HomeMy WebLinkAboutBroadband and USF Report.pdf1
Idaho
Public Utilities Commission
The Future of
IDAHO’S UNIVERSAL SERVICE
AND ITS RELATIONSHIP TO
BROADBAND DEPLOYMENT
April 2015
Idaho
Public Utilities
Commission
472 W. Washington St.
Boise, ID 83702
208.334.0300
www.puc.idaho.gov
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TABLE OF CONTENTS
Executive Summary ............................................................................................................ 1
Introduction ......................................................................................................................... 3
Background ......................................................................................................................... 4
A. The Commission’s Jurisdiction over Telecommunications ........................................... 4
B. Universal Service Fund .................................................................................................. 5
THE TELECOMMUNICATIONS SURVEY .................................................................... 6
CURRENT FEDERAL ISSUES THAT MAY AFFECT IDAHO ................................... 20
Connect America Fund (CAF I/II) .................................................................................... 20
Mobility Fund ................................................................................................................... 21
Rural Broadband Experiments .......................................................................................... 21
Open Internet Rules .......................................................................................................... 21
Re-write of the federal Telecommunications Act of 1996 ................................................ 22
Court Challenges ............................................................................................................... 22
D E F I N I T I O N S ........................................................................................................ 23
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Executive Summary
Since 1996, the telecommunication industry has developed and deployed new
technologies that have produced a more robust infrastructure and a wide array of
telecommunications services for consumers. This array of services has also resulted in
significant changes in how customers communicate with others and use the Internet. A
recent Federal Communications Commission report noted that the number of traditional
wirelines (“plain old telephone service” or “POTS”) has decreased and that more
American households now rely exclusively on wireless services. More residential
customers subscribe to some form of broadband telecommunications beyond POTS. The
changes in consumers’ preferences in telecommunications services have impacted federal
and state universal service mechanisms.
Since the 1930s, Congress has mandated that all telephone companies providing
interstate service must contribute to a federal Universal Service Fund (USF). The USF
helps to make phone service affordable and available to all Americans, including those
living in areas where the cost of providing telephone service is high. All telephone
consumers pay into the fund, which is then disbursed to telephone companies to provide
service, mostly in rural under-served areas.
Idaho has a state fund, the Idaho Universal Service Fund, (IC 62-610A), which
stipulates that "all consumers in this state, without regard to their location, should have
comparable accessibility to basic telecommunications services at just and reasonable
rates. Currently, Idaho telecommunications customers pay 16 cents per residential line,
25 cents per business line and $.0006 per minute on long distance calls. The fund is
designed to ensure that average rates in rural areas are no more than 25% higher than
average rates in urban areas. The Idaho rural carriers that receive IUSF support are ATC,
Cambridge, Direct, Fremont, Inland, Midvale, Rural and Silver Star.
However, the assessable base for Idaho Universal Service Fund contributions has
eroded as customers migrate to other services that do not support the fund. Simply put,
as more customers move to newer services, the base that supports the IUSF is eroding.
With the advent of nontraditional communications, such as broadband, wireless
Voice over Internet Protocol (VoIP) and cable-based communications, federal and state
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policymakers are grappling with how universal funds should now be collected and
disbursed to ensure new technologies are available at reasonable cost to all.
The Idaho Public Utilities Commission conducted a survey of Idaho
communication providers seeking input and suggestions as to how the changing
telecommunications field will affect rural high-cost areas and evaluate the sufficiency of
the Universal Service Fund and other cost mechanisms to ensure continued availability of
telecommunications and broadband services in Idaho.
The survey responders included a selection of Idaho’s Incumbent Local Exchange
Carriers, Rural Incumbent Local Exchange Carriers, Wireless and Cable providers as
well as some Competitive Local Exchange Carriers and a wholesale provider.
Summary of recommendations from Respondents and Commission
VoIP services should be included in the definition of Universal Service.
All Federal funding in Idaho should be exhausted and then a reassessment of
areas that still need broadband services could then be targeted.
Customers of all providers of telecommunications services should make equitable
contributions to the preservation and advancement of universal service.
Idaho PUC should follow the federal lead and to the extent that broadband is
included in either state or federal universal service requirements, state and federal
USF programs should be in place to fund those requirements.
A consensus that broadband to all of Idaho was necessary for economic
development and that all providers should pay into the USF to broaden the base
and provide adequate funding to expand.
Another common observation was that Idaho should wait until the Federal
changes are enacted and then follow those changes so that there will be certainty
and continuity for business planning and advancement of all communication
services.
The Commission is not, at this time, considering the assessment of broadband
services or broadening the base to include additional consumers not already contributing
to the IUSF. Rather the PUC proposes that, in the future it would be prudent to
modernize and reform the contribution mechanism to promote an equitable and
sustainable framework in an evolving communications environment. Since, there are
many unknowns at the federal level, the Commission and many other survey participants
believe it would be wise to defer any actions in Idaho until there is more certainty from
the FCC.
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Introduction
In June 2014, the Idaho Public Utilities Commission received a letter from
Senator Brent Hill, president pro tem of the Idaho Senate, and Representative Scott
Bedke, speaker of the Idaho House of Representatives, regarding the rapid changes taking
place in the telecommunications industry, specifically in regard to the deployment of
high-speed broadband service. Since Congress passed the Telecommunications Act of
1996, “... we have witnessed the dramatic transformation of the entire industry with the
explosion of the Internet and the advent of broadband services and other new
communication technologies,” wrote Senator Hill and Speaker Bedke.
With the rapid deployment of broadband technology, the Federal
Communications Commission (FCC) is making changes to how telecommunications and
broadband services are funded, particularly in rural, high-cost areas. “Some have
suggested those changes may not ensure the continued availability of affordable
telecommunications and broadband services throughout Idaho,” wrote Hill and Bedke.
“This is a concern to us. Both traditional telecommunications and broadband services are
critical to the economic future of Idaho, particularly rural Idaho. We can ill-afford a
digital divide that leaves our rural areas behind.”
The legislative leaders asked the IPUC to begin assembling information from
interested parties to evaluate the sufficiency of the Idaho Universal Service Fund (IUSF)
that provides financial support for traditional telecommunications services and how that
fund might be structured and allocated given the advent of broadband deployment. In
response, the IPUC opened an investigation and conducted a survey on changing
communication services for both traditional and new services. The fundamental
consideration focuses on broadband deployment. Should Idaho’s Universal Service
funds be used to expand broadband? If it is decided that the IUSF should be used to
expand broadband, then another question arises - to what extent? Should the funds be
used for facility build out or should they also be used for maintenance and operation
costs? These are serious questions that require careful deliberation and are ultimately
contingent upon pending federal decisions.
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Background
A. The Commission’s Jurisdiction over Telecommunications
The IPUC’s traditional regulatory authority over all utilities offering
telecommunication services includes setting rates, service obligations, safety and
consumer protection (customer notice, billings, deposits, complaints, etc.).
In 1988, the Idaho Legislature recognized that the telecommunication industry
was transitioning from a fully regulated industry to a competitive one and enacted the
Idaho Telecommunications Act. See Chapter 6 of Title 62. Under the Commission’s
“Title 62 authority,” it no longer sets rates for in-state, long-distance service or rates for
local telecommunication service for customers with more than five telephone lines. In
addition, the PUC was prohibited from regulating paging, wireless (cellular), and one-
way video (cable) services. Idaho Code § 62-603(13).
In 1996, Congress enacted the federal Telecommunications Act that opened local
telecommunications markets to competition, with some restrictions for rural markets.
Incumbent local exchange companies (ILECs) such as CenturyLink and Frontier, no
longer had a monopoly in their traditional service areas and were required to open their
local telephone networks to competitors. 47 U.S.C. §§ 251 and 253. Given the
increasing competition from both wireline and wireless carriers, our Legislature allowed
ILECs to opt-out of price regulation. Idaho Code § 62-622.
Today, the PUC retains authority to resolve disputes between carriers, handle
customer complaints, enforce service quality standards and assist with customer relations
(e.g., billing, collection, deposits, and termination of service).1 The PUC continues to set
rates for 10 telephone corporations, of which eight participate in the state Universal
Service Fund.
1 Under its Title 62 authority, the Commission also has authority to: designate Eligible
Telecommunications Carriers (ETCs) to receive federal USF support (62-610D); implement the federal
Telecommunications Act such as approve interconnection agreements and arbitrate disputed
interconnection requests (62-615; 47 U.S.C. §§ 252(b), 252(e)); and determine which telecommunication
services should be available to consumers of ETCs (62-610C).
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B. Universal Service Fund
One of the major components of the 1988 Idaho Telecommunications Act was the
creation of the Idaho Universal Service funding mechanism to provide a mechanism to
maintain “the universal availability of local [telecommunication] service at reasonable
rates and to promote the availability of [long-distance] service at reasonably comparable
prices throughout the state of Idaho.” Idaho Code § 62-610. Generally, the IUSF collects
a surcharge from all wireline and long-distance customers. Those collected funds are
used to keep rates for rural telecommunication customers reasonable. Id. at
62-610(2), (3). The rural carriers that receive IUSF support are ATC, Cambridge, Direct,
Fremont, Inland, Midvale, Rural and Silver Star.
Since 1996, the telecommunication industry has developed and deployed new
technologies that have produced a more robust infrastructure and a wide array of
telecommunications services for consumers. This array of services has also resulted in
significant changes in how customers communicate with others and use the Internet.
A recent FCC report noted that the number of traditional wirelines has decreased
at a rate of 10% per year, and 41% of American households now rely exclusively on
wireless services. More residential customers subscribe to some form of broadband
telecommunications beyond wireline service. (NeuStar Petition for Declaratory Ruling,
2014 WL 6694454.)
The changes in consumers’ telecommunications services preferences have
impacted federal and state universal service mechanisms. Specifically in Idaho, the
assessable base for IUSF contributions has eroded as customers migrate to other services
which do not support the fund. Simply put, as more customers move to newer services,
the base that supports the IUSF is eroding.
The FCC has been examining ways to stabilize the federal contribution
mechanism since 2002.2 After adopting sweeping Universal Service Fund reforms in
2011,3 the FCC again released several contribution reform proposals for public comment
2 See generally, Federal-State Joint Board on Universal Service et al., CC Docket No. 96-45, Further
Notice of Proposed Rulemaking and Report and Order, 17 FCC Rcd 3752 (2002) (“2002 Contribution
Order”).
3 See Connect America Fund et al., WC Docket No. 10-90 et al. Report and Order and Further Notice of
Proposed Rulemaking, 26 FCC Rcd 17663 (2011) (USF/ICC Transformation Order”).
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in 2012.4 On August 7, 2014, the FCC referred contribution reform to the Federal State
Joint Board on Universal Service for consideration.5 A proposed recommendation was
due April 7, 2015. The FCC has one year thereafter to decide whether to adopt, modify
or reject the Joint Board’s recommendations. We believe federal reforms may be several
years away.
THE TELECOMMUNICATIONS SURVEY
Because the FCC is making changes to the federal financial support mechanisms,
the IPUC opened an investigation to review the changing communication service
landscape in Idaho. The investigation sought input from Idaho telecommunication
providers and focused on both traditional and broadband services, which are critical to
the economic future of all Idaho, particularly rural Idaho.
The survey responders included a selection of Idaho’s Incumbent Local Exchange
Carriers (ILECs), Rural Incumbent Local Exchange Carriers (RLECs), wireless and cable
providers as well as some Competitive Local Exchange Carriers (CLECs) and wholesale
carriers. The responses helped identify the rapid technological changes occurring in the
industry over 20-plus years since the last revisions were made to the Idaho Universal
Service support mechanisms in 1993.
Questions for Comment and Analysis
The questions posed to the industry were:
1. Without regard to technology, what services should be considered a
component of “universal service”?
2. What level(s) of service should be provided under universal service?
3. Is access to the designated universal services essential to all regions
and areas of the state? Please explain.
4. Should universal service be provided at comparable prices regardless
of location or cost of service? Please explain.
4 See In the Matter of Universal Service Contribution Methodology; A National Broadband Plan for our
Future, WC Docket No. 06-122, GN Docket No. 09-51, Further Notice of Proposed Rulemaking, 27 FCC
Rcd 5357 (April 13, 2012) (“2012 Contributions FNPRM”).
5 See In the Matter of the Federal State Joint Board on Universal Service et al., WC Docket No. 96-45,
Order (August 7, 2014) (“Referral Order”).
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5. Should there be specific, predictable and sufficient state support
mechanisms to advance universal service?
6. Should universal service support be directed to advanced service
networks that provide voice services as well?
7. Should universal service support mechanisms and rules be
competitively and technologically neutral?
8. What mechanisms should be used to ensure all consumers including
low-income consumers and those in rural, remote, and high-cost areas
have access to telecommunications and information services?
9. Should the customers of all providers of telecommunications services
make equitable contributions to the preservation and advancement of
universal service?
10. Should the customers of all providers of telecommunications services
be required to support the Idaho Telecommunications Service
Assistance Program (ITSAP) and Telecommunications Relay Service
(TRS)?
11. Should Idaho’s universal service support mechanism be adjusted or
changed to direct support in some other fashion such as a customer
voucher, technology-neutral reverse auction or some other
mechanism?
Following is a summary of the survey responses received.
1) Without regard to technology, what services should be considered a component
of “universal service”
Incumbent Local Exchange Carriers (ILECs)
The Idaho PUC should follow the federal lead. To the extent broadband is included in
either state or federal universal service requirements, state and federal USF programs
should be in place to fund those requirements.
Universal service funds could be used to incent providers to offer broadband services in
high-cost areas, but there needs to be a balance between cost (surcharges on customer
bills statewide) and benefit (availability of broadband service statewide).
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As Universal Service Fund (USF) reform is considered in Idaho, policymakers should
make necessary changes to ensure consistency with the federal USF; for example, a
model identifying costs at a granular level should be used to determine the amount of
support needed.
Rural Local Exchange Carriers (RLECs)
It is important to remember that it is not so much the technology that brings universal
service to a consumer; rather it is the network that supports the services which support
the technology. The service provided on the network should be something that allows
consumers the ability to take advantage of current and future communications
applications, including reliable connectivity to nationwide voice network and emergency
services.
A reliable voice and broadband service should be the key components of universal
service. The ability to connect to emergency services, without difficulty, wherever you
live in the state is essential. A voice and/or broadband network are the two major
services that obtain this goal.
Wireless Providers
AT&T recommends that this Commission “hold off making material changes to the high-
cost support mechanisms funded by the Idaho Universal Service Fund at this time in light
of the significant support being made available through the Connect America Fund
(CAF)6 support mechanisms.”
Cable Providers
The cable industry argues that current Idaho Code §62-610 only provides that local
exchange service and MTS are components of the state universal service program.
However, unlike the current USF program, direct USF broadband payments should not be
made to legacy local exchange carriers based upon the company’s specific high-cost of
providing voice service. The flaw with the current USF system is that it is blind to
market competition and new market choices that have emerged within many incumbent
USF carrier service territories. If USF support is extended to broadband, a system must
be developed to focus that spending only on the geographic areas of the state where
broadband service is needed but not available because it is uneconomical to provide it at
a reasonable price. The unserved areas need to be defined. The data necessary to
allocate funding in this manner is available on a census block basis from the FCC. This
approach would ensure that the broadband USF program specifically targets pockets of
6 Connect America Fund. The FCC has adopted comprehensive reforms to modernize the High Cost
Program and accelerate the build-out of robust broadband networks across the country.
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unserved broadband consumers, rather than providing blanket funding for high-cost
companies with large geographic footprints.
Competitive Local Exchange Carriers (CLECs) and Wholesale Providers
All voice services should be considered components of universal service.
2) What level(s) of service should be provided under universal service?
Incumbent Local Exchange Carriers (ILECs)
A state definition of supported voice service that is consistent with the FCC’s existing
definition would complement the FCC’s funding mechanisms. Likewise, if broadband
service is supported by a state fund, consistency with the FCC’s definition would
complement the federal funding mechanism.
CenturyLink supports the FCC’s proposed expansion of the speed requirement for
broadband service to a download speed of 10Mbs,7 and notes that Section 254(f) of the
1996 Telecom Act allows states to expand definitions and requirements, but requires
specific, predictable and sufficient mechanisms to support any level(s) of service
required. The Company encourages Idaho policymakers to make sure that any state USF
reform is consistent with the federal USF.
Rural Local Exchange Carriers (RLECs)
Voice services that give consumers reliable access to local, long distance and emergency
services should be provided under Universal Service. In addition to voice, we believe a
broadband connection, as defined by the FCC, should also be provided.
Wireless Providers
AT&T recommends that the Commission hold off making material changes to the high-
cost support mechanisms funded by the Idaho Universal Service Fund at this time in light
of the significant support being made available through the CAF support mechanisms.
AT&T recommends that this question be considered once the CAF has been further
implemented.”
Cable Providers
Basic voice communication should be provided at “reasonable rates” as defined by Idaho
Code § 62-610. The basic voice communications should maintain current access to local
7 Current download speed in Idaho for the Broadband tax credit is 125 kbps.
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calling and connection to safety services such as 911. A comprehensive study regarding
costs and benefits of including broadband as a USF component should also be addressed
and consistent with the FCC’s minimum speed standards of 4Mbps down and 1 Mbps up.
The state may consider adding broadband as an additional component of state universal
service. This would be a significant policy change, so the state should study carefully
both the costs and potential benefits compared to the current USF program. If that study
results in a consensus that broadband is worthy of USF support, the resulting statutory
changes and regulatory actions must ensure that the limited USF resources are allocated
carefully to ensure the greatest public benefit.
Voice customers are cancelling their landlines and subscribing to voice services from
mobile telecommunications providers, including those offered by the eight legacy phone
companies8 that are currently receiving Idaho USF, as well as from cable companies
providing VoIP. State USF support dollars for voice services should not continue to be
used in those service areas, or portions of those areas, where voice competition exists.
Competitive Local Exchange Carriers (CLECs) and Wholesale Providers
Basic calling capabilities including VoIP or all voice services should be included as part
of universal service.
3) Is access to the designated universal services essential to all regions and areas of
the state? Please explain.
Incumbent Local Exchange Carriers (ILECs)
Comparable service at comparable rates for all regions of the state should continue to be
at the forefront of universal service principles. Without such access, the rural and high-
cost areas would be left behind. Universal service support should be targeted to only the
highest cost census-block groups in the state using an updated forward-looking cost
model such as the FCC’s Connect America Cost Model (CACM).
CenturyLink believes that the rural high-cost areas of America need broadband service
availability at speeds and prices comparable to more urban areas. The company believes
that the universal service program must provide support sufficient to create an economic
business case for rural broadband deployment in otherwise uneconomic areas. While the
FCC expanded universal service to include broadband, it lacked the funding necessary for
carriers to build and operate broadband networks in all high-cost regions of the U.S.
According to the company, the FCC challenged the states to fill in the gaps where the
FCC was unable to devote resources (primarily the highest cost areas, as well as census
blocks where only one or just a few locations enjoy broadband service). In areas that are
8 The eight legacy rural high cost USF recipient companies are: ATC, Cambridge, Direct, Fremont, Inland,
Midvale, Rural and Silver Star.
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economic to serve, broadband networks already exist (usually multiple networks). The
challenge for Idaho is that in those areas that are uneconomic, networks will not be built
unless there is support, regardless of the size of the carrier. Idaho policymakers cannot
create unfunded mandates, so funding must be aligned with the obligations.
Rural Local Exchange Carriers (RLECs)
Yes, the cost to provide service to a customer within Idaho can vary depending on the
location, without regard to the company providing the service. The continued support of
these high-cost areas is critical to providers remaining financially viable and able to
provide universal service in Idaho.
Idaho’s varying terrain and dispersed populations certainly create unique challenges for
utilities. Universal service should level the playing field by supporting those high-cost
areas that would not be served otherwise.
Wireless Providers
AT&T recommends that this Commission “hold off making material changes to the high-
cost support mechanisms funded by the Idaho Universal Service Fund at this time in light
of the significant support being made available through the CAF support mechanisms.”
Cable Providers
No, universal service should not be made available to all regions of the state. These are
personal choices made by Idahoans on where they live, and some choose to live remotely
with the benefits that such choice brings. It should not be the state’s obligation to
provide universal service to every single resident.
Competitive Local Exchange Carriers (CLECs) and Wholesale Providers
No. If people choose to live in remote areas without service, it should not be deemed a
requirement.
4) Should universal service be provided at comparable prices regardless of location
or cost of service? Please explain.
Incumbent Local Exchange Carriers (ILECs)
Universal service policies were established to ensure that customers in rural high-cost
areas had access to the same reliable and affordable telephone service as the residents in
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low-cost urban areas. Access to affordable rates in high-cost areas should continue as
public policy although it might now be necessary to continue with uniform statewide
averaged residential rates.
CenturyLink points out that if Idaho wants to devote the significant resources required to
build and maintain broadband networks to provide services in high-cost rural areas that
are comparable to those available in more densely populated areas, then it is essential to
recognize that the cost of providing service is dependent on the geography and density of
the service area, not on the size of the carrier. The company provides service to very
rural areas of Idaho and should be eligible for support from the state’s Universal Service
Fund. The company further believes that if policymakers determine that no support is
available, then it, “cannot be required to continue to service in uneconomic areas.” The
company believes that through federal CAF programs, the primary issue for Idaho
policymakers is to determine how broadband will be expanded to rural areas not covered
by CAF, and how this expansion is to be funded.
Rural Local Exchange Carriers (RLECs)
The cost for providing a quality network will vary depending on location. The recovery
from universal service should reflect the specific cost for that area. Comparable service
at comparable rates for all regions of the state has been, and should continue to be, at the
forefront of universal service principles. Without such access, the rural and high-cost
areas will be left behind
The cost of providing services varies from area to area with the type of geographic terrain
encountered. If a comparable cost of service is going to be obtained regardless of
location, a universal service funding mechanism needs to follow the actual costs incurred,
as long as all universal service funding requirements have been met.
Wireless Providers
AT&T recommends that the commission delay making material changes to the high-cost
support mechanisms funded by the Idaho Universal Service Fund in light of the
significant support being made available through the CAF support mechanisms. AT&T
recommends that this question be considered once the CAF has been further
implemented.
Cable Providers
The Cable Association believes that universal service as referred to in the context of this
question as a monthly service, should be provided at a “reasonable rate” (Idaho Code §
62-610), and at a relatively comparable price, regardless of location. However, in remote
or unserved areas where the cost of extending telecommunications facilities far exceeds
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investment, the bulk of the capital cost of line extensions should be the primary
responsibility of the consumer(s) or “cost-causer.”
CLEC/Wholesale Providers
Consumers in rural Idaho should have reasonably comparable prices to urban areas.
Provider costs will always vary depending on geographic location. Support should be
based on these costs using IPUC oversight and reporting.
5) Should there be specific, predictable and sufficient state support mechanisms to
advance universal service?
The consensus answer to this question was yes. One mid-size provider stated that
specific, predictable and sufficient state support mechanisms are necessary in order to
incent service providers to continue to invest in multi-purpose networks. Recent FCC
decisions have capped the Federal Universal Service Fund programs. That will make it
difficult for companies to expand broadband services and increase speeds without support
from the states. Moreover, the state as a whole benefits from advanced networks.
Uncertainty created by unknown support mechanisms would slow the construction of
advanced network deployment. Specific and known support mechanisms would create
the ability to plan and budget accordingly.
Incumbent Local Exchange Carriers (ILECs)
Funding must be predictable. Building broadband networks is capital-intensive and takes
multiple years to complete. Without predictable support, carriers cannot make long-term
capital decisions. Funding must also be sufficient. In areas where it is not economical to
provide services, carriers cannot borrow the funds necessary to deploy and operate
networks, and therefore need sufficient support to make the networks economic for the
carrier and the consumer.
Rural Local Exchange Carriers (RLECs)
Rural providers pointed out that without predictable and sufficient universal service
support, most lenders are very cautious to lend money to service providers. With that
type of restriction it makes it difficult to place infrastructure to support consumers’ future
needs without some form of support.
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Wireless Providers
AT&T still maintains that the Commission should do nothing until the CAF monies are
disbursed and then reassess what the state universal service funding should be.
CLEC/Wholesaler
TW Telecom wants verification that those receiving funds are using those funds for those
remote areas and not to support their overall business.
6) Should universal service support be directed to advanced service networks that
provide voice services as well?
Most all responders were in agreement with this proposal. Some of their statements were
that specific, predictable and sufficient state support mechanisms are necessary in order
to incent service providers to continue to invest in the multi-purpose networks. The
responders also pointed out that recent FCC decisions have capped federal USF
programs. That will make it difficult for companies to expand broadband services and
increase speeds without state support.
Incumbent Local Exchange Carriers (ILEC)
Universal Service should be used to support both voice and broadband services that are
fixed services. By doing that, Universal Service funding that is received for a specific
area will stay in that area so that current and future consumers have costs that are
comparable to others in that state.
As long as voice service is essential enough that Carrier of Last Resort obligations are
imposed on certain carriers, the primary goal of universal service should be to support
voice service. The additional benefit is that the supported voice infrastructure will also
provide the fundamental infrastructure to support broadband services.
CenturyLink believes this question raises the issue of selecting winners and losers based
on technology. Policymakers should be technology-neutral; they should consider any
technology that is comparable in terms of service and price. Idaho policymakers should
identify the minimum services it wants providers to offer and identify the funding
available for providing and maintaining the services in high-cost areas, rather than
specifying the technology that should be used. Selecting winners and losers based on
technology will seldom be an efficient use of taxpayer funds.
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Rural Local Exchange Carriers (RLECs)
The ability to support traditional voice and data on the same network is beneficial. At
this point, one benefits from the same network as the other. As long as the same network
that supports both voice and data (fiber) is being improved, the support is justifiable.
Support should be directed to high-cost rural areas within Idaho, not urban areas. By
providing support to nomadic voice (cellular and VoIP), there is no guarantee that the
dollars will be used in these high-cost areas to build the necessary facility-based
networks.
Wireless Provider
AT&T maintains that the Commission delay making material changes to the high-cost
support mechanisms funded by the Idaho Universal Service Fund in light of the
significant support being made available through the CAF support mechanisms. AT&T
recommends that this question be considered once the CAF has been further
implemented.
Cable Providers
The cable industry does not support this and believes that it should be used for basic
services only.
CLEC/Wholesale Provider
The provider believes that Idaho Universal Service Funds should support fiber networks
and not support VoIP.
7) Should universal service support mechanisms and rules be competitively and
technologically neutral?
There was some consensus between some rural providers and cable providers. Both
agree that the delivery technology should not be a critical component and any company
that services a high-cost area should be able to apply for and receive support. Moreover,
as the cable entity points out, the funds should be charged for all types of voice services,
including VoIP.
Incumbent Local Exchange Carriers (ILECs)
Incumbents support this if it is technologically neutral and as long as it is a facility-based
network and not funding an over-build in an area already funded by USF. One
commenter believes that universal service support should be available only to support the
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services of the providers that are subject to Carrier of Last Resort obligations regardless
of the technology used to provide service.
Yes, both the obligations and funding for Idaho universal service should be competitively
and technologically neutral. However, because universal service is designed to provide
service in areas where it is otherwise uneconomic, the funding should be provided to a
single provider to avoid unnecessary duplication or a waste of scarce funding.
Cable Providers
One cable provider believes universal service support should be distributed on a
competitively neutral and technologically neutral basis. If, after a comprehensive study,
it becomes the state’s policy that USF support should be extended to broadband, the
support should be limited only to unserved areas. If broadband is to receive USF support,
that support must not be based on the cost structure of an incumbent telephone provider,
nor should the scope of the support be tied to the incumbent’s service area. Broadband
service is identifiable on a census-block basis, and census block analysis should be the
basis by which USF support for broadband is based.
Wireless
AT&T maintains that the Commission delay making material changes to the high-cost
support mechanisms funded by the Idaho Universal Service Fund in light of the
significant support being made available through the CAF support mechanisms. AT&T
recommends this question be considered once the CAF has been further implemented.
8) What mechanisms should be used to ensure all consumers, including low-income
consumers, and those in rural, remote and high-cost areas have access to
telecommunications and information services?
Incumbent Local Exchange Carriers
Mechanisms should be based upon costs that support existing networks, as well as
funding to promote improvements to rural networks. The state should implement
programs that incent both capital investment (such as investment grant programs) and
help recover the costs of upgrading and maintaining existing networks, as is done with
existing state and federal programs.
Two suggested funding mechanisms should be utilized: one mechanism to providers
(both rural and non-rural) with carrier of last resort obligations to support the cost of
offering reasonable rates in high-cost areas. The second mechanism would be used to
provide support to ensure affordability for low-income individuals that is now offered
through the state Lifeline (or Idaho Telecommunications Service Assistance Program,
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ITSAP). The high-cost mechanism should be based on the extent to which forward-
looking costs at the census block level exceed a benchmark level that is determined to be
generally affordable. This second mechanism should bridge the gap between the
generally affordable level and the level deemed affordable for low-income individuals.
Availability and affordability are related by separate questions that both deserve
discussion. Service availability relates to the build-out and maintenance of services in
high-cost areas, while service affordability is related to the ability of consumers to pay
for such services in both urban and rural areas of the state. The mechanisms to ensure
service availability include the federal CAF programs, as well as the Idaho USF plan.
Idaho policymakers also need to decide how to best provide services to the very high-cost
rural areas that may be served via satellite. USF reform must result in customers having
similar services at comparable prices.
Service affordability is addressed through the federal Lifeline program and the Idaho
Telecommunications Service Assistance Program. While the Lifeline and ITSAP plans
provide credits toward voice service only, these credits could be expanded or redirected
to include broadband services. CenturyLink has offered a low-income broadband
discount program known as “Internet Basics” for the past three years. Lifeline eligibility
is one of several requirements for the program. CenturyLink has also partnered with
local and federal groups for both promotion of Internet Basics and computer training.
Rural Local Exchange Carriers
Universal service recipients should be required to build a reliable communications
network to any consumer who requests service, within reason. These Carriers of Last
Resort obligations will ensure consumers in rural and high-cost areas have access to
advanced communication services.
Wireless
AT&T explained that in its “Transformation Order,” the FCC established a $100 million
per year “Remote Areas Fund” to address affordable access through alternative
technology platforms in the most remote areas of the nation. Parties subsequently filed
comments regarding the structure of the RAF and other issues identified by the FCC.
Implementation is pending. The company believes that the RAF continues to be the
appropriate mechanism to address this universal service objective.
CLEC/Wholesale Provider
The IPUC can monitor, inspect and audit providers to ensure that consumers are
protected from fraud and abuse. Audits should be paid for from the fund.
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9) Should the customers of all providers of telecommunications services make
equitable contributions to the preservation and advancement of universal service?
Unanimously, the answer was yes. Comments included observations that universal
service is a social policy and value that has been in place since the 1934 Communications
Act. The users of the service provided should equally support the implementation of
such policy. The commenters also wanted the inclusion of VoIP services.
Other observations were that the availability of all the state telecommunications networks
is important for the proper functionality of the state. All should contribute to have access
to these networks.
Support for voice service should be provided by all voice customers, including
interconnected VoIP customers and wireless customers. Limiting funding from only a
segment of the voice market would create two problems. First, it would establish
artificial incentives for customers to migrate to services not subject to surcharges.
Second, it would create funding instability as customers migrate to services not subject to
surcharges.
Cable providers believe that wireless/mobile communications services should also be
included. This may require a statutory change to Idaho Code § 62-610.
With everyone receiving telecommunications services contributing equally, it will only
strengthen the overall program and allow all consumers the same opportunities wherever
they reside. There needs to be parity in contributions to the Idaho USF. All providers of
voice services, regardless of their regulatory status, should contribute to the fund. In
many states, wireless providers pay into the state USF and, in some states, VoIP
providers pay as well. If Idaho expands the definition of universal service to include
broadband networks, broadband providers should also contribute to the “preservation and
advancement of universal services.”
Recently, the FCC directed the Federal-State Joint Board9 to report back to the FCC by
late 2015 regarding the recommendations for updating federal USF contributions policy.
Idaho should also review and update its contributions policies to ensure parity in the
contributions to the Idaho USF.
AT&T supports universal service contribution methodologies being broadly based and
competitively neutral as possible and not driving purchasing decisions.
9 The Federal-State Joint Board on Universal Service was established in March 1996, to make
recommendations to implement the universal service provisions of the Act. This Joint Board is comprised
of FCC Commissioners, State Utility Commissioners, and a consumer advocate representative.
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10) Should the customers of all providers of telecommunications services be
required to support the Idaho Telecommunications Service Assistance Program
(ITSAP) and Telecommunications Relay Service (TRS)?
Again, a near unanimous yes was given. All agreed that VoIP providers be included in
the providers’ category.
Funding for public service programs should be recovered from customers of all providers
throughout Idaho.
AT&T believes that universal service contribution methodologies should be as broadly
based and competitively neutral as possible and should not drive purchasing decisions.
The cable providers had no opinion.
Summarized: The customers of all voice providers in Idaho benefit by being able to
communicate with low-income and hearing-impaired customers and therefore should
contribute to these funds.
11) Should Idaho’s universal service support mechanism be adjusted or changed to
direct support in some other fashion such as a customer voucher, technology-neutral
reverse auction, or some other mechanism?
The voucher support mechanism was rejected outright by all providers.
Incumbent Local Exchange Carriers
CenturyLink points out that Idaho policymakers have historically been leaders in
promoting broadband investment in Idaho and in rural high-cost areas. Previously, the
Legislature created the “Rural Broadband Matching Fund” as a way to incent broadband
investment in high cost rural areas. In addition, broadband providers in Idaho have the
ability to receive a tax credit for broadband investment in Idaho. The company believes
policymakers should continue to utilize and enhance these options as well as considering
USF reform and other possible options to increase broadband investment in rural high-
cost areas.
Finally, CenturyLink stated that the FCC is planning a reverse auction in 2015–2016 for
areas where the price cap provider does not exercise its ‘right of first refusal’ and
declines CAF funds. This type of auction has not been attempted, and the FCC has not
finalized the rules and service obligations for the auction. Therefore, it is premature for
Idaho to attempt a similarly-styled auction. One option that a number of states have
adopted, or are considering, is funding the deployment of broadband networks through a
grant program, similar to one-time distributions from the USF as an aid to construction.
While this would not work for all areas, it would work for many areas where operating
the network is economic, but capital assistance is required to deploy the network.
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Nebraska, Utah and California have existing programs, and other states are currently
considering similar models.
Rural Local Exchange Carriers
The current Idaho USF system promotes high-quality networks and should be based upon
the cost of expanding the network. USF support should be provided through a
competitively neutral mechanism to a single entity so that facilities can be deployed and
the requisite services offered.
Wireless Provider
AT&T recommends that this question be considered once the CAF has been further
implemented.
Cable Providers
The cable industry advocates that a system be focused on USF support as a contribution
in aid of construction (CIAC) paid to a provider that otherwise finds it uneconomic to
extend facilities into an unserved area. If the capital investment is subsidized by the
USF, the monthly service would not have to be. Capital investment in unserved areas
could be competitively bid, with the winning provider receiving some level of USF
support as a CIAC. The level of CIAC would be calculated to bring the capital cost per
customer down to some reasonable industry standard of investment per customer.
CURRENT FEDERAL ISSUES THAT MAY AFFECT IDAHO
Many issues are underway at the Federal level that may have a direct impact on
Idaho. Following is a list of many that could impact Idaho in the future.
Connect America Fund (CAF I/II)
The FCC has adopted comprehensive reforms to modernize the High Cost
Program and accelerate the build-out of robust broadband networks across the
country. In November 2011, the Federal Communications Commission (FCC)
released the USF/ICC Transformation Order.
For Connect America Phase II, high-cost support is calculated using a forward-
looking cost model was offered to incumbent price cap carriers for each state they
serve in exchange for their commitment to offer voice and broadband services
throughout their service territories. For the areas where the incumbent price cap
carriers decline model-based support, support was to be disbursed using a
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competitive bidding mechanism. The Federal Communications Commission
expects that what it learns from conducting the rural broadband experiments will
inform its decisions in the coming months as to how to implement a Phase II
competitive bidding process.
Mobility Fund
The Mobility Fund is the wireless component of the Connect America Fund. It
provides support for the expansion of mobile broadband networks in areas that
might otherwise not be served. The Mobility Fund consists of two phases.
Phase I provides immediate one-time support to accelerate the deployment of
mobile broadband and voice service to unserved areas. A nationwide reverse
auction held in September 2012 awarded $300 million of Phase I funds to more
than 30 service providers. A separate auction, called the Tribal Mobility Auction,
will award up to $50 million to providers that serve Tribal lands.
Phase II provides ongoing support to deploy and maintain mobile broadband and
voice service in high-cost areas. Up to $500 million will be available every year;
however, the FCC is studying the exact amount to be allocated for services on
Tribal lands in future years.
Rural Broadband Experiments
On January 31, 2014, the Commission released the Technology Transitions Order,
which, among other things, adopted targeted experiments to help learn more about
the impact of technology transitions on rural America. In addition to furthering
the FCC’s goal to gain experience and data on how to ensure universal access as
networks transition, this experiment is designed to help inform the policy
decisions in various proceedings pending before the FCC.
On July 11, 2014, the Commission adopted a $100 million budget for the rural
broadband experiments and established an objective methodology for selecting
projects among formal applications, which were due 90 days after release of the
order.
Open Internet Rules
An Open Internet means consumers can go where they want, when they want.
This principle is often referred to as Net Neutrality. It means innovators can
develop products and services without asking for permission. It means consumers
will demand more and better broadband as they enjoy new lawful Internet
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services, applications and content, and broadband providers cannot block, throttle
or create special "fast lanes" for that content.
The FCC's Open Internet rules protect and maintain open, uninhibited access to
legal online content without broadband Internet access providers being allowed to
block, impair, or establish fast/slow lanes to lawful content.
The FCC's Open Internet rules are designed to protect free expression and
innovation on the Internet and promote investment in the nation's broadband
networks.
Re-write of the federal Telecommunications Act of 1996
The Committee on Energy and Commerce has issued a series of white papers
as a first step toward modernizing the laws governing the communications and
technology sector. Changes in technology and the rate at which they are
occurring warrant an examination of whether, and how, communications law
can be rationalized to address the 21st Century communications landscape.
Comments have been sought so that the objective of a statutory rewrite should
consider a flexible and technologically neutral framework that will be capable
of adapting to technical invention and innovation, whatever it may prove to
be.
Court Challenges
Open Internet
Re-write of the Telecommunications Act of 1996
Cost model for rural exchanges may be challenged
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D E F I N I T I O N S
CLEC – Competitive Local Exchange Carrier –
Created as a result of the Telecommunications Act of 1996. Essentially the idea
of the CLEC was that it would be a new local phone company that would compete
with the ILEC.
Carrier of Last Resort (COLR) –
Idaho currently does not have COLR statues; but it is part of the national
discussion. A carrier of last resort is a telecommunications carrier that commits
(or is required by law) to provide service to any customer in its service area that
requests it, even if serving that customer would not be economically viable at
prevailing rates.
Connect America Fund (CAF) –
The FCC adopted a comprehensive reform process to modernize the High Cost
Program and accelerate the build-out of robust broadband networks across the
country.
Connect America Cost Model (CACM) –
The Wireline Competition Bureau at the FCC adopted the platform and inputs for
the forward-looking Connect America Cost Model. The model allows
Commission staff and interested parties to calculate costs based on a series of
inputs and assumptions for Connect America Phase II implementation.
Federal-State Joint Board –
An organization with representatives from the FCC and the state public service
commission’s which tries to resolve Federal and State conflicts on
telecommunications regulatory issues.
ILEC – Incumbent Local Exchange Carrier –
The dominant phone carrier within a geographic area as determined by the FCC.
Idaho’s 10 Legacy Rural Telecos –
ATC, Cambridge, Direct, Fremont, Inland, Midvale, Oregon-Idaho Utilities,
Potlatch, Rural and Silver Star.
Idaho’s 8 State USF recipients –
ATC, Cambridge, Direct, Fremont, Inland, Midvale, Rural and Silver Star
ITSAP –
A telecommunications service assistance program established within the
department of health and welfare to provide eligible recipients with a reduction in
costs of telecommunications services to promote universal service.
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Lifeline –
A minimal telephone service designed for the poor and elderly to assure they can
be reached by phone and have a “Lifeline” to the world in case of emergency.
RLEC – Rural Local Exchange Carrier –
Defined by the FCC as an independent phone company serving rural
communities, small towns, etc but could be adjacent to a major metropolitan area.
Government protects these companies by making them permitted monopolies
which are extremely difficult to compete with both because of government
regulation and economics. Certain rules apply which determine whether or not an
ILEC qualifies as a RLEC.
TRS – Telephone Relay Service
Established under the Title IV of the Americans with Disabilities Act, the TRS
allows individuals who are hearing- or speech-impaired to engage in telephone
communications in a manner functionally equivalent to that of individuals without
hearing or speech impairments. Communications is accomplished with the
assistance of an operator service and the use of specialized equipment.
UFS/ICC Transformation Order –
On November 18, 2011, the FCC released the USF/ICC Transformation Order,
which comprehensively reforms and modernizes the universal service (USF) and
intercarrier compensation (ICC) systems. Intercarrier compensation is what
carriers charge each other for originating, transporting and terminating telephone
traffic. In the Order, the FCC adopted a framework for providing ongoing
support to areas served by price cap carriers, including areas where broadband
service is not currently provided, known as Connect America Phase II.
Specifically, the Commission will provide ongoing support to these areas through
“a combination of a forward-looking cost model and competitive bidding.”
VoIP – Voice over Internet Protocol
A methodology and group of technologies for the delivery of voice
communications and multimedia sessions over Internet Protocol (IP) networks,
such as the Internet. Other terms commonly associated with VoIP are IP
telephony, Internet telephony, broadband telephony, and broadband phone
service.