Summary of USF ICC Reform - Intro USF

8/3/2019 Summary of USF ICC Reform - Intro USF

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ummary o

Reform Order & NPRM

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CAF & ICC REFORM ORDER & FNPRM

Intercarrier Compensation (ICC) Reform

o Approved October 27, 2011

,

o Order primarily addresses long term ICC and interimUSF reform

Proposed effective dates beginning in 2012

o FNPRM primarily addresses long term USF reform

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o Preserve & enhance universal availability of

Measured using telephone penetration rate

o Universal availabilit of networks ca able ofproviding voice and broadband Measured by the number of residential, business, and

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o Universal availability of networks capable of

No performance measures adopted at this time

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

o Minimize USF contribution burden onconsumers

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easure n mon y cos per ouse o


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o Modernize USF & ICC for Broadband

o fund

government administrators

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o Up to $4.5B each year $1.8B for Price Cap carriers

$500M Mobility Fund

$100M Remote Areas Fund

o Funding in a given year could be more or less

Contribution will not exceed $4.5B + expenses

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USF REFORM

o Voice grade access to the PSTN or its functionalequivalent

o Local minutes of use at no additional charge

o Toll limitation for qualifying low income consumerso Access to 911 and E911

o Voice must be offered as a standalone service

Within 2 standard deviations above the national average

o Continue to satisfy state requirements

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USF REFORM

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

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

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

1 Mbps/256 Kbps

Latency and capacity requirements do not apply

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USF REFORM

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 andoperate broadband capable networks

Own retail broadband

u s an a y unserve areas No unsubsidized competition

2014 at least 2/3 of support

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USF REFORM

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 accepteddivided by $775

2 3 of locations within 2 ears

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


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USF REFORM

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

Cost model based support for incumbents that make astatewide commitment to provide broadband

Eligibility determined at a census block, or smaller, level o e e erm nes w ere cos canno e suppor e y reasona e

end user rates

5year commitment (2013 2017)

4/1 Mbps requirement

85% of locations in years 13 100% by the end of year 5

6/1.5 Mbps to a # of locations to be determined in the FNPRM

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,distributed via reverse auctions


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USF REFORM

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

Carriers rejecting statewide commitment

Receives CAF Phase I support until reverse auction winnerreceives support under CAF Phase II

Support then ceases

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USF REFORM

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

HCLS

ICLS

LSS

SNA

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USF REFORM

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

De lo broadband u on recei t of a reasonable re uest forservice, within a reasonable amount of time

Annual reporting to the PUC and USAC

Construction charges may be assessed pursuant to state

requirements Additional requirements to be identified in FNPRM

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USF REFORM

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 inplace of actual costs that exceed the cap

Focused initially on HCLS, but FNPRM directs similarbenchmarks for ICLS

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USF REFORM

o Extends Corporate Operations Expense limitation toICLS, 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 GDPCPI, beginning

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USF REFORM

o Reduces HCLS for carriers with artificially low voicerates

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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USF REFORM

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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USF REFORM

o Eliminate LSS as a separate support mechanismeffective 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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USF REFORM

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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USF REFORM

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 replycomments

Absent action by the WCB, waiver deemed granted 60 daysafter reply comments

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USF REFORM

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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USF REFORM

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

7/1/2012 6/30/2013 = $250/line + 2/3 of difference

7/1/2013 6/30/2014 = $250/line + 1/3 of difference

=

o Carriers may file a petition for waiver or adjustment

o Support reduced from each support mechanism, except

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LSS, ase on t e re ative amounts o support


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USF REFORM

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 supportin study areas with less than 100% overlap

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Summary of USF ICC Reform - Intro USF

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