Price Cap Carriers Back Faster CAF, Phase II Speeds, But With Conditions

In their replies, CenturyLink and USTelecom backed the idea raised in the FCC’s further notice to increase the standard for the broadband built with CAF Phase II funds from 4 Mbps download and 1 Mbps upload to 10 Mbps download/1 Mbps upload. The current five years of funding is not “nearly enough support to make a FTTH [fiber to the home] network economical,” USTelecom said (http://bit.ly/1tt7KYe), saying there’s “a significant difference in the design and associated costs of a network designed to meet the proposed 10/1 Mbps higher speed standard” versus the current speed.

Cable companies’ have long believed the FCC’s cost model to calculate CAF funding for price-cap carriers is too generous, and the proposed changes would only add to the carriers advantage, American Cable Association Senior Vice President-Government Affairs Ross Lieberman told us in an interview. Basing CAF’s funding of projects as “greenfields,” which assumes carriers have to build networks from scratch to provide, does not reflect reality that the carriers will largely use existing copper infrastructure, Lieberman said. More years of support or the ability to avoid higher-cost unserved locations would give carriers more funds to improve their networks in other areas where they compete with cable companies and others, he said. ACA also wants the FCC to switch to a competitive bidding process open to any provider. Giving price cap carriers more time to build, would delay that from happening, he said.

Allowing the carriers, as they propose, to use some funds to serve households in areas that are deemed served, ACA argued in its reply, posted Tuesday (http://bit.ly/1rBjxBy), would give price cap LECs a “windfall” by allowing them “opt out of serving high-cost locations in eligible census blocks” and “select lower-cost locations in their place."

The proposals would give ILEC’s “additional preferences simply because they are ILECs,” said the Competitive Carriers Association in its reply (http://bit.ly/1rV6nVW). It does not believe the price cap carriers should get preferential treatment for the funds. Under the CAF Phase II process, price cap carriers have the right of first refusal to receive funds to serve a census tract the commission deems unserved. Excusing them from serving all households in the tract goes against the FCC’s justification for giving price cap carriers preference -- that they have carrier of last resort obligations, CCA said. NCTA also opposed the proposals in its comments Aug. 8 (http://bit.ly/1uuxvsL), but did not file a reply.

"The debate comes down to how much funding and time is needed, how close to served areas CAF funds should go, and recognizing the uncertainties in bringing and maintaining broadband to households that don’t have it,” said Jeff Lanning, CenturyLink vice president - federal regulatory affairs, in a statement. “The price cap carriers may want to serve all the households in a Census block that are not currently served by any provider, but need some flexibility because serving some homes may be cost-prohibitive. Some funds may be better used in a Census block that is partially serviced by a provider, so that those households with no service in that census block can get service,” Lanning said.

CenturyLink, which did not file a reply comment, proposed in its initial comment Aug. 8 (http://bit.ly/ZfQkp8) requiring recipients to serve 90 percent of a census track, with a proportional reduction in funding.

"It seems obvious” carriers will choose not to serve the highest cost areas, and will get 90 percent of the funding while incurring less than 90 percent of the cost of serving the area, an NCTA spokesman said.

USTelecom also argued the 10/1 Mbps standard would cost more by requiring fiber be deployed deeper into the network than the current 4/1 standard and thus would require more plant investment. Not having to serve all areas of a census track or being able to substitute using the funds to build in an area deemed “served” for building in an “unserved” area, would allow prudent and efficient network design, USTelecom said. It would allow “a reasonable level of flexibility as facilities are actually built out and the situation on the ground is determined,” their filing said.

Lawmakers from both parties and chambers have sent the FCC letters urging flexibility on how the agency treats ISPs as they move forward in seeking Connect America Fund Phase II money. The Congressional Black Caucus sent a letter Friday, and the Wyoming congressional delegation sent one July 31. Rep. Lee Terry, R-Neb., sent a letter Aug. 20. Sen. Bill Nelson, D-Fla., sent one Aug. 29. The FCC “should consider extending the CAF II funding period, within appropriate budget restraints, from the current 5 years to 10 years to allow adequate time and support for construction of higher capacity networks,” Nelson said, also urging the FCC to “consider allowing carriers flexibility to substitute some extremely high cost areas with unserved locations in partially-served census blocks to meet deployment obligations.” The Congressional Black Caucus pointed to similar need for flexibility. “The same Mbps standards should apply when identifying broadband availability from all competitors, or else communities with just 4 Mbps will be left behind,” the caucus said. ,