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, AT&T > 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 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. > > We pay for this. USF is funded by a tax on "interstate > telecommunications". That includes long distance calls, circuits, and > interconnected VoIP (assumed 64.9% interstate, IIRC, but I'm typing > this off-line on my laptop in a rural location -- I haven't paid VZW > for tethering and for some reason it no longer works on my cell phone > ;-] ). This is technically a "fee" rather than "tax" because it > doesn't go to the Treasury's General Fund, but it is enforced like a > tax (big fines if you don't pay). It goes to USAC, who runs > USF. It's a self-adjusting tax. Every quarter, they compute a new > rate, and it takes effect automatically. It started out around 3% > and is now around 15.5%. > > The FCC's new set of proposals has a couple of major impacts. It > continues the phase-out of CETC support. It also creates a new fund, > "Connect America", which explicitly covers "broadband", as if that > were a noun. (Broadband what? It's an adjective.) This will be > distibuted by reverse auction; the ETC who asks the least to serve a > given area gets the exclusive support. If may be the ILEC. Whether > or not it's the ILEC, the ILEC-ETC *continues* to get their current > support. Connect America is incremental. So the ILECs can get even more. > > BTW there's a separate pending proposal to create a new USF to fund > mobile wireless -- licensed CMRS, not WISP. This may be related to > the recently announced 98% goal, though it seem to me that Verizon > had planned that for its LTE network anyway! BTW the Frontline > Wireless plan that almost happened in 2007 was required to have 99.3% > population coverage, though (speaking as one of their network > designers) that was sort of optimistic, and a sane proposal (that > might have happened) would have needed a lower number. > > -- > Fred Goldstein k1io 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! 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