Carrier Agreement May Speed USF Reform

Universal Service Fund reform may have inched closer, now that the largest six U.S. carriers have agreed on a plan that's gotten support, if not total endorsement, from the three major rural telecom associations. (See US Carriers Push USF Reform Plan and Rural Groups Support USF Plan.)

The Federal Communications Commission (FCC) had basically told the industry to come up with a plan or see the agency implement its own plan for reforming the Universal Service Fund and Intercarrier Compensation, expected to be largely based on the National Broadband Plan. By producing a plan and getting buy-in from rural groups, the industry may get more of what it wants. (See FCC Plan to Revamp USF, Intercarrier Payments .)

The FCC is interested in an industry plan, Wireline Competition Deputy Bureau Chief Carol Mattey told the Organization for the Promotion and Advancement of Small Telecommunications Companies (Opastco) in July. But it wouldn't rubber-stamp just anything.

The big six -- AT&T Inc. (NYSE: T), CenturyLink Inc. (NYSE: CTL), FairPoint Communications Inc. , Frontier Communications Corp. (NYSE: FTR), Verizon Communications Inc. (NYSE: VZ) and Windstream Communications Inc. (Nasdaq: WIN) -- announced their plan Friday after months of negotiations led by their association, the United States Telecom Association (USTelecom) . The carriers say the plan strikes a balance between keeping money flowing into rural areas to build broadband networks and eliminating the waste that's plagued the multibillion-dollar USF.

The three rural groups -- the NTCA - The Rural Broadband Association , Opastco and the Western Telecommunications Alliance (WTA) -- didn't endorse the USTelecom plan, but did send a letter saying that they agreed with its "framework" and believe it is complementary to their own plan.

In particular, the rural groups say, the USTelecom plan retains rate-of-return regulation, something near and dear to rural telcos because it allows them to recover the cost of building out networks in areas of very low population density and earn a profit. In return, the rural carriers have proposed lowering the return rate to 10 percent from 11.5 percent. (See Rural Telcos Go Toe-to-Toe With DC.)

The USTelecom plan also would not cap growth in funding over time, and would allow a longer transition -- eight years -- for changes in Intercarrier Compensation (ICC), which is how service providers reimburse each other for the use of facilities to terminate calls.

Rural telcos have been fearful since the NBP was issued that its proposed changes put them on the endangered list by cutting off two prime sources of funding for rural networks in USF and ICC. The USTelecom plan retains ICC compensation for tandem switching traffic and transport traffic, something the FCC may or may not accept. (See FCC Blind to Rural Telco Plight?)

— Carol Wilson, Chief Editor, Events, Light Reading

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