Re: [WISPA] A quick primer on USF
sounds like congress! On Sun, Feb 13, 2011 at 11:39 AM, Scottie Arnett sarn...@info-ed.comwrote: I live in one of these rural coop areas. I bet the rates here are much lower than the people in the city pay. The last home telephone I had(2008) ran me around $24/mth including all taxes, etc... with no long distance. The telco workers make twice to three times the hourly prevailing wage in this area, but on par with what a telco worker would make in say New Jersey. I think something is flawed in this? They are supposed to be non-profit and they making so much money, instead of giving it back to the coop members, they just give everyone raises and bonuses. I would like to know just how much they get in USF in my area. Oh, voice? Well, the real scandal of USF is that the ILEC-ETC is allowed to do practically anything so long as it's useful for voice. They can build Fiber to the Ranch, for $20,000+/home (CapEx) or more, or $1000/month per sub (though they propose making it harder to get $250/line/mo), if it also delivers voice, *even if* they already have copper to the ranch *and* an unlicensed WISP. Check out Border to Border in Texas. So USF does fund broadband; it just does it indirectly, by letting them build a broadband-ready network with subsidy money. The ISP they run across it is then incidental, not *directly* subsidized, but if the wire or fiber is already there, how much does more it cost to drop on broadband Internet? Thanks to this policy, many rural ILECs have better broadband coverage than unsubsidized Bells. This is the one that really gets under my skin. I compete against it every day and they get BIP/BTOP funding in addition. I think they need to FORCE every company getting funding from the government or USF to either separate their ISP/telco activities and resell to any ISP at the same rate as their ISP, or be FORCED to open their network for other ISP's to use at a competitive rate. I guess you could say I would like to see it got back to the Computer Inquiries. Nice explanation Fred. Scottie - Original Message - From: Fred Goldstein fgoldst...@ionary.com To: WISPA General List wireless@wispa.org Sent: Saturday, February 12, 2011 12:48 PM Subject: [WISPA] A quick primer on USF First off, this last thread's title was offensive, so I changed it. The current Administration is not doing much that previous ones didn't do, and that's the problem. The FCC sees the spectrum as a source of revenue (auctions), and Congress sees the FCC as a source of subsidy money to rural states. USF exists because the Telecom Act requires it. USF replaced an even uglier system wherein rural telcos charged really really high switched access per minute rates to LD carriers at either end of the call. VoIP would have killed that anyway... so now there are explicit cash subsidies. Let's set aside the smaller parts of USF (Schools Libraries, Rural Health Care, and Low Income) and focus on the one on the table now, High Cost Support. This is the one that gets the bulk of the tax money anyway. The statutory requirement is that rural telephone rates be comparable (not identical) to urban ones. So if it really costs $100/month to provide telephone service in East Overshoe, then the East Overshoe Telephone Cooperative is entitled to USF to let them hold down the rate. But it's a lot more complicated than that. Cost is averaged across a study area, which is in general the operating territory of one (historic, pre-merger) telephone company in one state. So South Central Bell- Mississippi is one study area, and South Central Bell- Tennessee is another. Verizon has at least two study areas in California, though, one ex-Contel and one ex-GTE. CenturyTel has a heap of them all over the place, as does TDS. The point of averaging across a study area is that low-cost urban areas cross-subsidize high-cost rural ones. So Qwest in Omaha is supposed to subsidize Qwest in the rural parts of Nebraska. Thus the big recipients are the small telephone companies who do not have urban areas. That would be bad enough, but a small telephone company typically has a separate corporate structure, including IT, CS, etc., which supports very few subscribers. So the OpEx per subscriber can be really high too, because small telcos are inefficient. If TDS or CenturyTel buys them, they often keep the study areas separate... cost goes down but the money still flows! (The pending NPRM does however at least open the issue of merging study areas.) And the Bells, especially Qwest/USWest, have sold off a lot of rural areas. So they have lowered their average cost. This doesn't lower their rate, though, because they don't get USF anyway, and they are on price caps, not rate of return, so they keep their rates and raise their margins. The rural chains that buy the rural turf
Re: [WISPA] A quick primer on USF
Here are my thoughts What I think would be a good idea (both pro-competitive and reasonable) to all would be a capped competitive voucher system based on aggregate line count So, say for a given region/study area 10,000 households To qualify for the voucher, you would have to deliver a minimum level of service (call it 4 Mb / 1 Mb) and fulfill certain statutory requirements like voice delivery, network neutrality / openness / etc... Cap the total funding for the area, and let everyone access the line pot based on actual market dynamics Everyone reports on Form 477, so the total number of lines is figured out If a CLEC/WISP comes in and figures out a better/faster/cheaper way of delivering the service (assuming it meets the statutory requirements), then they should get the subsidy and the ILEC loses out So, if the ILECs decide that they want to invest fiber everywhere and get all the customers back...good for them (but no guaranteed rate of return regulation, so they would have all the risks that normal businesses like us run into) -Charles WISPA Wants You! Join today! http://signup.wispa.org/ WISPA Wireless List: wireless@wispa.org Subscribe/Unsubscribe: http://lists.wispa.org/mailman/listinfo/wireless Archives: http://lists.wispa.org/pipermail/wireless/
Re: [WISPA] A quick primer on USF
I live in one of these rural coop areas. I bet the rates here are much lower than the people in the city pay. The last home telephone I had(2008) ran me around $24/mth including all taxes, etc... with no long distance. The telco workers make twice to three times the hourly prevailing wage in this area, but on par with what a telco worker would make in say New Jersey. I think something is flawed in this? They are supposed to be non-profit and they making so much money, instead of giving it back to the coop members, they just give everyone raises and bonuses. I would like to know just how much they get in USF in my area. Oh, voice? Well, the real scandal of USF is that the ILEC-ETC is allowed to do practically anything so long as it's useful for voice. They can build Fiber to the Ranch, for $20,000+/home (CapEx) or more, or $1000/month per sub (though they propose making it harder to get $250/line/mo), if it also delivers voice, *even if* they already have copper to the ranch *and* an unlicensed WISP. Check out Border to Border in Texas. So USF does fund broadband; it just does it indirectly, by letting them build a broadband-ready network with subsidy money. The ISP they run across it is then incidental, not *directly* subsidized, but if the wire or fiber is already there, how much does more it cost to drop on broadband Internet? Thanks to this policy, many rural ILECs have better broadband coverage than unsubsidized Bells. This is the one that really gets under my skin. I compete against it every day and they get BIP/BTOP funding in addition. I think they need to FORCE every company getting funding from the government or USF to either separate their ISP/telco activities and resell to any ISP at the same rate as their ISP, or be FORCED to open their network for other ISP's to use at a competitive rate. I guess you could say I would like to see it got back to the Computer Inquiries. Nice explanation Fred. Scottie - Original Message - From: Fred Goldstein fgoldst...@ionary.com To: WISPA General List wireless@wispa.org Sent: Saturday, February 12, 2011 12:48 PM Subject: [WISPA] A quick primer on USF First off, this last thread's title was offensive, so I changed it. The current Administration is not doing much that previous ones didn't do, and that's the problem. The FCC sees the spectrum as a source of revenue (auctions), and Congress sees the FCC as a source of subsidy money to rural states. USF exists because the Telecom Act requires it. USF replaced an even uglier system wherein rural telcos charged really really high switched access per minute rates to LD carriers at either end of the call. VoIP would have killed that anyway... so now there are explicit cash subsidies. Let's set aside the smaller parts of USF (Schools Libraries, Rural Health Care, and Low Income) and focus on the one on the table now, High Cost Support. This is the one that gets the bulk of the tax money anyway. The statutory requirement is that rural telephone rates be comparable (not identical) to urban ones. So if it really costs $100/month to provide telephone service in East Overshoe, then the East Overshoe Telephone Cooperative is entitled to USF to let them hold down the rate. But it's a lot more complicated than that. Cost is averaged across a study area, which is in general the operating territory of one (historic, pre-merger) telephone company in one state. So South Central Bell- Mississippi is one study area, and South Central Bell- Tennessee is another. Verizon has at least two study areas in California, though, one ex-Contel and one ex-GTE. CenturyTel has a heap of them all over the place, as does TDS. The point of averaging across a study area is that low-cost urban areas cross-subsidize high-cost rural ones. So Qwest in Omaha is supposed to subsidize Qwest in the rural parts of Nebraska. Thus the big recipients are the small telephone companies who do not have urban areas. That would be bad enough, but a small telephone company typically has a separate corporate structure, including IT, CS, etc., which supports very few subscribers. So the OpEx per subscriber can be really high too, because small telcos are inefficient. If TDS or CenturyTel buys them, they often keep the study areas separate... cost goes down but the money still flows! (The pending NPRM does however at least open the issue of merging study areas.) And the Bells, especially Qwest/USWest, have sold off a lot of rural areas. So they have lowered their average cost. This doesn't lower their rate, though, because they don't get USF anyway, and they are on price caps, not rate of return, so they keep their rates and raise their margins. The rural chains that buy the rural turf eventually (this takes a couple of years, though again the pending NPRM may reduce this interval, which the FCC cutely calls The Parent Trap) get new subsidy flows for them
Re: [WISPA] A quick primer on USF
At 2/13/2011 12:39 PM, you wrote: I live in one of these rural coop areas. I bet the rates here are much lower than the people in the city pay. The last home telephone I had(2008) ran me around $24/mth including all taxes, etc... with no long distance. The telco workers make twice to three times the hourly prevailing wage in this area, but on par with what a telco worker would make in say New Jersey. I think something is flawed in this? They are supposed to be non-profit and they making so much money, instead of giving it back to the coop members, they just give everyone raises and bonuses. I would like to know just how much they get in USF in my area. Who's your telco, where? The USF numbers are public and I have downloaded some fairly recent ones. Coops sometimes do give back their excess revenues to members; this essentially reduces the net price to something much less than urban customers pay for their own service... in effect they're also paying for the coop's service. Oh, voice? Well, the real scandal of USF is that the ILEC-ETC is allowed to do practically anything so long as it's useful for voice. They can build Fiber to the Ranch, for $20,000+/home (CapEx) or more, or $1000/month per sub (though they propose making it harder to get $250/line/mo), if it also delivers voice, *even if* they already have copper to the ranch *and* an unlicensed WISP. Check out Border to Border in Texas. So USF does fund broadband; it just does it indirectly, by letting them build a broadband-ready network with subsidy money. The ISP they run across it is then incidental, not *directly* subsidized, but if the wire or fiber is already there, how much does more it cost to drop on broadband Internet? Thanks to this policy, many rural ILECs have better broadband coverage than unsubsidized Bells. This is the one that really gets under my skin. I compete against it every day and they get BIP/BTOP funding in addition. I think they need to FORCE every company getting funding from the government or USF to either separate their ISP/telco activities and resell to any ISP at the same rate as their ISP, or be FORCED to open their network for other ISP's to use at a competitive rate. I guess you could say I would like to see it got back to the Computer Inquiries. I sure agree on that! But then I think the Computer Inquiries should apply to all ILECs, permanently. Nice explanation Fred. Thanks. Scottie - Original Message - From: Fred Goldstein fgoldst...@ionary.com To: WISPA General List wireless@wispa.org Sent: Saturday, February 12, 2011 12:48 PM Subject: [WISPA] A quick primer on USF First off, this last thread's title was offensive, so I changed it. The current Administration is not doing much that previous ones didn't do, and that's the problem. The FCC sees the spectrum as a source of revenue (auctions), and Congress sees the FCC as a source of subsidy money to rural states. USF exists because the Telecom Act requires it. USF replaced an even uglier system wherein rural telcos charged really really high switched access per minute rates to LD carriers at either end of the call. VoIP would have killed that anyway... so now there are explicit cash subsidies. Let's set aside the smaller parts of USF (Schools Libraries, Rural Health Care, and Low Income) and focus on the one on the table now, High Cost Support. This is the one that gets the bulk of the tax money anyway. The statutory requirement is that rural telephone rates be comparable (not identical) to urban ones. So if it really costs $100/month to provide telephone service in East Overshoe, then the East Overshoe Telephone Cooperative is entitled to USF to let them hold down the rate. But it's a lot more complicated than that. Cost is averaged across a study area, which is in general the operating territory of one (historic, pre-merger) telephone company in one state. So South Central Bell- Mississippi is one study area, and South Central Bell- Tennessee is another. Verizon has at least two study areas in California, though, one ex-Contel and one ex-GTE. CenturyTel has a heap of them all over the place, as does TDS. The point of averaging across a study area is that low-cost urban areas cross-subsidize high-cost rural ones. So Qwest in Omaha is supposed to subsidize Qwest in the rural parts of Nebraska. Thus the big recipients are the small telephone companies who do not have urban areas. That would be bad enough, but a small telephone company typically has a separate corporate structure, including IT, CS, etc., which supports very few subscribers. So the OpEx per subscriber can be really high too, because small telcos are inefficient. If TDS or CenturyTel buys them, they often keep the study areas separate... cost goes down but the money still flows! (The pending NPRM does however at least open the issue of merging study
Re: [WISPA] A quick primer on USF
Twin Lakes Telephone Cooperative and North Central Telephone Cooperative. Twin Lakes headquarters is in Gainesboro, TN and North Central's is in Lafayette, TN. If you need NPA-NXX they are 931-268 and 615-666, of course there are more. I would be interested in what they receive in USF. Neither will sell DSL without a phone line too, so I am guessing it is getting subsidized extremely through USF. Scottie - Original Message - From: Fred Goldstein fgoldst...@ionary.com To: WISPA General List wireless@wispa.org Sent: Sunday, February 13, 2011 4:34 PM Subject: Re: [WISPA] A quick primer on USF At 2/13/2011 12:39 PM, you wrote: I live in one of these rural coop areas. I bet the rates here are much lower than the people in the city pay. The last home telephone I had(2008) ran me around $24/mth including all taxes, etc... with no long distance. The telco workers make twice to three times the hourly prevailing wage in this area, but on par with what a telco worker would make in say New Jersey. I think something is flawed in this? They are supposed to be non-profit and they making so much money, instead of giving it back to the coop members, they just give everyone raises and bonuses. I would like to know just how much they get in USF in my area. Who's your telco, where? The USF numbers are public and I have downloaded some fairly recent ones. Coops sometimes do give back their excess revenues to members; this essentially reduces the net price to something much less than urban customers pay for their own service... in effect they're also paying for the coop's service. Oh, voice? Well, the real scandal of USF is that the ILEC-ETC is allowed to do practically anything so long as it's useful for voice. They can build Fiber to the Ranch, for $20,000+/home (CapEx) or more, or $1000/month per sub (though they propose making it harder to get $250/line/mo), if it also delivers voice, *even if* they already have copper to the ranch *and* an unlicensed WISP. Check out Border to Border in Texas. So USF does fund broadband; it just does it indirectly, by letting them build a broadband-ready network with subsidy money. The ISP they run across it is then incidental, not *directly* subsidized, but if the wire or fiber is already there, how much does more it cost to drop on broadband Internet? Thanks to this policy, many rural ILECs have better broadband coverage than unsubsidized Bells. This is the one that really gets under my skin. I compete against it every day and they get BIP/BTOP funding in addition. I think they need to FORCE every company getting funding from the government or USF to either separate their ISP/telco activities and resell to any ISP at the same rate as their ISP, or be FORCED to open their network for other ISP's to use at a competitive rate. I guess you could say I would like to see it got back to the Computer Inquiries. I sure agree on that! But then I think the Computer Inquiries should apply to all ILECs, permanently. Nice explanation Fred. Thanks. Scottie - Original Message - From: Fred Goldstein fgoldst...@ionary.com To: WISPA General List wireless@wispa.org Sent: Saturday, February 12, 2011 12:48 PM Subject: [WISPA] A quick primer on USF First off, this last thread's title was offensive, so I changed it. The current Administration is not doing much that previous ones didn't do, and that's the problem. The FCC sees the spectrum as a source of revenue (auctions), and Congress sees the FCC as a source of subsidy money to rural states. USF exists because the Telecom Act requires it. USF replaced an even uglier system wherein rural telcos charged really really high switched access per minute rates to LD carriers at either end of the call. VoIP would have killed that anyway... so now there are explicit cash subsidies. Let's set aside the smaller parts of USF (Schools Libraries, Rural Health Care, and Low Income) and focus on the one on the table now, High Cost Support. This is the one that gets the bulk of the tax money anyway. The statutory requirement is that rural telephone rates be comparable (not identical) to urban ones. So if it really costs $100/month to provide telephone service in East Overshoe, then the East Overshoe Telephone Cooperative is entitled to USF to let them hold down the rate. But it's a lot more complicated than that. Cost is averaged across a study area, which is in general the operating territory of one (historic, pre-merger) telephone company in one state. So South Central Bell- Mississippi is one study area, and South Central Bell- Tennessee is another. Verizon has at least two study areas in California, though, one ex-Contel and one ex-GTE. CenturyTel has a heap of them all over the place, as does TDS. The point of averaging across a study area is that low-cost urban areas cross-subsidize high-cost rural ones. So Qwest
Re: [WISPA] A quick primer on USF
For Q4 2010 North Central Telephone Cooperative received ~$1.2 million in high cost support Twin Lakes Telephone Cooperative received ~$1.2 million in high cost support -Charles -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Scottie Arnett Sent: Sunday, February 13, 2011 6:12 PM To: WISPA General List Subject: Re: [WISPA] A quick primer on USF Twin Lakes Telephone Cooperative and North Central Telephone Cooperative. Twin Lakes headquarters is in Gainesboro, TN and North Central's is in Lafayette, TN. If you need NPA-NXX they are 931-268 and 615-666, of course there are more. I would be interested in what they receive in USF. Neither will sell DSL without a phone line too, so I am guessing it is getting subsidized extremely through USF. Scottie - Original Message - From: Fred Goldstein fgoldst...@ionary.com To: WISPA General List wireless@wispa.org Sent: Sunday, February 13, 2011 4:34 PM Subject: Re: [WISPA] A quick primer on USF At 2/13/2011 12:39 PM, you wrote: I live in one of these rural coop areas. I bet the rates here are much lower than the people in the city pay. The last home telephone I had(2008) ran me around $24/mth including all taxes, etc... with no long distance. The telco workers make twice to three times the hourly prevailing wage in this area, but on par with what a telco worker would make in say New Jersey. I think something is flawed in this? They are supposed to be non-profit and they making so much money, instead of giving it back to the coop members, they just give everyone raises and bonuses. I would like to know just how much they get in USF in my area. Who's your telco, where? The USF numbers are public and I have downloaded some fairly recent ones. Coops sometimes do give back their excess revenues to members; this essentially reduces the net price to something much less than urban customers pay for their own service... in effect they're also paying for the coop's service. Oh, voice? Well, the real scandal of USF is that the ILEC-ETC is allowed to do practically anything so long as it's useful for voice. They can build Fiber to the Ranch, for $20,000+/home (CapEx) or more, or $1000/month per sub (though they propose making it harder to get $250/line/mo), if it also delivers voice, *even if* they already have copper to the ranch *and* an unlicensed WISP. Check out Border to Border in Texas. So USF does fund broadband; it just does it indirectly, by letting them build a broadband-ready network with subsidy money. The ISP they run across it is then incidental, not *directly* subsidized, but if the wire or fiber is already there, how much does more it cost to drop on broadband Internet? Thanks to this policy, many rural ILECs have better broadband coverage than unsubsidized Bells. This is the one that really gets under my skin. I compete against it every day and they get BIP/BTOP funding in addition. I think they need to FORCE every company getting funding from the government or USF to either separate their ISP/telco activities and resell to any ISP at the same rate as their ISP, or be FORCED to open their network for other ISP's to use at a competitive rate. I guess you could say I would like to see it got back to the Computer Inquiries. I sure agree on that! But then I think the Computer Inquiries should apply to all ILECs, permanently. Nice explanation Fred. Thanks. Scottie - Original Message - From: Fred Goldstein fgoldst...@ionary.com To: WISPA General List wireless@wispa.org Sent: Saturday, February 12, 2011 12:48 PM Subject: [WISPA] A quick primer on USF First off, this last thread's title was offensive, so I changed it. The current Administration is not doing much that previous ones didn't do, and that's the problem. The FCC sees the spectrum as a source of revenue (auctions), and Congress sees the FCC as a source of subsidy money to rural states. USF exists because the Telecom Act requires it. USF replaced an even uglier system wherein rural telcos charged really really high switched access per minute rates to LD carriers at either end of the call. VoIP would have killed that anyway... so now there are explicit cash subsidies. Let's set aside the smaller parts of USF (Schools Libraries, Rural Health Care, and Low Income) and focus on the one on the table now, High Cost Support. This is the one that gets the bulk of the tax money anyway. The statutory requirement is that rural telephone rates be comparable (not identical) to urban ones. So if it really costs $100/month to provide telephone service in East Overshoe, then the East Overshoe Telephone Cooperative is entitled to USF to let them hold down the rate. But it's a lot more complicated than that. Cost is averaged across a study area, which is in general the operating territory of one (historic, pre-merger) telephone
Re: [WISPA] A quick primer on USF
At 2/13/2011 07:11 PM, Scottie wrote: Twin Lakes Telephone Cooperative and North Central Telephone Cooperative. Twin Lakes headquarters is in Gainesboro, TN and North Central's is in Lafayette, TN. If you need NPA-NXX they are 931-268 and 615-666, of course there are more. I would be interested in what they receive in USF. Neither will sell DSL without a phone line too, so I am guessing it is getting subsidized extremely through USF. If I'm reading the annual report spreadsheet correctly, and I can't be certain given how it is all labeled with inside terms, North Central Coop - TN received 2,170,823.27 for the year 2010, serving 20,119 loops in 10 exchanges. So it's about $108/loop/year -- not a huge draw. If I read it correctly, Twin Lakes, with about 35k lines in 15 exchanges, qualifies for *0* USF support. Their average cost was too close to the national average to need support. Is it a relatively easy area to serve (mostly a high density of subscribers per plant mile)? It is an ETC; it just needs more creative accountants. ;-) Scottie - Original Message - From: Fred Goldstein fgoldst...@ionary.com To: WISPA General List wireless@wispa.org Sent: Sunday, February 13, 2011 4:34 PM Subject: Re: [WISPA] A quick primer on USF At 2/13/2011 12:39 PM, you wrote: I live in one of these rural coop areas. I bet the rates here are much lower than the people in the city pay. The last home telephone I had(2008) ran me around $24/mth including all taxes, etc... with no long distance. The telco workers make twice to three times the hourly prevailing wage in this area, but on par with what a telco worker would make in say New Jersey. I think something is flawed in this? They are supposed to be non-profit and they making so much money, instead of giving it back to the coop members, they just give everyone raises and bonuses. I would like to know just how much they get in USF in my area. Who's your telco, where? The USF numbers are public and I have downloaded some fairly recent ones. Coops sometimes do give back their excess revenues to members; this essentially reduces the net price to something much less than urban customers pay for their own service... in effect they're also paying for the coop's service. Oh, voice? Well, the real scandal of USF is that the ILEC-ETC is allowed to do practically anything so long as it's useful for voice. They can build Fiber to the Ranch, for $20,000+/home (CapEx) or more, or $1000/month per sub (though they propose making it harder to get $250/line/mo), if it also delivers voice, *even if* they already have copper to the ranch *and* an unlicensed WISP. Check out Border to Border in Texas. So USF does fund broadband; it just does it indirectly, by letting them build a broadband-ready network with subsidy money. The ISP they run across it is then incidental, not *directly* subsidized, but if the wire or fiber is already there, how much does more it cost to drop on broadband Internet? Thanks to this policy, many rural ILECs have better broadband coverage than unsubsidized Bells. This is the one that really gets under my skin. I compete against it every day and they get BIP/BTOP funding in addition. I think they need to FORCE every company getting funding from the government or USF to either separate their ISP/telco activities and resell to any ISP at the same rate as their ISP, or be FORCED to open their network for other ISP's to use at a competitive rate. I guess you could say I would like to see it got back to the Computer Inquiries. I sure agree on that! But then I think the Computer Inquiries should apply to all ILECs, permanently. Nice explanation Fred. Thanks. Scottie - Original Message - From: Fred Goldstein fgoldst...@ionary.com To: WISPA General List wireless@wispa.org Sent: Saturday, February 12, 2011 12:48 PM Subject: [WISPA] A quick primer on USF First off, this last thread's title was offensive, so I changed it. The current Administration is not doing much that previous ones didn't do, and that's the problem. The FCC sees the spectrum as a source of revenue (auctions), and Congress sees the FCC as a source of subsidy money to rural states. USF exists because the Telecom Act requires it. USF replaced an even uglier system wherein rural telcos charged really really high switched access per minute rates to LD carriers at either end of the call. VoIP would have killed that anyway... so now there are explicit cash subsidies. Let's set aside the smaller parts of USF (Schools Libraries, Rural Health Care, and Low Income) and focus on the one on the table now, High Cost Support. This is the one that gets the bulk of the tax money anyway. The statutory requirement is that rural telephone rates be comparable (not identical) to urban ones. So if it really costs $100/month
Re: [WISPA] A quick primer on USF
At 2/13/2011 08:04 PM, Charles Wu wrote: For Q4 2010 North Central Telephone Cooperative received ~$1.2 million in high cost support Twin Lakes Telephone Cooperative received ~$1.2 million in high cost support I think you're right -- I was first looking at the wrong report, the only one with the line counts. Let's try a different report... Pulling the numbers from their query system, I had the January 2010 support for North Central total $394k, and Twin Lakes get $436k . So assuming the line count is correct, it is about $12/month for Twin Lakes, and almost $20/month for North Central. Still not huge compared to some of them, but not trivial. -- Fred Goldsteink1io fgoldstein at ionary.com ionary Consulting http://www.ionary.com/ +1 617 795 2701 WISPA Wants You! Join today! http://signup.wispa.org/ WISPA Wireless List: wireless@wispa.org Subscribe/Unsubscribe: http://lists.wispa.org/mailman/listinfo/wireless Archives: http://lists.wispa.org/pipermail/wireless/
Re: [WISPA] A quick primer on USF
Ok, thanks guys. I had heard some coops getting close to $100/mth per line. What is interesting is the line counts are about the same at NCTC as they were about 7 or 8 years ago. The most interesting is the that TLTC had almost 60k lines 7 or 8 years ago. TLTC was at one time(I heard) the 2nd or 3rd largest telco coop in America. If you take out the taxes and fees, the home line charges were around $18 at TLTC. So is $30, without taxes and fees, about the average home rate in the bigger cities that Verizon and BellSouth cover? NCTC was a bit higher last time I checked. Without taxes and fees their home line charges were around $24. I do not see why they do not sell DSL without the phone if they are not getting anymore funding than that from USF. Of course, TLTC has dropped a considerable amount of lines over the past few years, so that may be their reasoning. I should not be complaining about the DSL without a phone, that is my major selling point, but if they change the USF and can get funding for broadband, they may start selling DSL without the phone and then it is going to be a hurt to us. Scottie - Original Message - From: Fred Goldstein fgoldst...@ionary.com To: WISPA General List wireless@wispa.org Sent: Sunday, February 13, 2011 8:39 PM Subject: Re: [WISPA] A quick primer on USF At 2/13/2011 08:04 PM, Charles Wu wrote: For Q4 2010 North Central Telephone Cooperative received ~$1.2 million in high cost support Twin Lakes Telephone Cooperative received ~$1.2 million in high cost support I think you're right -- I was first looking at the wrong report, the only one with the line counts. Let's try a different report... Pulling the numbers from their query system, I had the January 2010 support for North Central total $394k, and Twin Lakes get $436k . So assuming the line count is correct, it is about $12/month for Twin Lakes, and almost $20/month for North Central. Still not huge compared to some of them, but not trivial. -- Fred Goldsteink1io fgoldstein at ionary.com ionary Consulting http://www.ionary.com/ +1 617 795 2701 WISPA Wants You! Join today! http://signup.wispa.org/ WISPA Wireless List: wireless@wispa.org Subscribe/Unsubscribe: http://lists.wispa.org/mailman/listinfo/wireless Archives: http://lists.wispa.org/pipermail/wireless/ WISPA Wants You! Join today! http://signup.wispa.org/ WISPA Wireless List: wireless@wispa.org Subscribe/Unsubscribe: http://lists.wispa.org/mailman/listinfo/wireless Archives: http://lists.wispa.org/pipermail/wireless/
[WISPA] A quick primer on USF
First off, this last thread's title was offensive, so I changed it. The current Administration is not doing much that previous ones didn't do, and that's the problem. The FCC sees the spectrum as a source of revenue (auctions), and Congress sees the FCC as a source of subsidy money to rural states. USF exists because the Telecom Act requires it. USF replaced an even uglier system wherein rural telcos charged really really high switched access per minute rates to LD carriers at either end of the call. VoIP would have killed that anyway... so now there are explicit cash subsidies. Let's set aside the smaller parts of USF (Schools Libraries, Rural Health Care, and Low Income) and focus on the one on the table now, High Cost Support. This is the one that gets the bulk of the tax money anyway. The statutory requirement is that rural telephone rates be comparable (not identical) to urban ones. So if it really costs $100/month to provide telephone service in East Overshoe, then the East Overshoe Telephone Cooperative is entitled to USF to let them hold down the rate. But it's a lot more complicated than that. Cost is averaged across a study area, which is in general the operating territory of one (historic, pre-merger) telephone company in one state. So South Central Bell- Mississippi is one study area, and South Central Bell- Tennessee is another. Verizon has at least two study areas in California, though, one ex-Contel and one ex-GTE. CenturyTel has a heap of them all over the place, as does TDS. The point of averaging across a study area is that low-cost urban areas cross-subsidize high-cost rural ones. So Qwest in Omaha is supposed to subsidize Qwest in the rural parts of Nebraska. Thus the big recipients are the small telephone companies who do not have urban areas. That would be bad enough, but a small telephone company typically has a separate corporate structure, including IT, CS, etc., which supports very few subscribers. So the OpEx per subscriber can be really high too, because small telcos are inefficient. If TDS or CenturyTel buys them, they often keep the study areas separate... cost goes down but the money still flows! (The pending NPRM does however at least open the issue of merging study areas.) And the Bells, especially Qwest/USWest, have sold off a lot of rural areas. So they have lowered their average cost. This doesn't lower their rate, though, because they don't get USF anyway, and they are on price caps, not rate of return, so they keep their rates and raise their margins. The rural chains that buy the rural turf eventually (this takes a couple of years, though again the pending NPRM may reduce this interval, which the FCC cutely calls The Parent Trap) get new subsidy flows for them. So we're screwed both ways. When TA96 passed, the FCC at the time was pro-competition (Hundt, Kennard) and they wanted to make USF pro-competition too. So they created the Equal Support Rule. This is a tiny bit like Jeremie's suggested voucher system. A USF-eligible carrier is called an ETC (eligible telecommunications carrier). A Competitive ETC (CETC) could move into an area whose ILEC got USF. The CETC would then get the same amount *per line* as the ILEC-ETC. So if East Overshoe Telephone got $80/month/line, then Northern Wireless could get $80/month/line for selling a fixed-wireless telephone line (using their cellular network and a POTS-phone adapter). Northern Wireless (I made that name up but it alludes to a once-huge CETC) would not need to show its own costs, as competitors don't fit the ILEC accounting model. Now you'd think that this was a great idea, like a voucher, but it had a big problem. The ILEC-ETC is usually under Rate of Return regulation. So their profit margin is fixed. Most of their costs are fixed too. So if the CETC takes lines away, the ILEC-ETC is still entitled to keep the subsidy level needed to maintain their rate of return and the same low prices. So they keep their subsidy, and USF ends up paying twice! This is the FCC's justification for wanting to do away with competitive ETCs entirely -- they could have simply removed Equal Support, but they're killing CETC in toto, regardless of what the law actually says. A few years ago, they capped CETC support. If a new CETC comes into an area, their subsidy comes out of other CETCs, no longer equal support. The total is supposed to phase down to 0 over five years. BTW the biggest CETCs were cellular carriers, including Sprint, ATT Mobility and its predecessors, and some Verizon Wireless acquisitions. VZ and I think Sprint agreed to phase out their CETC support as merger conditions. CLECs got a rather small share of the pie. WISPS need not apply, since they're not carriers, and the support was technically for voice. Oh, voice? Well, the real scandal of USF is that the ILEC-ETC is allowed to do practically anything so long
Re: [WISPA] A quick primer on USF
With competition the ILEC's would have to actually take care of their customers instead of treating them like they don't have a choice. I remember the day I cut the cord from bell. It was a memorable moment. Sent from my iPhone4 On Feb 12, 2011, at 4:28 PM, Mike Hammett wispawirel...@ics-il.net wrote: It's too bad they're axing competition instead of embracing it. - Mike Hammett Intelligent Computing Solutions http://www.ics-il.com On 2/12/2011 12:48 PM, Fred Goldstein wrote: First off, this last thread's title was offensive, so I changed it. The current Administration is not doing much that previous ones didn't do, and that's the problem. The FCC sees the spectrum as a source of revenue (auctions), and Congress sees the FCC as a source of subsidy money to rural states. USF exists because the Telecom Act requires it. USF replaced an even uglier system wherein rural telcos charged really really high switched access per minute rates to LD carriers at either end of the call. VoIP would have killed that anyway... so now there are explicit cash subsidies. Let's set aside the smaller parts of USF (Schools Libraries, Rural Health Care, and Low Income) and focus on the one on the table now, High Cost Support. This is the one that gets the bulk of the tax money anyway. The statutory requirement is that rural telephone rates be comparable (not identical) to urban ones. So if it really costs $100/month to provide telephone service in East Overshoe, then the East Overshoe Telephone Cooperative is entitled to USF to let them hold down the rate. But it's a lot more complicated than that. Cost is averaged across a study area, which is in general the operating territory of one (historic, pre-merger) telephone company in one state. So South Central Bell- Mississippi is one study area, and South Central Bell- Tennessee is another. Verizon has at least two study areas in California, though, one ex-Contel and one ex-GTE. CenturyTel has a heap of them all over the place, as does TDS. The point of averaging across a study area is that low-cost urban areas cross-subsidize high-cost rural ones. So Qwest in Omaha is supposed to subsidize Qwest in the rural parts of Nebraska. Thus the big recipients are the small telephone companies who do not have urban areas. That would be bad enough, but a small telephone company typically has a separate corporate structure, including IT, CS, etc., which supports very few subscribers. So the OpEx per subscriber can be really high too, because small telcos are inefficient. If TDS or CenturyTel buys them, they often keep the study areas separate... cost goes down but the money still flows! (The pending NPRM does however at least open the issue of merging study areas.) And the Bells, especially Qwest/USWest, have sold off a lot of rural areas. So they have lowered their average cost. This doesn't lower their rate, though, because they don't get USF anyway, and they are on price caps, not rate of return, so they keep their rates and raise their margins. The rural chains that buy the rural turf eventually (this takes a couple of years, though again the pending NPRM may reduce this interval, which the FCC cutely calls The Parent Trap) get new subsidy flows for them. So we're screwed both ways. When TA96 passed, the FCC at the time was pro-competition (Hundt, Kennard) and they wanted to make USF pro-competition too. So they created the Equal Support Rule. This is a tiny bit like Jeremie's suggested voucher system. A USF-eligible carrier is called an ETC (eligible telecommunications carrier). A Competitive ETC (CETC) could move into an area whose ILEC got USF. The CETC would then get the same amount *per line* as the ILEC-ETC. So if East Overshoe Telephone got $80/month/line, then Northern Wireless could get $80/month/line for selling a fixed-wireless telephone line (using their cellular network and a POTS-phone adapter). Northern Wireless (I made that name up but it alludes to a once-huge CETC) would not need to show its own costs, as competitors don't fit the ILEC accounting model. Now you'd think that this was a great idea, like a voucher, but it had a big problem. The ILEC-ETC is usually under Rate of Return regulation. So their profit margin is fixed. Most of their costs are fixed too. So if the CETC takes lines away, the ILEC-ETC is still entitled to keep the subsidy level needed to maintain their rate of return and the same low prices. So they keep their subsidy, and USF ends up paying twice! This is the FCC's justification for wanting to do away with competitive ETCs entirely -- they could have simply removed Equal Support, but they're killing CETC in toto, regardless of what the law actually says. A few years ago, they capped CETC support. If a new CETC comes into an area, their subsidy comes out of other CETCs, no longer equal support. The total is
Re: [WISPA] A quick primer on USF
Well, in most Bell territories you can get service from a CLEC. In most RLEC cases, there are many things they don't have to do, including port numbers. - Mike Hammett Intelligent Computing Solutions http://www.ics-il.com On 2/12/2011 4:35 PM, Jeremie Chism wrote: With competition the ILEC's would have to actually take care of their customers instead of treating them like they don't have a choice. I remember the day I cut the cord from bell. It was a memorable moment. Sent from my iPhone4 On Feb 12, 2011, at 4:28 PM, Mike Hammettwispawirel...@ics-il.net wrote: It's too bad they're axing competition instead of embracing it. - Mike Hammett Intelligent Computing Solutions http://www.ics-il.com On 2/12/2011 12:48 PM, Fred Goldstein wrote: First off, this last thread's title was offensive, so I changed it. The current Administration is not doing much that previous ones didn't do, and that's the problem. The FCC sees the spectrum as a source of revenue (auctions), and Congress sees the FCC as a source of subsidy money to rural states. USF exists because the Telecom Act requires it. USF replaced an even uglier system wherein rural telcos charged really really high switched access per minute rates to LD carriers at either end of the call. VoIP would have killed that anyway... so now there are explicit cash subsidies. Let's set aside the smaller parts of USF (Schools Libraries, Rural Health Care, and Low Income) and focus on the one on the table now, High Cost Support. This is the one that gets the bulk of the tax money anyway. The statutory requirement is that rural telephone rates be comparable (not identical) to urban ones. So if it really costs $100/month to provide telephone service in East Overshoe, then the East Overshoe Telephone Cooperative is entitled to USF to let them hold down the rate. But it's a lot more complicated than that. Cost is averaged across a study area, which is in general the operating territory of one (historic, pre-merger) telephone company in one state. So South Central Bell- Mississippi is one study area, and South Central Bell- Tennessee is another. Verizon has at least two study areas in California, though, one ex-Contel and one ex-GTE. CenturyTel has a heap of them all over the place, as does TDS. The point of averaging across a study area is that low-cost urban areas cross-subsidize high-cost rural ones. So Qwest in Omaha is supposed to subsidize Qwest in the rural parts of Nebraska. Thus the big recipients are the small telephone companies who do not have urban areas. That would be bad enough, but a small telephone company typically has a separate corporate structure, including IT, CS, etc., which supports very few subscribers. So the OpEx per subscriber can be really high too, because small telcos are inefficient. If TDS or CenturyTel buys them, they often keep the study areas separate... cost goes down but the money still flows! (The pending NPRM does however at least open the issue of merging study areas.) And the Bells, especially Qwest/USWest, have sold off a lot of rural areas. So they have lowered their average cost. This doesn't lower their rate, though, because they don't get USF anyway, and they are on price caps, not rate of return, so they keep their rates and raise their margins. The rural chains that buy the rural turf eventually (this takes a couple of years, though again the pending NPRM may reduce this interval, which the FCC cutely calls The Parent Trap) get new subsidy flows for them. So we're screwed both ways. When TA96 passed, the FCC at the time was pro-competition (Hundt, Kennard) and they wanted to make USF pro-competition too. So they created the Equal Support Rule. This is a tiny bit like Jeremie's suggested voucher system. A USF-eligible carrier is called an ETC (eligible telecommunications carrier). A Competitive ETC (CETC) could move into an area whose ILEC got USF. The CETC would then get the same amount *per line* as the ILEC-ETC. So if East Overshoe Telephone got $80/month/line, then Northern Wireless could get $80/month/line for selling a fixed-wireless telephone line (using their cellular network and a POTS-phone adapter). Northern Wireless (I made that name up but it alludes to a once-huge CETC) would not need to show its own costs, as competitors don't fit the ILEC accounting model. Now you'd think that this was a great idea, like a voucher, but it had a big problem. The ILEC-ETC is usually under Rate of Return regulation. So their profit margin is fixed. Most of their costs are fixed too. So if the CETC takes lines away, the ILEC-ETC is still entitled to keep the subsidy level needed to maintain their rate of return and the same low prices. So they keep their subsidy, and USF ends up paying twice! This is the FCC's justification for wanting to do away with competitive ETCs entirely -- they could have
Re: [WISPA] A quick primer on USF
I've actually ran into some centurytel areas that you can't port numbers. The customers hate the service and if they could port their numbers they would be gone. Sent from my iPhone4 On Feb 12, 2011, at 4:37 PM, Mike Hammett wispawirel...@ics-il.net wrote: Well, in most Bell territories you can get service from a CLEC. In most RLEC cases, there are many things they don't have to do, including port numbers. - Mike Hammett Intelligent Computing Solutions http://www.ics-il.com On 2/12/2011 4:35 PM, Jeremie Chism wrote: With competition the ILEC's would have to actually take care of their customers instead of treating them like they don't have a choice. I remember the day I cut the cord from bell. It was a memorable moment. Sent from my iPhone4 On Feb 12, 2011, at 4:28 PM, Mike Hammettwispawirel...@ics-il.net wrote: It's too bad they're axing competition instead of embracing it. - Mike Hammett Intelligent Computing Solutions http://www.ics-il.com On 2/12/2011 12:48 PM, Fred Goldstein wrote: First off, this last thread's title was offensive, so I changed it. The current Administration is not doing much that previous ones didn't do, and that's the problem. The FCC sees the spectrum as a source of revenue (auctions), and Congress sees the FCC as a source of subsidy money to rural states. USF exists because the Telecom Act requires it. USF replaced an even uglier system wherein rural telcos charged really really high switched access per minute rates to LD carriers at either end of the call. VoIP would have killed that anyway... so now there are explicit cash subsidies. Let's set aside the smaller parts of USF (Schools Libraries, Rural Health Care, and Low Income) and focus on the one on the table now, High Cost Support. This is the one that gets the bulk of the tax money anyway. The statutory requirement is that rural telephone rates be comparable (not identical) to urban ones. So if it really costs $100/month to provide telephone service in East Overshoe, then the East Overshoe Telephone Cooperative is entitled to USF to let them hold down the rate. But it's a lot more complicated than that. Cost is averaged across a study area, which is in general the operating territory of one (historic, pre-merger) telephone company in one state. So South Central Bell- Mississippi is one study area, and South Central Bell- Tennessee is another. Verizon has at least two study areas in California, though, one ex-Contel and one ex-GTE. CenturyTel has a heap of them all over the place, as does TDS. The point of averaging across a study area is that low-cost urban areas cross-subsidize high-cost rural ones. So Qwest in Omaha is supposed to subsidize Qwest in the rural parts of Nebraska. Thus the big recipients are the small telephone companies who do not have urban areas. That would be bad enough, but a small telephone company typically has a separate corporate structure, including IT, CS, etc., which supports very few subscribers. So the OpEx per subscriber can be really high too, because small telcos are inefficient. If TDS or CenturyTel buys them, they often keep the study areas separate... cost goes down but the money still flows! (The pending NPRM does however at least open the issue of merging study areas.) And the Bells, especially Qwest/USWest, have sold off a lot of rural areas. So they have lowered their average cost. This doesn't lower their rate, though, because they don't get USF anyway, and they are on price caps, not rate of return, so they keep their rates and raise their margins. The rural chains that buy the rural turf eventually (this takes a couple of years, though again the pending NPRM may reduce this interval, which the FCC cutely calls The Parent Trap) get new subsidy flows for them. So we're screwed both ways. When TA96 passed, the FCC at the time was pro-competition (Hundt, Kennard) and they wanted to make USF pro-competition too. So they created the Equal Support Rule. This is a tiny bit like Jeremie's suggested voucher system. A USF-eligible carrier is called an ETC (eligible telecommunications carrier). A Competitive ETC (CETC) could move into an area whose ILEC got USF. The CETC would then get the same amount *per line* as the ILEC-ETC. So if East Overshoe Telephone got $80/month/line, then Northern Wireless could get $80/month/line for selling a fixed-wireless telephone line (using their cellular network and a POTS-phone adapter). Northern Wireless (I made that name up but it alludes to a once-huge CETC) would not need to show its own costs, as competitors don't fit the ILEC accounting model. Now you'd think that this was a great idea, like a voucher, but it had a big problem. The ILEC-ETC is usually under Rate of Return regulation. So their profit margin is fixed. Most of their costs are fixed too. So if the CETC takes lines away,
Re: [WISPA] A quick primer on USF
Fred, this was a great explanation! Thanks, Victoria Proffer - President/CEO www.ShowMeBroadband.com www.StLouisBroadband.com www.FarmingtonForum.com 314-974-5600 On 2/12/2011 12:48 PM, Fred Goldstein wrote: First off, this last thread's title was offensive, so I changed it. The current Administration is not doing much that previous ones didn't do, and that's the problem. The FCC sees the spectrum as a source of revenue (auctions), and Congress sees the FCC as a source of subsidy money to rural states. USF exists because the Telecom Act requires it. USF replaced an even uglier system wherein rural telcos charged really really high switched access per minute rates to LD carriers at either end of the call. VoIP would have killed that anyway... so now there are explicit cash subsidies. Let's set aside the smaller parts of USF (Schools Libraries, Rural Health Care, and Low Income) and focus on the one on the table now, High Cost Support. This is the one that gets the bulk of the tax money anyway. The statutory requirement is that rural telephone rates be comparable (not identical) to urban ones. So if it really costs $100/month to provide telephone service in East Overshoe, then the East Overshoe Telephone Cooperative is entitled to USF to let them hold down the rate. But it's a lot more complicated than that. Cost is averaged across a study area, which is in general the operating territory of one (historic, pre-merger) telephone company in one state. So South Central Bell- Mississippi is one study area, and South Central Bell- Tennessee is another. Verizon has at least two study areas in California, though, one ex-Contel and one ex-GTE. CenturyTel has a heap of them all over the place, as does TDS. The point of averaging across a study area is that low-cost urban areas cross-subsidize high-cost rural ones. So Qwest in Omaha is supposed to subsidize Qwest in the rural parts of Nebraska. Thus the big recipients are the small telephone companies who do not have urban areas. That would be bad enough, but a small telephone company typically has a separate corporate structure, including IT, CS, etc., which supports very few subscribers. So the OpEx per subscriber can be really high too, because small telcos are inefficient. If TDS or CenturyTel buys them, they often keep the study areas separate... cost goes down but the money still flows! (The pending NPRM does however at least open the issue of merging study areas.) And the Bells, especially Qwest/USWest, have sold off a lot of rural areas. So they have lowered their average cost. This doesn't lower their rate, though, because they don't get USF anyway, and they are on price caps, not rate of return, so they keep their rates and raise their margins. The rural chains that buy the rural turf eventually (this takes a couple of years, though again the pending NPRM may reduce this interval, which the FCC cutely calls The Parent Trap) get new subsidy flows for them. So we're screwed both ways. When TA96 passed, the FCC at the time was pro-competition (Hundt, Kennard) and they wanted to make USF pro-competition too. So they created the Equal Support Rule. This is a tiny bit like Jeremie's suggested voucher system. A USF-eligible carrier is called an ETC (eligible telecommunications carrier). A Competitive ETC (CETC) could move into an area whose ILEC got USF. The CETC would then get the same amount *per line* as the ILEC-ETC. So if East Overshoe Telephone got $80/month/line, then Northern Wireless could get $80/month/line for selling a fixed-wireless telephone line (using their cellular network and a POTS-phone adapter). Northern Wireless (I made that name up but it alludes to a once-huge CETC) would not need to show its own costs, as competitors don't fit the ILEC accounting model. Now you'd think that this was a great idea, like a voucher, but it had a big problem. The ILEC-ETC is usually under Rate of Return regulation. So their profit margin is fixed. Most of their costs are fixed too. So if the CETC takes lines away, the ILEC-ETC is still entitled to keep the subsidy level needed to maintain their rate of return and the same low prices. So they keep their subsidy, and USF ends up paying twice! This is the FCC's justification for wanting to do away with competitive ETCs entirely -- they could have simply removed Equal Support, but they're killing CETC in toto, regardless of what the law actually says. A few years ago, they capped CETC support. If a new CETC comes into an area, their subsidy comes out of other CETCs, no longer equal support. The total is supposed to phase down to 0 over five years. BTW the biggest CETCs were cellular carriers, including Sprint, ATT Mobility and its predecessors, and some Verizon Wireless acquisitions. VZ and I think Sprint agreed to phase out their CETC support as merger conditions. CLECs got a rather small
Re: [WISPA] A quick primer on USF
It's too bad they're axing competition instead of embracing it. - Mike Hammett Intelligent Computing Solutions http://www.ics-il.com On 2/12/2011 12:48 PM, Fred Goldstein wrote: First off, this last thread's title was offensive, so I changed it. The current Administration is not doing much that previous ones didn't do, and that's the problem. The FCC sees the spectrum as a source of revenue (auctions), and Congress sees the FCC as a source of subsidy money to rural states. USF exists because the Telecom Act requires it. USF replaced an even uglier system wherein rural telcos charged really really high switched access per minute rates to LD carriers at either end of the call. VoIP would have killed that anyway... so now there are explicit cash subsidies. Let's set aside the smaller parts of USF (Schools Libraries, Rural Health Care, and Low Income) and focus on the one on the table now, High Cost Support. This is the one that gets the bulk of the tax money anyway. The statutory requirement is that rural telephone rates be comparable (not identical) to urban ones. So if it really costs $100/month to provide telephone service in East Overshoe, then the East Overshoe Telephone Cooperative is entitled to USF to let them hold down the rate. But it's a lot more complicated than that. Cost is averaged across a study area, which is in general the operating territory of one (historic, pre-merger) telephone company in one state. So South Central Bell- Mississippi is one study area, and South Central Bell- Tennessee is another. Verizon has at least two study areas in California, though, one ex-Contel and one ex-GTE. CenturyTel has a heap of them all over the place, as does TDS. The point of averaging across a study area is that low-cost urban areas cross-subsidize high-cost rural ones. So Qwest in Omaha is supposed to subsidize Qwest in the rural parts of Nebraska. Thus the big recipients are the small telephone companies who do not have urban areas. That would be bad enough, but a small telephone company typically has a separate corporate structure, including IT, CS, etc., which supports very few subscribers. So the OpEx per subscriber can be really high too, because small telcos are inefficient. If TDS or CenturyTel buys them, they often keep the study areas separate... cost goes down but the money still flows! (The pending NPRM does however at least open the issue of merging study areas.) And the Bells, especially Qwest/USWest, have sold off a lot of rural areas. So they have lowered their average cost. This doesn't lower their rate, though, because they don't get USF anyway, and they are on price caps, not rate of return, so they keep their rates and raise their margins. The rural chains that buy the rural turf eventually (this takes a couple of years, though again the pending NPRM may reduce this interval, which the FCC cutely calls The Parent Trap) get new subsidy flows for them. So we're screwed both ways. When TA96 passed, the FCC at the time was pro-competition (Hundt, Kennard) and they wanted to make USF pro-competition too. So they created the Equal Support Rule. This is a tiny bit like Jeremie's suggested voucher system. A USF-eligible carrier is called an ETC (eligible telecommunications carrier). A Competitive ETC (CETC) could move into an area whose ILEC got USF. The CETC would then get the same amount *per line* as the ILEC-ETC. So if East Overshoe Telephone got $80/month/line, then Northern Wireless could get $80/month/line for selling a fixed-wireless telephone line (using their cellular network and a POTS-phone adapter). Northern Wireless (I made that name up but it alludes to a once-huge CETC) would not need to show its own costs, as competitors don't fit the ILEC accounting model. Now you'd think that this was a great idea, like a voucher, but it had a big problem. The ILEC-ETC is usually under Rate of Return regulation. So their profit margin is fixed. Most of their costs are fixed too. So if the CETC takes lines away, the ILEC-ETC is still entitled to keep the subsidy level needed to maintain their rate of return and the same low prices. So they keep their subsidy, and USF ends up paying twice! This is the FCC's justification for wanting to do away with competitive ETCs entirely -- they could have simply removed Equal Support, but they're killing CETC in toto, regardless of what the law actually says. A few years ago, they capped CETC support. If a new CETC comes into an area, their subsidy comes out of other CETCs, no longer equal support. The total is supposed to phase down to 0 over five years. BTW the biggest CETCs were cellular carriers, including Sprint, ATT Mobility and its predecessors, and some Verizon Wireless acquisitions. VZ and I think Sprint agreed to phase out their CETC support as merger conditions. CLECs got a rather small share of the pie. WISPS
