Transcript Federal Telecom Policy and Rural America

Federal Telecom Policy
and Rural America
October 6, 2002
Des Moines, Iowa
Glenn H. Brown
[email protected]
1
Agenda
1. The FCC and State PUCs
2. Major Trends in Telecommunications
3. The Telecommunications Act of 1996
4. Regulatory Issues Facing Rural America
•
Universal Service
•
Broadband Deployment
2
Federal Communications Commission
• Established by the Communications Act of 1934
• Five Commissioners
–
–
–
–
Appointed by the President and Confirmed by the Senate
No More Than 3 From The Same Political Party
Five Year Terms
President Designates Chairman
• Six Bureaus
– Organized by Function
– Handle Day-to-Day Responsibilities
• Total Staff of 1755 (Per 1997 Annual Report)
– Highly Qualified
– Generally Lawyers, Accounts & Economists
3
The FCC
4
How the FCC Works
• Telecom Rules in Code of Federal Regulations (CFR) Title 47
• FCC Processes to Make and/or Modify Rules
– Notice of Inquiry (NOI)
• FCC Considering Possible Action
• Requests Input From Interested Parties
• Written Comments, Reply Comments and Ex-Parte Presentations
– Notice of Proposed Rulemaking (NPRM)
• FCC Proposing Additions or Changes to Rules
• Written Comments, Reply Comments and Ex-Parte Presentations
– Requests for Public Comment
• Requests Comment on Proposals and/or Papers Presented to Commission
• FCC Processes to Enforce Rules
5
When/How to Work With the FCC
• Before Visiting With Commissioners or Bureau Chief be Sure
Issue is “On the Radar Screen”
• Work With the Lower Level Staff First
• Best Time to Present Views is Before Issue is Put Out For
Comment
– Opportunity to Shape the Notice
– Ex-Parte Filings Not Required
• File Complete and Informative Comments and Replies
– Use Facts and Data
• Make Ex-Parte Contacts to Reinforce Your Advocacy
– Support Your Position
– Address the Issues Presented by Other Parties
– Form Coalitions When Possible
• Contacts Prohibited During “Sunshine” Period
6
State Regulatory Commissions
All 50 States and DC Have Commissions
– From 3 to 7 Commissioners
– Commissioner Selection
• 39 States Appointed
• 12 States Elected
– Staff Size From 11 (RI) to 800 (CA)
– Varied Responsibilities Including Telecom, Electricity,
Gas, Water, Taxi Cabs, Insurance, etc.
– Varied Rules and Procedures
7
State Commissions
STATE
NUMBER TYPE
STAFF
Alabama
3
Elected
140
Alaska
5
Appointed
42
Arizona
3
Elected
250
Arkansas
3
Appointed
101
California
5
Appointed
800
Colorado
3
Appointed
93
Connecticut
5
Appointed
156
Delaware
5
Appointed
26
District of Columbia
3
Appointed
57
Florida
5
Appointed
370
Georgia
5
Elected
148
Hawaii
3
Appointed
31
Idaho
3
Appointed
55
Illinois
5
Appointed
300
Indiana
5
Appointed
85
Iowa
3
Appointed
75
Kansas
3
Appointed
213
Kentucky
3
Appointed
121
Louisiana
5
Elected
85
Maine
3
Appointed
65
Maryland
5
Appointed
128
Massachusetts
5
Appointed
134
Michigan
3
Appointed
150
Minnesota
5
Appointed
43
Mississippi
3
Elected
145
STATE
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
NUMBER
5
5
3
3
3
5
5
7
3
5
3
3
5
3
7
3
3
3
3
3
3
3
3
3
3
TYPE
STAFF
Elected
43
Elected
42
Appointed
88
Appointed
78
Appointed
289
Appointed
NA
Appointed
700
Appointed
139
Elected
43
Appointed
370
Elected
460
Appointed
109
Appointed
538
Appointed
11
Elected
72
Elected
23
Elected
253
Appointed
245
Appointed
15
Appointed
23
Appointed
550
Appointed
156
Appointed
235
Appointed
180
Appointed
29
8
Major Differences
FCC
State PUCs
Responsibilities
Interstate Services
Intrastate Services
Operating Mode
Paper Proceedings
Live Hearings
Staff Resources
Significant
Generally Less
Local Service Rates
Local Competition
Universal Service
Access Rates
Local Competition
Individual Parties
Coalitions
Major Issues
Advocacy
9
U. S. Telephone Penetration
10
U. S. Telephone Penetration
11
U. S. Telephone Penetration
12
Revenue Trends by Service
1997
Total Local Service
Total Wireless
Total Toll Service
Total Telecom Service
$96,831
32,760
99,260
$228,851
1998
1999
2000
($ Millions)
$103,967 $111,764 $121,147
36,585
48,495
62,000
103,522 108,246 109,615
$244,075 $268,505 $292,762
13
Total U.S. Telephone Lines
Year
1995
1996
1997
1998
1999
2000
2001
Access
Lines
158M
165M
173M
180M
187M
189M
180M
Annual
Growth
4.40%
4.60%
5.10%
3.80%
3.40%
1.10%
-4.70%
14
Technology Substitution
From
To
Local
Toll
Pay Phone
Wireless
800 Service
FAX
Internet
2nd
Wireless
Broadband
Lines
15
Percentage of CLEC Lines
Dec-99
Jun-00
Dec-00
Jun-01
Dec-01
Lines
Percent
ILEC
CLEC CLEC
181M
8.2M
4.30%
180M
11.6M
6.00%
178M
14.9M
7.70%
174M
17.3M
9.00%
173M
19.7M 10.20%
16
Number of CLECs
Number of
CLECs
0
1 to 3
4 to 6
7+
% of Zip Codes
% of Households
Jun-00
Jun-01
Jun-00
Jun-01
46.6%
40.0%
14.5%
9.5%
35.7%
34.4%
37.9%
29.3%
11.3%
13.2%
27.1%
26.4%
6.4%
12.4%
20.5%
34.8%
17
Number of CLECs
18
High Speed Lines
Type of
Technology
ADSL
Other Wireline
Cable
Fiber
Satellite/MMDS
Total
Dec-99
370
610
1,411
312
50
2,753
Number of Lines (Thousands)
Jun-00
Dec-00
Jun-01
Dec-01
952
1,977
2,694
3,948
759
1,021
1,088
1,079
2,284
3,583
5,184
7,060
307
376
456
494
66
112
195
213
4,368
7,069
9,617
12,794
19
Number of High-Speed
Providers
Number of
Providers
0
1 to 3
4 to 6
7+
Dec-99
40.3%
49.7%
8.7%
1.3%
% of Zip Codes
Jun-00
Dec-00
33.0%
26.8%
52.9%
52.0%
10.8%
13.0%
3.3%
8.2%
Jun-01
22.2%
50.2%
16.8%
10.8%
20
Number of High-Speed Providers
21
Major Industry Trends
• Explosive Growth in Wireless
• Declines in Other Areas
– Long Distance
– Pay Phones
– 2nd Lines
•
•
•
•
Increasing Burdens From Universal Service
Emergence of Local Competition
The Importance of the Internet
The “Digitalization” of Everything
– It is truly becoming a world of “0s and 1s”
22
Industry Dynamics
•
•
•
•
•
•
Evolving Technology and Markets
The “Mania” of the Late 1990s
Huge Debt Loads
Cut-Throat Competition
Plunging Margins
Bankruptcies
• The “Comoditization” of Telecommunications
23
1996 Telecom Act
Major Objectives
• Incumbent Local Exchange Carriers (LECs) Must Open
Their Networks To Competitors:
– Interconnection
– Wholesale provisioning of services
– Unbundled Network Elements
• RBOCs Long Distance Upon Meeting 14-point “Checklist”
• FCC Must Provide For The Provision Of Universal Service
– Rural Areas have comparable services and rates to urban areas
– Schools And Libraries have access to advanced services
• Broadband Development
– Forebear from regulation where necessary
24
1996 Telecom Act
Other Major Provisions
– Creates a Federal/State Joint Board to recommend universal
service solutions to the FCC (254(a))
• Recommendation due November 8, 1996
• FCC to act on recommendations by May 8, 1997
– Defines “Eligible Telecommunications Carriers” (ETC) for
receipt of universal service funds (214(e))
– Differentiates between “Rural” LECs and “Non-Rural” LECs
• Based on size (I.e. < 100,000 lines) and area served (3(37))
• Different market opening requirements (251(f))
• NRLECS shall have multiple ETCs (214(e)(2))
– States that any Federal universal service support “should be
explicit” (254(e))
25
Section 214(e)
214(e)(1)
Eligible Telecommunications Carriers
– Must offer defined universal services
– Must advertise in media of general distribution
214(e)(2)
Designation of ETC
– The Commission may for rural companies, and shall for nonrural companies designate more than one ETC
– Before designating additional ETC for a rural company area
the State Commission shall find that the designation is in the
public interest
214(e)(6)
ETCs not Subject to State PUC Jurisdiction
– Added 12/1/97
– The [FCC] shall, upon request, designate such common
carrier that meets the requirements of 214(e)(1)
– Before designating additional ETC for a rural company area
the [FCC] shall find that the designation is in the public
interest
26
Obligations of Carriers
251(a) All Carriers
– Interconnection
251(b) All Local Exchange Carriers
–
–
–
–
–
Resale
Number Portability
Dialing Parity
Access to Rights-of-Way
Reciprocal Compensation
27
Obligation of Carriers
251(c)
Incumbent Local Exchange Carriers
–
–
–
–
–
–
Duty to negotiate (252 provides specifics)
Interconnection at any technically feasible point
Unbundled access to network elements
Resale at wholesale rates
Notice of changes for transmission and routing
Physical collocation of equipment
251(f)(1) Rural Exemption
– Rural carriers exempt from 251(c) until
• Bona fide request
• State Commission finding of public interest
28
Section 254(b) - Universal
Service Principles
The Six “Pillars of Wisdom”
(1) Quality and Rates
• Quality services should be available at just, reasonable and
affordable prices
(2) Access to Advanced Services
• Access to advanced telecommunications and information services
should be provided in all regions of the Nation
(3) Access in Rural and High Cost Areas
• Consumers in all regions of the Nation should have access to
services (including advanced services) at rates that are reasonably
comparable to those in urban areas
29
Section 254(b) - Universal
Service Principles
The Six “Pillars of Wisdom”
(4) Equitable and Non-Discriminatory Contributions
• All telecommunications providers should contribute to the
preservation and advancement of universal service
(5) Specific and Predictable Support Mechanisms
• There should be specific, predictable and sufficient Federal and
State mechanisms to preserve and advance universal service
(6) Access to Advanced Services for Schools, Rural
Health Care and Libraries
• Elementary and secondary schools and classrooms, health care
providers, and libraries should have access to advanced services.
30
Other Section 254 Provisions
254(a) Joint Board Created
• Recommendation in 9 months
• FCC to complete proceeding in 15 months
254(c) Universal Service is an Evolving Level of Service
• The Joint Board “from time to time” will recommend modifications
254(d) Telecommunication Carrier Contribution
• “Every provider that provides interstate telecom services…”
254(e) Universal Service Support
• Only ETCs (per 214(e)) may receive support
• Support must be used only for the provision, maintenance and upgrading of
facilities and services for which the support is intended
• Any such support should be explicit
31
Other Section 254 Provisions
254(f) State Authority for Universal Service
• States can adopt different standards but must provide funding
254(g) Interexchange and Interstate Services
• Rural and high cost areas no higher than urban areas
254(h)
254(i)
254(j)
254(k)
Schools, Libraries and Rural Health Care
Rates Must be Just, Reasonable and affordable
Lifeline Assistance Not Affected
Subsidy of Competitive Services Prohibited
• Universal Service shall bear “no more than a reasonable share” of joint and
common costs
32
Major Universal Service Issues
•
•
•
•
•
Growth of the Fund
Contribution Methodology
Portability
The “Non-Rural-Rural” Problem
The “Parent Trap” Rule
33
Growth of the Fund
• The Universal Service Fund has grown significantly in recent
years due to:
– The Schools and Libraries Fund
– MAG lifting of funding cap
– Access Reform Proceedings
• CALLS/IAS
• MAG/ICLS
– Portabilitiy
• The Fund will experience additional growth in the future due to:
– The “Non-Rural-Rural” Problem
– Rural Broadband Initiatives
34
Contribution Methodology
• Section 254(d) provides that funding will be paid by “all
interstate telecommunications providers” on a nondiscriminatory basis.
• Interstate end-user services assessed 7.2% of revenues
• Many carriers are marking-up their assessment
– AT&T surcharge is 11.5%
• It is not politically possible to grow this much more
• Interstate toll revenues are declining
• Proposals before the FCC:
–
–
–
–
Bifurcate Rural High-Cost from Schools and Libraries fund
Change assessment to a “per-connection” fee
Expand funding base to include Internet services
Assess both Interstate and Intrastate revenues
35
USF Portability
• Portability in Rural Areas Requires Public Interest Finding
• FCC and Many States Take a Simplistic View
– Competition = Public Interest
• In Reality, the Public Interest is More Complex
– Portability has Benefits and Costs
– Benefits
• Greater Choice, Higher Quality, Lower Price
• Incentives on all providers to serve customers and be more efficient
– Costs
• Increased Fund Size
• Decreased Network Efficiency
• The Public Interest is Only Served When Benefits Exceed Costs
36
CETC Support is Growing
CETC Support
Annualized Support ($Millions)
$90.0
$76.4M
$80.0
$70.0
$60.0
$47.9M
$50.0
$40.0
$30.0
$20.0
$15.3M
$10.9M
$10.0
$6.8M
$0.0
3Q01
4Q01
1Q02
2Q02
3Q02
Quarter
37
The “Top 20” CETCs
4Q02
ST
MS
PR
AZ
WA
MN
CO
IA
AL
VA
MI
MP
SC
GU
WA
SD
MT
TX
WI
NY
MN
SAC
289001
639001
459001
529001
369002
469001
359010
259001
199001
319001
659001
249001
669001
529002
399001
489001
449004
339001
159001
369001
Name
CELLULAR SOUTH LICENSE
CENTENNIAL PCS OPER
SMITH BAGLEY
UNITED STATES CELLULAR
MIDWEST WIRELESS-MN
NE COLORADO CELLULAR
MIDWEST WIRELESS-IA
RCC HOLDINGS
VIRGINIA CELLULAR
RFB CELLULAR
GUAM CELLULAR
HARGRAY WIRELESS
GUAM CELLULAR
RCC HOLDINGS
WESTERN WIRELESS
MID-RIVERS TEL COOP
CUMBY TEL
CTC COMM
MCI METRO
WESTERN WIRELESS
R
N
N
R
R
R
R
R
R
R
R
R
R
R
R
R
N
N
R
N
R
Annual
$29,011,380
$9,466,104
$7,065,281
$6,258,744
$5,955,936
$2,177,378
$2,002,692
$1,454,004
$1,420,656
$1,115,117
$1,111,740
$901,500
$713,436
$563,220
$507,747
$475,992
$467,856
$414,323
$383,148
$341,405
38
The “Customer List” Issue
• Wireless Carriers Generally Have an Established
Customer Base in Rural Areas
• These Customers Were Obtained Under Business
Plans That did not Include High Cost Funding
• Should This Existing Base Receive Funding?
– Significant Additional Funding Requirement
– Questionable Consumer Benefits
• States Generally do not Regulate Wireless Prices
– How Will Wireless Carriers Meet 254(e) Obligations?
– Scarce Universal Service Funds Should Bring New Services to
New Areas
39
Network Efficiency Issues
• Commissioner Martin’s Question:
“I also note that I have some concerns with the Commission’s policy – adopted
long before this Order – of using universal service support as a means of
creating “competition” in high cost areas. I am hesitant to subsidize multiple
competitors to serve areas in which costs are prohibitively expensive for even
one carrier. This policy may make it difficult for any one carrier to achieve the
economies of scale necessary to serve all of the customers in a rural area,
leading to inefficient and/or stranded investment and a ballooning universal
service fund. It is thus with real pause that I sign on to an Order that may
further this policy.” Separate Statement of Commissioner Martin to the MAG
Order, May, 2001
• In Some Subset of Rural America is Telephone Service a
Natural Monopoly?
40
Other CETC Issues
• What Level of Funding is Appropriate for CETCs?
– Current Rules Use Wireline Incumbent Cost
– ILECs Incur Costs That Wireless Carriers Don’t:
• Presubscribed Interexchange Carrier
• Unlimited Local Usage
• State and Federal Regulation
– FCC Will Have Proceeding Later This Year
• How Will CETCs Meet 254(e) Certifications?
– Funds Only Used for Intended Purposes
– Should ILECs Propose Proactive 254(e) Agenda?
• FCC is Planning NPRM on Portability
41
“Parent Trap” Rule
• The FCC’s Proxy Model Provides Limited Support to
Non-Rural LECs
• Rule 54.305 Provides That Party Acquiring an Exchange
Receives the Same Support as the Seller
• Over Half of High-Cost Rural Lines Nationwide are
Served by “Non-Rural” LECs
• Unless Something is Done With the “Parent Trap” Rule
Consumers in Legacy-RBOC Communities Could
Become “Digital Have-Nots”
• The “Non-Rural-Rural” Problem
42
Broadband
• Major Change in Focus
– Kennard Commission focused on Unbundled Network Elements (UNEs)
– Powell Commission has changed focus to facilities-based competition
• Regulation of Broadband
– Is it “Telecommunications” or “Information Service”
– Should different provider types be regulated differently?
• ILECs
• Cable
– Should Broadband services contribute to Universal Service?
• Rural Broadband
– What does 254(b)(3) mean?
• “Customers in all areas of the nation shall have access to …”
– How will rural broadband be funded?
– Can it even be funded if it is an “Information Service”
43