FCC GIVES HIGHLAND CELLULAR ETC STATUS, SETS MORE PRECEDENTS

The FCC gave ETC status to Highland for only part of the territory it sought. The FCC agreed Highland could operate as an ETC in a wire center served by Verizon Va., a non-rural carrier, and in areas served by 2 of 3 rural companies -- all of Burkes Garden Telephone’s study area and some but not all of the United Telephone wire centers included in Highland’s service area. The FCC denied Highland’s request for ETC status for Verizon South, which is a rural company, and one of United Telephone’s wire centers. The Commission said there was too much opportunity for cream skimming in those 2 areas. In rural areas, cream skimming occurs when a carrier serves only areas with low costs, such as villages and towns, instead of high-cost outlying areas.

The FCC said it didn’t appear that Highland was deliberately seeking to enter only parts of these companies’ study areas in order to cream skim. However, “for reasons beyond a competitive carrier’s control, the lowest cost portion of a rural study areas may be the only portion of the study area that a wireless carrier is licensed to serve. Under these circumstances, granting a carrier ETC designation for only its licensed portion… may have the same effect on the ILEC as rural cream skimming.”

Among the significant actions taken by the FCC in the Highland case was its decision to redefine the study area of United Telephone, subject to agreement by the Va. State Corp. Commission. A competitive ETC must serve all of the area served by the incumbent rural telco it competes with. However, Highland’s service area doesn’t cover all of United Telephone’s territory so Highland asked for a redefinition for ETC designation purposes. A similar request was made for Verizon South, but the FCC didn’t act on it because it denied Highland ETC status for that part of its service area. Such redefinition is allowed under the Communications Act, the FCC said.

The agency defended the decision to redefine United’s service area, saying it won’t result in cream skimming or won’t hurt United. “The redefinition merely enables competitive ETCs to serve areas that are smaller than the entire ILEC study area,” the FCC said. “Our decision to redefine the service area does not modify the existing rules applicable to rural telephone companies for calculating costs on a study area basis, nor, as a practical matter, the manner in which United Telephone will comply with these rules.”

Also significant was a conclusion that it wasn’t in the public interest to designate Highland Cellular as an ETC in only a portion of United Telephone’s Saltville wire center, the area turned down for ETC status. “Although the Wireline Competition Bureau previously designated an ETC for portions of a rural telephone company’s wire center, we conclude that making [such] designations… would be inconsistent with the public interest… A rural telephone company’s wire center is an appropriate minimum geographic area for ETC designation because rural carrier wire centers typically correspond with county and/or town lines. We believe that requiring a competitive ETC to serve entire communities will make it less likely that the competitor will relinquish its ETC designation at a later date.”

In a related public notice also issued Mon., the Wireline Bureau referred to this language as important, saying the agency has concluded “that a telephone company in a rural study area may not be designated as a competitive ETC below the wire center level.” The public notice invited wireless carriers to supplement their pending ETC applications “with any new information or arguments they believe relevant” in light of the new requirements expressed by the FCC in the Virginia Cellular and Highland decisions. Among companies with pending ETC petitions are Smith Bagley, Sprint, AT&T Wireless, AllTel.

The FCC conditioned Highland’s ETC approval on commitments the company made to the FCC during the proceeding: (1) “Submit records and documentation on an annual basis detailing its progress towards meeting its build-out plans.” (2) “Become a signatory to [CTIA’s] Code for Wireless Service and provide the number of customer complaints per 1,000 mobile handsets on an annual basis.” (3) “Annually submit information detailing how many requests for service from potential customers were unfulfilled for the past year.”

“We conclude that the value of increased competition, by itself, is not sufficient to satisfy the public interest test in rural areas,” the FCC said. Several factors should be weighed in determining if designation of a competitive ETC is in the public interest, the agency said: “Benefits of increased competitive choice, the impact of multiple designations on the universal service fund, the unique advantages and disadvantages of the competitor’s service offering, any commitments made regarding quality of telephone service provided by competing providers and the competitive ETC’s ability to provide the supported services throughout the designated service area within a reasonable time frame.”

Comr. Martin said he objected “to this order’s finding that the goals of universal service are to provide greater mobility and a choice of providers in rural areas.” He said he thought “the main goals of the universal service program are to ensure that all consumers -- including those in high cost areas -- have access at affordable rates.” He said he continues to be concerned that the agency may be emphasizing competition too much in rural, high cost areas: “I am hesitant to subsidize multiple competitors to serve areas in which costs are prohibitively expensive for even one carrier.” Martin also expressed concern that the order: (1) Didn’t “require ETCs to provide the same type and quality of services throughout the same geographic service area as a condition of receiving universal service support.” (2) Didn’t require competitors to provide equal access. He said he also had misgivings about redefining a rural ILEC’s service area.

Martin said he was also concerned that these FCC decisions on individual ETC applications “may prejudge the Commission’s upcoming decision regarding the framework for high-cost universal service support.” He said these ETC decisions “now provide a template for approving the numerous CETC [competitive ETC] applications currently pending at the Commission and I believe may ultimately push the Commission to take more aggressive steps to slow the growth of the universal service fund such as primary line restrictions and caps on the amount of universal service support available for service providers in rural America.”

Comr. Copps said the Highland decision was a “step in the right direction” toward more “rigorous review” of ETC applications. Comr. Adelstein said it “marks a significant improvement from past Commission decisions by more fully embracing the statutory public interest mandate.” He said the FCC’s ETC decisions “have provided a more stringent examination of the public interest and acknowledged that competition alone cannot satisfy the public interest analysis.”