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Will USF Reform Include Muni Networks?

5:15 PM -- Federal Communications Commission (FCC) Chairman Julius Genachowski didn't reveal the details of his Universal Service Fund (USF) reform package today, but he dropped a few intriguing hints. (See Genachowski Tees Up USF Reform.)

Notably, Genachowski refers to "public-private partnerships" that involve a full range of service providers -- wireline, fixed wireless, satellite and mobile -- but doesn't specify what kind of public entities might be involved.

Could he be opening the door to involvement of local governments, namely counties and municipalities, in USF-funded broadband networks?

Craig Settles hopes so. The CEO of broadband consultancy Successful.com, a consultant and an strong advocate of local control of broadband networks, Settles believes that competition is the answer to available and affordable broadband, and local control is the answer to competition.

Municipal networks are anathema to service providers as unneeded competition and unwarranted interference, but there's a reason they haven't gone away, despite some high-profile failures. There are too many reports of USF dollars going into the pocket of a local telco that earns double-digit profits -- and anger over those accounts was exacerbated by last summer's revelations by The Washington Post that AT&T Inc. (NYSE: T) and Verizon Wireless were raking in millions in USF money for building wireless networks they were probably going to build anyway.

So far the current FCC's record on muni networks is somewhat mixed, Settles points out. The National Broadband Plan makes clear mention of them, and says states should rescind existing laws against them. But the $300 million Mobility Fund announced last fall appears to cut them out of the action in favor of wireless network operators.

We'll have to wait until tomorrow to see which way the FCC goes on this one.

— Carol Wilson, Chief Editor, Events, Light Reading

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spc_markl 12/5/2012 | 5:13:25 PM
re: Will USF Reform Include Muni Networks?

seven,


The problem is that if the muni becomes the ILEC, there is no change in the status quo.&nbsp;&nbsp; These new networks are being created because the incumbent is not adequately serving their needs &ndash; and these communities want competitive pricing.


Mark

klross2 12/5/2012 | 5:13:23 PM
re: Will USF Reform Include Muni Networks?

Seven...


You are a bit confused about what is a COLR.&nbsp; A COLR is not required to provide anything but POTS to all comers in its service area.&nbsp; Not ISDN, not 4WE&amp;M, not dry pairs, etc. etc.&nbsp; You are correct that an ILEC is usually the COLR for its service area, but it offers special services for commercial reasons, not regulatory reasons.


There's a good white paper at www.nrri.org/pubs/telecommunications/COLR july 09-10.pdf&nbsp;that describes the responsibilities of a COLR.&nbsp; I suggest that you read it before expounding further.

fgoldstein 12/5/2012 | 5:13:21 PM
re: Will USF Reform Include Muni Networks?

USF is structured as a monopoly-support program, to allow ILECs to spend as much as they want and be guaranteed a profit.&nbsp; USF is paid for retail services only.&nbsp; So if the ILEC "cost" is $200/month for a loop and their retail price for POTS is $8/month, USF makes up the entire difference.&nbsp; But if a CLEC requests a UNE, the rate is still $200.


Under ongoing FCC "reforms" which are carried forward in the new docket, CLECs do not have the right to even ask for USF support.&nbsp; So the ILEC charges $8 and a CLEC needing the loop would have to pay them the full $200, with no help.&nbsp; This is like owning three hotels on Boardwalk.


Under the old rules, technically only POTS was supported,&nbsp; but the ILEC could build an FTTH network for $10,000/subscriber to deliver $8/month POTS, and the full cost of the RUS loan would be covered by USF.&nbsp; Data services provided over that network would be incidental, not technically subsidized, but would hardly need any, since the expensive part was covered.&nbsp; Under the new rules, the data service itself is also subsidized, so the ILEC has an incentive to use our money to build out farther, competing (subsizied) with unsubsized wireless ISPs.


Who's picking whose cherries here?

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