiber only in areas where the cost for the build is less than the average cost.

The Price Cap LECs also did not discuss the FCC's question about the amount of matching support they should be required to make for second-mile deployments.   Again, ACA discussed this issue in its first round of comments and showed that the FCC has no evidence that can be used to ensure a match results in the efficient distribution of support.

ACA noted that the price cap LECs offered to certify that they are using incremental support to deploy broadband facilities on their routes in a manner intended to maximize benefits to unserved locations.

"The FCC should accept only data-driven proposals.  Proposals that do not provide  measurable outcomes would almost certainly result in the FCC not achieving its broadband deployment objectives.  It would also result in support being distributed inefficiently," Polka said.

ACA also urged the FCC to establish an equitable process for challenging designations on the National Broadband Map (NBM), and apply unaccepted 2012 and 2013 Phase I incremental support to the Phase II process or return it to contributors.

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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