Draft CAF Order Draws Criticism From Carriers, Cable

The draft order was drawing criticism from carriers for not going far enough, and from the cable industry for giving carriers too much, according to interviews and ex parte filings. The order would increase CAF Phase II support from five to six years, with telcos having the option for a seventh year of support, the officials said. Deployment would have to be completed within six years. The change would be less than the 10 years of support telcos wanted. The draft also would let carriers serve only 95 percent of an area for which they receive support, allowing them to bypass households that would cost the most to serve, the officials said. CenturyLink and others had sought a requirement to serve only 90 percent of an area, which the company said would help offset the additional cost of providing faster broadband. Carriers choosing not to serve of all of an area would have to return that proportion of the funding. The FCC did not comment.

The provisions in the draft order involve a long-standing conflict between telcos and the cable industry, which fears additional money carriers make through CAF will be used to compete against them in other parts of the country. Asked about the provisions, ITTA President Genny Morelli was "concerned" it doesn't provide more years of funding. The American Cable Association opposed increasing the length of CAF funding, according to an ex parte filing. ACA also said carriers would be excused from serving the highest cost areas, but the refunds they’d have to pay would be based on a statewide average of the costs of deployment. The difference in what carriers could gain in not serving 5 percent of an area, and the 5 percent of CAF refunds they’d have to give, would amount to about $100 million annually, ACA said.

ACA Senior Vice President-Government Affairs Ross Lieberman and Kelley Drye’s Thomas Cohen, representing the ACA, made the arguments in meetings with Wheeler aide Daniel Alvarez and an aide to Commissioner Mike O’Rielly Monday, and with aides to Commissioners Ajit Pai and Mignon Clyburn Tuesday, said the filing. Asked about it, Lieberman focused on not allowing carriers to serve expensive-to-serve areas. "This isn't supposed to line the coffers of the price-cap carriers; it’s to wisely spend money on deploying broadband," he said. "We don't object to giving LECs flexibility, but they shouldn’t profit from not building." NCTA has also opposed the changes sought by carriers.

Both sides have begun lobbying the commission in recent days, according to ex parte filings. Malena Barzilai, Windstream senior government affairs counsel, and Eric Einhorn, senior vice president-government affairs, met with aides to Clyburn, O’Rielly and Pai Monday, said an ex parte filing in docket 10-90. The company officials distributed USTelecom’s Nov. 13 letter to the commission backing the increase to 10 Mbps “under certain conditions to make it economically feasible" (see 1411170046), and also met with Alvarez Nov. 20, said the filing. Frontier Communications Executive Vice President-External Affairs Kathleen Abernathy and Vice President-Federal Regulatory Affairs Michael Saperstein met with Wireline Bureau officials Nov. 21, said an ex parte filing. The Frontier officials said if the commission is considering increasing CAF Phase II obligations, “then it must also consider adjusting other terms associated with the program, including increasing the term of support and extending the timeframe to complete the CAF Phase II broadband deployment.”

The carriers' argument has centered on the additional demands of providing faster broadband. Another USTelecom comment argued five years of funding is not “nearly enough support to make a FTTH [fiber to the home] network economical.” It said 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.

ACA countered that the nearly 600 rural broadband experiment bids that the agency received, all proposing less support than the model used to calculate CAF support, shows the amount carriers are getting is already “excessive.” The carriers also do not need more help because they would receive more revenue for providing faster broadband, ACA said. They also don't need more time to build the faster speeds because the carriers already provide 10 Mbps in 20 percent of the areas that receive support, said ACA. It said the carriers have provided “insufficient evidence” for more support or time to deploy.