Skip Navigation

Federal Communications Commission

English Display Options

Commission Document Attachment

FCC-14-54A6

image01-00.jpg612x792

STATEMENT OF

COMMISSIONER MICHAEL O’RIELLY

APPROVING IN PART AND CONCURRING IN PART

Re:

Connect America Fund, WC Docket No. 10-90, Establishing Just and Reasonable Rates for

Local Exchange Carriers, WC Docket No. 07-135, Developing a Unified Intercarrier

Compensation Regime, CC Docket No. 01-92, Universal Service Reform – Mobility Fund, WT

Docket No. 10-208, ETC Annual Reports and Certifications, WC Docket No. 14-58.

There are many different views on how to meet our statutory obligation to preserve and advance

universal service so that all consumers have access to reasonably comparable services at reasonably

comparable rates. The fact that rational minds may differ is not surprising given the complexities of

universal service policies and their importance to our Nation and its people.

The 2011 USF/ICC Transformation Order recognized these complexities and created a multi-part

framework for tackling them. It established funding for fixed service, mobile service, and alternative

technologies. It funded price cap carriers differently than rate-of-return carriers or mobile providers. And

it phased in all of the reforms to give carriers and consumers time to adjust. I was not at the Commission

in 2011, and I don’t agree with every reform, but I commend those that were here for their courage to start

us down those paths.

The question before us now is whether to continue down these paths or disruptively reverse

course. Universal service was intended to evolve, so the Commission must periodically take stock of

changes in technology and the marketplace to see whether adjustments are warranted. And we must

remain mindful that we are dealing with scarce consumer-provided dollars. Each dollar we can save—by

targeting funding to areas where there is no other provider and by making the programs more efficient—is

a dollar that we can use to extend service to unserved areas or that we can return to consumers.

Therefore, I am pleased that the Further Notice recognizes the strides that have been made by wireless

and satellite providers and asks how we should modify our policies and funding accordingly.

It is also important that the Commission periodically review and replace rules that may have been

well-intentioned but did not operate as envisioned. Therefore, I’m glad that the Order eliminates the

QRA benchmarks and that the Further Notice seeks comment on replacement rules for rate-of-return

carriers. Without the distraction of the QRA benchmarks, I hope that we will finally be able to move

forward with a long-term Connect America Fund (CAF) for rate-of-return areas and finalize the QRA’s

replacement.

As we consider additional changes to the 2011 framework, however, we must weigh the benefits

of continuing to fine tune our policies against the costs of upending plans and further delaying the

remaining reforms. Many consumers throughout rural America are still waiting to see the benefits

promised in 2011. Moreover, all of the universal service and intercarrier compensation reforms are

intertwined. If we second guess too many of the individual reforms, I worry that we put at risk the entire

package of reforms that took years to enact. With one notable exception, I think that today’s item hits

enough of the right chords for me to lend my support.

The one exception is that the Further Notice proposes to increase the broadband speed standard

for all support recipients from the current 4 Mbps downstream to 10 Mbps downstream—before we’ve

completed the task of ensuring that all consumers have access to 4 Mbps. I too want to get the most bang

for our limited USF bucks and I want greater speeds for all Americans, especially rural citizens.

However, raising the speed standard will come at a substantial cost and implementing it within the budget

could entail significant tradeoffs for consumers.

image02-00.jpg612x792

In 2011, the Commission decided to cover more consumers with a basic level of broadband

service rather than upgrade fewer consumers to a higher capacity service. The decision appears consistent

with the statute, which calls for universal service. Additionally, the 4 Mbps standard that the

Commission selected seems to be reasonably comparable to what is offered in urban areas. It is sufficient

to enable people to send email, look for jobs, complete homework assignments, and even watch an

occasional movie. For those that have dial-up service or no service at all, getting access to broadband can

be a welcome improvement. And given the way that networks are constructed, delivering 4 Mbps to the

very remote homes meant that most homes would have access to far greater speeds. However, the

Commission seems ready to explore undoing that fundamental decision and more parts of rural America

could remain unserved for a lot longer as a result.

For example, in price cap areas, raising the standard could shift funding towards upgrading

existing broadband service—potentially in areas where there’s another provider—rather than extending

new broadband service in truly unserved areas. In addition, it could mean that some price cap carriers

that would have quickly expanded broadband throughout their entire territories decide not to make

statewide commitments to provide service, or that they scale back the percentage of locations they would

be willing to serve. That puts increased pressure on the competitive bidding process and the Remote

Areas Fund to ensure that people that are served today do not lose service in the future. In short, while

the tradeoffs envisioned in the Further Notice may be necessary to accommodate increased speed

obligations, I would have retained the current speed standard for now and avoided these tradeoffs

altogether. Raising the speed standard is a questionable approach and potentially sends the wrong signals

to providers, the markets, and most importantly, consumers. As a result, I must concur with this section

of the Further Notice.

In addition, while not addressed in this item, I note that the CAF reserve is projected to exceed

$1.5 billion, and is now growing at a rate of over $190 million per quarter.1 That extra money has been

coming out of the pockets of consumers—who are now paying 16.6 percent fees on their phone bills—for

programs that will not be implemented for another year or two. I do not see the upside of maintaining

such a large reserve while we continue to revise the programs, and I do see some real downsides. Having

that much money on hand raises false hopes for creative funding ideas and spending. Once we have

decided how to revise the programs to ensure that the money is well spent, I am hopeful that we will be in

a position to review the budget, which is currently $4.5 billion a year, and consider reducing it to an

appropriate spending level. In the meantime, we should at least stop overcharging consumers. Perhaps

this is something we could consider in the next CAF item.

On the whole, I support today’s item. I appreciate that the Chairman was willing to accommodate

many of my suggestions, and I thank the staff for their good work and assistance.

1 Universal Service Administrative Company, Federal Universal Service Support Mechanisms Fund Size Projections

for Second Quarter 2014, at 9-11 (Jan. 31. 2014), http://www.usac.org/about/tools/fcc/filings/2014/

Q2/USAC%202Q2014%20Federal%20Universal%20Service%20Mechanism%20Quarterly%20Demand%20Filing.

pdf.

2

Note: We are currently transitioning our documents into web compatible formats for easier reading. We have done our best to supply this content to you in a presentable form, but there may be some formatting issues while we improve the technology. The original version of the document is available as a PDF, , or as plain text.

close
FCC

You are leaving the FCC website

You are about to leave the FCC website and visit a third-party, non-governmental website that the FCC does not maintain or control. The FCC does not endorse any product or service, and is not responsible for, nor can it guarantee the validity or timeliness of the content on the page you are about to visit. Additionally, the privacy policies of this third-party page may differ from those of the FCC.