RURAL LECs URGE FCC TO BE FLEXIBLE IN REGULATORY REFORM
In latest skirmish over regulatory reform in rural areas, rural LECs (RLECs) urged FCC to give them flexible rules to better serve their costly areas, while competitors said agency should stick to its guns in eliminating protections for RLECs. Their comments, filed Feb. 14, were in response to 2nd part of agency’s reform effort. FCC last year acted on access and universal service portions of Multi- Association Group (MAG) plan proposed by RLECs (CD Oct 12 p1). Agency now is looking at several portions that were deferred, such as incentive regulation to encourage rural carriers to move from rate-of-return to price cap regulation.
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National Telecom Coop Assn. (NTCA) and other rural telco groups told agency that incentive regulation should be optional: “Determining a single alternative regulation plan that establishes the proper incentives for more than 1,300 diverse rate-of-return carriers spread throughout all regions of the [U.S.] will be extremely difficult.” Several members of original MAG group -- National Rural Telecom Assn., OPASTCO and USTA -- agreed, saying carriers needed to “suit their form of regulation to the challenges of their service areas.”
Not so, said Competitive Universal Service Coalition (CUSC), which is composed of wireless and wireline competitors. FCC should “eliminate all revenue guarantees for rural ILECs” and quickly transition them from rate-of- return to incentive-based regulation. “Any form of regulation that relies on ensuring a carrier’s rate of return -- which is really just granting the carrier a revenue guarantee -- is fundamentally inconsistent with competition and creates powerful incentives for inefficiency.”
Similar disagreement was registered on “all-or-nothing” rule that requires carriers to operate entirely under one type of regulation. That means that if rate-of-return carrier converted one study area to price caps or acquired price-cap-regulated study area, it would have to convert all of its study areas to that type of regulation. Rule was intended to guard against cross-subsidization that might occur if carriers operated part of their company under price cap and part under rate-of-return regulation.
Rural carriers have been urging FCC to eliminate that rule, one of MAG group’s original recommendations that wasn’t acted upon last year. NTCA said rule should be deleted for “single study area” rate-of-return carriers and “multistudy area rate-of-return carriers seeking to keep all their study areas under rate-of-return regulation.” All-or-nothing rule doesn’t apply to such carriers, Assn. said: “NTCA member rural telephone companies do not acquire entire study areas from other carriers. They acquire neighboring exchanges in the rural areas of large ILEC study areas and then seek a waiver from price cap regulation to include the acquired exchanges into their rate-of-return regulated study area. The reasons for having the rule simply do not apply to these carriers.”
CUSC said protections offered by all-or-nothing rule, “while critical in the past, are indispensable if open competition is to have any chance of taking root and surviving in rural ILEC service areas.” In fact, group said, “the Commission should stop waiving the rule as often as it does presently.”