WASHINGTON-Financing telecom carriers to offer service in rural America has been standard practice for several decades. But today those methods, universal service subsidies and access charges, are under increasing pressure as telecom evolves from a circuit-switched wired world to one where calls are connected without wires and without switches, and the distinction between local and long distance is shrinking.
Recently several developments have affected the various revenue streams of carriers serving rural America.
Last week a group of rural carriers, the Alliance for Rational Intercarrier Compensation, submitted to the Federal Communications Commission what it termed the Fair and Affordable Comprehensive Telecom Solution (FACTS) plan to reform intercarrier compensation.
The FACTS plan attempts to unify the rates carriers-regardless of technology-pay each other to terminate calls. According to ARIC, “all minutes of use recorded by a company will be billed at the same rate level.” This could increase some wireless costs because wireless carriers pay little or nothing to terminate calls.
The National Telecommunications Cooperative Association, which is supporting but has not yet endorsed the plan, said it “demonstrates that there are credible alternatives to bill-and-keep.”
The FACTS plan is an alternative to the plan submitted by the Intercarrier Compensation Forum. The ICF, a group of nine wireline companies, two with wireless affiliates, proposed radically changing the way carriers compensate each other to carry traffic on each other’s networks.
While both the FACTS plan and the ICF proposal create a new universal-service fund to overcome expected shortfalls in rural telecom revenues, FACTS allows this money to subsidize wireless carriers serving rural areas subject to state conditions.
Today carriers pay each other to carry traffic using a scheme known as reciprocal compensation. The incumbent LECs, particularly the regional Bell operating companies, have complained that with the Internet, some competitive carriers are gaming the system because more traffic goes out than comes in, so the Bells have to pay. The Bells began arguing for a new scheme of bill-and-keep, where carriers decide the best method to transport calls, buy this transport and then bill their customers what they think the market will bear. Wireless carriers have made the same argument.
Delay in USF payments?
All may not be happy in rural America soon, warned Legg Mason in an investor note last week.
“There are significant concerns in the rural LEC community that high-cost universal-service support may also be delayed by the application of the Anti-Deficiency Act upon the United States Administrative Co.,” wrote Legg Mason.
USAC is a quasi-governmental organization created to collect and pay out universal-service subsidies.
As part of its efforts to tighten control on the much-derided E-rate program to connect schools and libraries to the Internet, the FCC recently ordered USAC to begin using Generally Accepted Accounting Principles, which meant it had to comply with ADA. Because it couldn’t comply with the new accounting standards, USAC suspended E-rate payments in August. Now there is concern that due to a shortfall in USF high-cost funding, there may be a delay in these subsidies as well.
Advantage as an ETC
The FCC Oct. 22 granted Advantage Cellular Systems Inc. eligible telecommunications carrier status for parts of Tennessee but denied it in other parts, saying it would amount to cherry-picking the rural local exchange carriers’ territories.
ETC status is necessary to receive universal-service subsidies. Advantage was forced to ask the FCC for ETC status after Tennessee state regulators punted on the issue.
The FCC’s complex ruling was necessary because Advantage’s license area does not cover the entire service areas of the RLECs with which it will compete. The FCC said earlier this year that wireless carriers wishing to receive universal-service subsidies either must offer service or plan to serve all of the RLEC’s customers. Many RLECs have complained that wireless carriers are receiving universal-service subsidies for cherry-picking the easy-to-serve customers.
Advantage was given ETC status but not for the area served by United Telephone Co. and some territory of Frontier Communications and Twin Lakes Cooperative Corp.
“Our analysis of the population density of each of the affected wire centers reveals that Advantage Cellular will not be serving only low-cost areas to the exclusion of high-cost areas,” said the FCC, referring to areas where Advantage was Ok’ed ETC status.
