Blog Posts by Wireline Competition Bureau

WCB Cost Model Virtual Workshop 2012 - Support Thresholds [1]

by Wireline Competition Bureau

May 17th, 2013

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop [2] 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.”

WCB Cost Model Virtual Workshop 2012 - Connect America Fund-Intercarrier Compensation Recovery Mechanism Set Aside Amount [3]

by Wireline Competition Bureau

May 17th, 2013

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop [2] for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

In the USF/ICC Transformation Order, the Commission established an annual funding target of $4.5 billion for high-cost universal service support. Within the $4.5 billion budget, the Commission set aside up to $1.8 billion annually for a five-year period to support areas served by price cap carriers. This amount includes the support that price cap carriers receive through the Connect America Fund intercarrier compensation (CAF-ICC) recovery mechanism. The CAF-ICC recovery mechanism is an explicit support mechanism that replaces the implicit support previously received by carriers from carrier-to-carrier revenues.

WCB Cost Model Virtual Workshop 2012 - Finalizing Input Values for Connect America Cost Model Cost Estimation Module [4]

by Wireline Competition Bureau

May 17th, 2013

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop [2] 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.

WCB Cost Model Virtual Workshop 2012 -Operating Expenses Input Values [5]

by Wireline Competition Bureau

April 11th, 2013

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop [2] for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

The Connect America Cost Model (CACM) calculates monthly operating expenses (opex) generally as a dollar amount representing a percentage of capital investment or a percentage of assumed average revenue per user (ARPU). [6] Here we describe in more detail the methodology used to develop opex values and seek comment on whether any adjustments should be made to the specific input values currently contained in CACM version 3.0.

Parties who have signed the Third Supplemental Protective Order may view the CACM version 3.0 opex input values, along with a more detailed description of how the inputs were calculated and supporting spreadsheets, by accessing the model, visiting the Resources page, and opening the Opex Overview file.

CACM uses publicly-available data where possible for opex input values, supplemented by other sources where there is no readily-available public source of information for opex, to develop baseline opex amounts per month per subscriber line, by company size. Opex input values vary depending on classification of the company size at the holding company level as described in the OCNCoSize input table.

WCB Cost Model Virtual Workshop 2012 - Rate of Return for Connect America Cost Model [7]

by Wireline Competition Bureau

February 28th, 2013

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop [2] for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

The Commission previously adopted a unitary rate of return for all incumbent LECs – regardless of size – when such carriers were operating as regulated monopolies. Since that time, Congress enacted the 1996 Act, technology changes have introduced alternatives to the incumbent’s service, and most of the larger incumbent LECs have moved to price cap regulation.

Hybrid Cost Proxy Model: The authorized federal rate of return has been 11.25 percent since January 1, 1991. HCPM utilizes the authorized rate of return. When establishing criteria to ensure consistency in the calculations of federal universal service support, the Commission concluded that the authorized federal rate of return on interstate services would be a “reasonable rate of return by which to determine forward looking costs.”

WCB Cost Model Virtual Workshop 2012 - Determining the Fraction of Supported Locations that will Receive Speeds of 6 Mbps/1.5 Mbps or Greater [8]

by Wireline Competition Bureau

February 22nd, 2013

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop [2] for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

The USF/ICC Transformation Order requires price cap carriers that accept the state-level commitment for universal service support under Connect America Phase II to offer broadband at speeds of 4 Mbps/1 Mbps to all supported locations and at least speeds of 6 Mbps/1.5 Mbps to a number of supported locations by the end of the fifth year. The Commission directed the Wireline Competition Bureau to design the forward-looking cost model so that it ensures that the “most locations possible” receive broadband at speed of 6 Mbps/1.5 Mbps or greater at the end of the five year term.

WCB Cost Model Virtual Workshop 2012 - FTTP Capital Cost Inputs [9]

by Wireline Competition Bureau

February 22nd, 2013

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop [2] for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

The second version of the Connect America Cost Model (CACM v2.0) has defined inputs for specified hardware associated with a fiber-to-the-premises (FTTP) network, such as optical network terminal units, fiber drop terminals, fiber splitters, and optical line terminal equipment, as shown in CostQuest’s Oct. 19, 2012 ex parte filing.

Questions for Comment

Does CACM v2.0 make appropriate assumptions about the types of hardware that are needed for a FTTP architecture? Are there other types of hardware that should be added, or some types of hardware that should not be included, when the Bureau adopts the final version of the model?
Are the individual input values that CACM v2.0 identifies for each specified category of hardware or infrastructure reasonable? Should the Bureau use these input values when it adopts the final version of the CACM?

Source

Letter from Mark Guttman, CostQuest Associates, Inc., to Marlene H. Dortch, Secretary, FCC [10], WC Docket Nos. 10-90, 05-337 (filed Oct. 19, 2012)

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WCB Cost Model Virtual Workshop 2012 - Income and Property Tax [12]

by Wireline Competition Bureau

February 22nd, 2013

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop [2] for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

The second version of the Connect America Cost Model (CACM v2.0) assumes an average federal corporate income tax rate of 34 percent and an average state corporate income tax rate of 5.3 percent. Parties who have signed the Third Supplemental Protective Order may view how these income tax values are used in CACM v2.0 by accessing the model, selecting the “Posted Data Sets” option, and visiting the “Capital Cost Inputs” tab of the “CQCapCostForCACM” capital cost model.

For property taxes, CACM v2.0 uses a set of state-specific factors that are applied to general and administrative (G&A) costs, which are calculated as an operating expense. G&A costs include property tax. The factors are designed to reflect the difference in property tax rates across the states, based on information obtained from Duff & Phelps, LLC, a large national company that handles property tax assessments for telecommunications carriers. The state-specific factors are applied against the G&A costs, which are calculated as an operating expense. Parties who have signed the Third Supplemental Protective Order may view the state-specific factors by accessing the model, selecting the “Posted Data Sets” option, and visiting the “Ptax V3” table in the “Inputs Collection.” To see how CACM applies the state-specific property tax factors, these parties may select the “Posted Data Sets” option and visit the “Telco Opex” tab of the “OpexV4” table in the “Inputs Collection.”

Connect America Cost Model (Version 2) [13]

by Wireline Competition Bureau

January 16th, 2013

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop [2] for inclusion in the record. Comments are moderated for conformity to the workshop's guidelines.

Background

On December 11, 2012, WCB announced the release of version one of the Connect America Cost Model. Version one of the cost model allowed the Bureau and interested parties to examine various options for different network deployments to serve funded locations (e.g., fiber to the premises or fiber-fed digital subscriber line) and different assumptions about both the amount of existing facilities assumed to exist (e.g., green-field or brown-field deployments, the mix of aerial, buried or underground plant) and unit costs for capital and operating expenses.

Version two of the Connect America Cost Model augments version one in a number of key areas, specifically with regard to input data sets. Version two utilizes 2010 census boundaries and December 2011 broadband map data, as well as the latest available version of GeoResults wire center boundaries. Additionally, version two incorporates updated consumer location and business location counts.

The Bureau expects to adopt a final version of the Connect America Cost Model, with specific inputs, at a later date in 2013, which it will use to set Phase II support amounts to be offered to price cap carriers.

Connect America Cost Model Platform [14]

by Wireline Competition Bureau

December 10th, 2012

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop [2] for inclusion in the record. Comments are moderated for conformity to the workshop's guidelines.

Background

On December 11, 2012, WCB announced the availability of version one of the Connect America Cost Model. Version one of the model provides the ability to calculate costs using a variety of different inputs and assumptions, allowing the Bureau to choose among different network deployments to serve funded locations (e.g., fiber to the premises or fiber-fed digital subscriber line), different assumptions about the amount of existing facilities assumed to exist (e.g., green-field or brown-field deployments, the mix of aerial, buried or underground plant), as well as different assumptions about unit costs for capital and operating expenses.

While version one of the Connect America Cost Model is similar to the CQBAT model submitted into the record by the ABC Coalition, it contains a number of key differences, including an estimate of the cost of providing not only broadband services, but also voice services, and an updated calculation of brown-field costs to include replacement capital expenditures. The Bureau anticipates that a second version of the Connect America Cost Model will be available in the coming weeks and will include an update to 2010 census geographies and updated SBI data. The Bureau expects to adopt the final version of the Connect America Cost Model, with specific inputs, in 2013, which it will use to set Phase II support amounts to be offered to price cap carriers.