Ten days ago, the FCC gave birth to an opus, albeit an imperfect one. The Commission’s Connect America Fund Report and Order, which will be published in today’s Federal Register, is some 750 pages long and sets forth in much detail the new rules of the road for High Cost Universal Service support and compensation for the exchange of traffic (Intercarrier Compensation). Yet, even with this detail, it leaves many questions unanswered and sets in motion numerous key follow-on proceedings.
Takeaways on Market Direction
As you review the many amended rules and focus on the new proceedings, it also is critical that you understand the overall course the Commission has charted. In short, the Commission’s order essentially affirms and reflects the changes you have experienced in your businesses and the direction of the market:
- The monopoly voice business is on its last legs; broadband – and most importantly – competitive broadband -- is the fundamental service offering, and it will be the focus for government support.
- Wireless too is part of the competitive voice and broadband mix, and so government will provide support where necessary to ensure consumers have access to it.
- As a result of competition, the government will phase out implicit subsidies in intercarrier compensation. Further, to reflect the cost structure of modern networks, local service providers will recover the costs of providing service directly from their end users and not upstream providers, like interexchange providers. (By the way, as a business matter, local providers also are unlikely to obtain revenues from upstream content providers.)
- Also because of competition, the government will withdraw explicit support where unsubsidized competitors provide service.
- Finally, in this new world, state regulation has a much more limited role to play: largely one of consumer protection and not traditional common carrier regulation. Unfortunately, the law and regulations already are out of touch with market reality and will continue to be for the foreseeable future, all of which is to the detriment of providers.
Where we'll see follow-on proceedings
As I mentioned earlier, the FCC's order is not totally comprehensive or final. Some portions of the order, such as the intercarrier compensation rules, are more direct and complete: a Bill & Keep regime will clearly be the end game.
Other portions, especially those dealing with High Cost support for broadband, are more a work in progress. In fact, the Commission direction on the Connect America Fund is limited and rule proceedings to be held over the next year will be key. Even then, the Commission is only fleshing out short to middle term rules. This is not surprising. The Commission faced a near Herculean task in transitioning from voice to broadband support in an industry that is highly dynamic and increasingly competitive. The balance struck by the Commission in its order is a very rough justice that leaves incumbents and competitors unsatisfied. That said, the Commission appears to understand that in the long run it will be much more efficient to provide support that is portable to users.
Looking Forward
What’s next? The effects of the rules will be very different for each provider but, because they will be effective in 30 days, it is essential that everyone focuses immediately on the specific impact. In addition, the first filings for the extensive new proceedings are due in the middle of January. Finally, if you haven’t already done so, you should undertake a strategic review of your business plan. The FCC’s action has given everyone a wake-up call about how much the telecommunications world has already changed.
|
About the Author
Thomas Cohen is a partner at Kelly Drye & Warren's Washington, D.C. office. His practice focuses on matters involving communications, including telecommunications, wireless and media, the Internet, privacy and government relations. |
Thomas Cohen
