Summary of USF & ICC Reform - Intro & RoR USF · 2012. 1. 13. · Deppy p p qloy broadband upon receipt of a reasonable request for service, within a reasonable amount of time –

S f USF & ICCSummary of USF & ICC Reform Order & NPRM

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CAF & ICC REFORM ORDER & FNPRM

• Connect America Fund (CAF) and• Connect America Fund (CAF) and Intercarrier Compensation (ICC) Reform Order and FNPRMOrder and FNPRMo Approved October 27, 2011 o Released November 18 2011o Released November 18, 2011 o Order primarily addresses long term ICC and interim USF reform Proposed effective dates beginning in 2012

o FNPRM primarily addresses long term USF reform

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• Identifies 5 Goals• Identifies 5 Goalso Preserve & enhance universal availability of voicevoice Measured using telephone penetration rate

o Universal availability of networks capable of y pproviding voice and broadband Measured by the number of residential, business, and anchor institutions with new access to broadbandanchor institutions with new access to broadband

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• Identifies 5 Goals• Identifies 5 Goalso Universal availability of networks capable of providing mobile voice and broadbandproviding mobile voice and broadband No performance measures adopted at this time

o Ensure that rates for voice and broadband are reasonably comparable across the U.S. No performance measures adopted at this time

oMinimize USF contribution burden on consumers

M d i thl t h h ld

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Measured in monthly cost per household


• Guided by 4 Principles• Guided by 4 PrinciplesoModernize USF & ICC for Broadband o Fiscal Responsibility control the size of theo Fiscal Responsibility – control the size of the fund

o Accountability for recipients ando Accountability – for recipients and government administrators

o Incentive Based Policieso Incentive Based Policies

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CAF & ICC REFORM ORDER & FNPRM • BudgetBudget

o Up to $4.5B each year $1.8B for Price Cap carriers $500M Mobility Fund $100M Remote Areas Fund $2.0B for Rate of Return carriers$2.0B for Rate of Return carriers

o Funding in a given year could be more or less Contribution will not exceed $4.5B + expenses

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USF REFORM• Voice Service RequirementsVoice Service Requirements

o Voice grade access to the PSTN or its functional equivalent

o Local minutes of use at no additional charge o Toll limitation for qualifying low income consumers o Access to 911 and E911o Voice must be offered as a standalone service o Rates reasonably comparable to urban rateso Rates reasonably comparable to urban rates

Within 2 standard deviations above the national average

o Continue to satisfy state requirements

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USF REFORM• Broadband Service RequirementsBroadband Service Requirements

o Rates reasonably comparable to urban rates Reasonable range left to the FNPRM USF recipients must report rates annually

o 4 Mbps download/1 Mbps upload Speed from the modem to the public internet Speed from the modem to the public internet Annual testing and reporting to USAC

o Latency sufficiently low to enable real time applications, generally less than 100 milliseconds Annual testing and reporting to USAC

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USF REFORM• Measuring and Reporting BroadbandMeasuring and Reporting Broadband

o No monthly capacity requirements at this time Usage limits must be reasonably comparable to broadband offerings in urban areas

o Relaxed requirements for satellite backhaul Annual certification of need to rely on satelliteAnnual certification of need to rely on satellite 1 Mbps/256 Kbps Latency and capacity requirements do not apply

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USF REFORM• Price Cap CarriersPrice Cap Carriers

o CAF Phase I Freezes existing high cost support at 2011 level for the study area effective 1/1/2012

– Price cap and rate of return affiliates – Reduced if rates are below urban rate floor – 2013 – at least 1/3 of support must be used to build and operate broadband capable networks

» Own retail broadband S b t ti ll d» Substantially unserved areas

» No unsubsidized competition – 2014 – at least 2/3 of support 2015 all support

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– 2015 – all support


o CAF Phase I Adds $300M of “incremental support” in 2012

– Deploy 4/1 Mbps in unserved areas – Support distributed based on a cost model estimate of per location costs in a wire center

– Carriers may accept all, some, or no support» Must deploy broadband to a # of locations = to amount accepted divided by $775

• 2/3 of locations within 2 years2/3 of locations within 2 years • All locations within 3 years • Support returned if milestones not met

– Continues until CAF Phase II is implemented

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» Phase II expected to begin on 1/1/2013


o CAF Phase II Up to $1.8B in annual support

– Cost model based support for incumbents that make a statewide commitment to provide broadband

» Eligibility determined at a census block, or smaller, level M d l d t i h t t b t d b bl• Model determines where cost cannot be supported by reasonable end user rates

» 5‐year commitment (2013 – 2017) » 4/1 Mbps requirement

• 85% of locations in years 1‐3 • 100% by the end of year 5

» 6/1.5 Mbps to a # of locations to be determined in the FNPRM » At the end of 5 years, expectation is that all support will be

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» At the end of 5 years, expectation is that all support will be distributed via reverse auctions


o CAF Phase II Cost Model based support

– Carriers accepting statewide commitment » Support is phased in over 2 years

• Year 1 – 50% of CAF Phase I and 50% of CAF Phase II • Year 2 100% of CAF Phase II• Year 2 – 100% of CAF Phase II

– Carriers rejecting statewide commitment » Receives CAF Phase I support until reverse auction winner receives support under CAF Phase II

» Support then ceases

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o CAF Phase II Competitive bidding to distribute support where incumbent declines statewide commitment

– Process to be defined in the FNPRM – Census block is the minimum area eligible for competitive bidding

» Potential for aggregation of census blocks

Cost Model characteristics – Estimate costs at the census block or smaller level– Estimate the cost of a wireline network

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USF REFORM• Rate of Return CarriersRate of Return Carriers

o $2.0B annual budget Includes current high cost mechanisms and ICC reform

– HCLS – ICLS – LSS – SNA

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o Public Interest Obligations 4 Mbps downstream/1 Mbps upstream

– No 5 year requirement at 6/1.5 Mbps 100 millisecond latency, suitable for real time applications Deploy broadband upon receipt of a reasonable request for p y p p qservice, within a reasonable amount of time

– Annual reporting to the PUC and USAC – Construction charges may be assessed pursuant to state g y prequirements

Additional requirements to be identified in FNPRM

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o Limitations on capital and operating expenses Implemented no later than 7/1/2012 Additional comment as part of FNPRM

– Regression analysis using publicly available cost, geographic and demographic data

– Comparison of costs to similarly situated companies Annual publication of capped costs that will be used in place of actual costs that exceed the cap

Focused initially on HCLS, but FNPRM directs similar benchmarks for ICLS

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o Extends Corporate Operations Expense limitation to ICLS, effective 1/1/2012 Minor updates to the formula

– Loops ≤ 6,000 Loops – monthly per loop expense = greater of » $42.337 – (.00328 * working loops) » $63,000/working loops

– 6,000 ≥ Loops ≤ 17,887 – monthly per loop expense = » $3.007 + (117,990/working loops)

– Loops ≥ 17,887 – monthly per loop expense =» $9.56

Adjusted by the annual change in GDP‐CPI, beginning 1/1/2013

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1/1/2013


o Reduces HCLS for carriers with artificially low voice rates 3 step phase in beginning 7/1/2012

– 7/1/2012 – 6/30/2013 = $10.00 – 7/1/2013 – 6/30/2014 = $14.00 – Thereafter, annually determined by WCB annual survey of voice rates

» Current national average = $15.62 – Includes state SLC, state USF fees and mandatory EAS

Dollar for dollar reduction in HCLS Requires annual submission of rates and fees to USAC

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o Safety Net Additive grandfathered or phased out Eligibility a result of 14% increase in TPIS

– Support grandfathered for the remainder of eligibility period – No new support for costs incurred after 2009

Eligibility as a result of loss of access lines – Support phased out over 2 years

» 50% of calculated support in 2012 » Support eliminated in 2013

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o Eliminate LSS as a separate support mechanism effective 7/1/2012 Limited ongoing recovery through ICC recovery mechanism Support frozen at 2011 support levels for 1/1/2012 – 6/30/2012/ /

– Subject to true up based on actual 2011 operating costs

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o Adjusted HCLS Cap for 2012 Elimination of HCLS for Price Cap carriers requires that the overall size of the fund be reduced

– Includes Rate of Return study areas affiliated with Price Cap carriers

– NECA required to submit revised cap within 30 days

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o Study Area Waivers Eliminate 1% change in USF guideline New standards for approval

– State PUC approval – Public interest

Streamlined Process – Public Notice with 30 day comment and 45 day reply comments

– Absent action by the WCB, waiver deemed granted 60 days after reply comments

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o Revisions to Parent Trap Rule If actual costs would generate lesser support, LEC will receive the lesser

Does not apply to price cap carriers and their rate of return affiliates (frozen support)

Effective 1/1/2012

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o Cap per line support at $250 a month Effective 7/1/2012 Applies to both ETCs and CETCs Applies to all High Cost Support, excluding CAF ICC support 3 year phase in of cap3 year phase in of cap

– 7/1/2012 – 6/30/2013 = $250/line + 2/3 of difference – 7/1/2013 – 6/30/2014 = $250/line + 1/3 of difference – 7/1/2014 = No more than $250/line7/1/2014 No more than $250/line

o Carriers may file a petition for waiver or adjustment o Support reduced from each support mechanism, except LSS b d h l i f

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LSS, based on the relative amounts of support


o Unsubsidized Competition Eliminates support where unsubsidized competitor(s) offer voice and broadband to 100% of the study area

Incumbent support phased out over 3 years – Support frozen at the lesser of 2010 support or $3,000/line – Support reduced by 33% each year

FNPRM seeks comment on process for determining support in study areas with less than 100% overlap

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Documents

Summary of USF & ICC Reform - Intro & RoR USF · 2012. 1. 13. · Deppy p p qloy broadband upon receipt of a reasonable request for service, within a reasonable amount of time –