Official FCC Blog

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop [6] for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

In the USF/ICC Transformation Order, the Commission adopted a methodology “that will target support to areas that exceed a specified cost benchmark, but not provide support for areas that exceed an 'extremely high cost' threshold.” With regard to the support benchmark, the Commission stated that it would use the model “to identify those census blocks where the cost of service is likely to be higher than can be supported through reasonable end-user rates alone.” With regard to the “extremely high cost” threshold, the Commission also concluded that "a small number of extremely high-cost census blocks that should receive funding specifically set aside for remote and extremely high-cost areas . . . rather than receiving CAF Phase II support." The Commission anticipated that no more than 1 percent of all American household would be in such remote and extremely high-cost areas. Finally, the Commission directed that "[t]he threshold should be set to maintain total support in price cap areas within our up to $1.8 billion annual budget.”

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop [6] for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

The Connect America Cost Model (CAM v3.1.2) has two input collections for the cost estimation module. The two input collections contain identical default inputs, except one includes values for Annual Charge Factors (ACFs) calculated with a nine percent cost of capital, and the other includes values for ACFs calculated with an eight percent cost of capital. Parties who have signed the Third Supplemental Protective Order will be able to view the input collections by accessing the model and viewing the “ICCQA20130516CAM312ACF8SBI6VoiceCblVoiceFW2” and “ICCQA20130516CAM312ACF9SBI6VoiceCblVoiceFW2” ZIP files on the “Posted Data Sets” page under “Model Inputs.” The input collections include values for such variables as plant mix, network sizing and sharing, company size categories, operating expenses, capital investments by density and terrain, state property tax factors, regional cost adjustments, bandwidth, business and residential take rate, and state sales tax.

The Connect America Fund is the FCC’s 21^st Century solution to expanding broadband to unserved areas of rural America.  One reason why the Connect America Fund can stay within a budget as it accomplishes this task – while continuing to support traditional voice service as its 20^th Century predecessor program did – is because we are targeting the right amount of subsidies to the right places: places where help is needed the most. The old universal service fund did little to protect against unneeded subsidies. Developing ways to stop this fiscal waste was a major focus of our 2011 Connect America reforms.

We are well on the way to implementing these reforms, including making initial decisions on a Cost Model that will calculate what level of support is needed, down to the Census block level.  Today, we’re adopting another set of policies to make sure that we don’t support providers in Census blocks where another provider is delivering service without subsidies.

It’s fiscally prudent to reserve the Fund for areas where there’s no business case to serve consumers. And it’s common sense that in areas where a provider delivers voice and broadband without subsidies, a business case has been made.  Moreover, giving subsidies to one provider and not the other is unfair.

So accounting for unsubsidized providers is critical as we distribute support for rural voice and broadband in this phase, Phase II, of the Connect America Fund.  Here’s how we are going to do it.

Today, the Technology Transitions Policy Task Force issued a Public Notice [17] proposing to conduct real-world trials and seeking input on specific potential trials.  The goal of any trials will be to assist the Commission in ensuring that its policy decisions relating to ongoing technology transitions are solidly grounded in good data.

Communications networks are changing from copper to fiber and from time division multiplexing (TDM) to Internet protocols; wireless voice and data services are increasingly important.  These are exciting developments.  The ongoing technology transitions hold the promise for tremendous benefits for consumers.  Among other things, these new technologies can deliver higher quality service and higher speed broadband to more Americans.  IP-based networks also make it easier to deploy feature-rich next-generation 911 systems.   At the same time, we must ensure that the transitions preserve and advance the core values reflected in the Communications Act:  consumer protection, universal service, competition, and public safety.

To protect those core values, we need good data.  Indeed, Chairman Genachowski established the Technology Transitions Policy Task Force to “conduct a data driven review” as it formulates “recommendations to modernize the Commission’s policies.”  Accordingly, in March, the Task Force held a public workshop [18] with experts from around the country.  The workshop focused on the capabilities and limitations of new and emerging technologies, the decisions consumers are making as they adopt voice and broadband services, and the plans of various providers in deploying the new technologies.