MTA Asks Members About Effect of FCC Order on Fiber Deployment

Thanks to Brent Christensen for letting me share a recent article from MTA (Minnesota Telecom Alliance) Newsletter. I know that broadband policy issues get pretty wonky pretty quickly, so when I see something that I think helps make a connection between policy and practice I like to share it.

At the end I’ll try to add some definitions and context that might not be at the front of you mind if you’re not seeped in telecommunications policy on a daily basis…

MTA Asks Members About Effect of FCC Order on Fiber Deployment

Recently the MTA sent out a survey to members with two questions: 1. Has your company delayed any fiber projects because of the FCC’s Transformation Order? and 2. Has your company cancelled any fiber projects because of the FCC’s Transformation Order? 37% of MTA Active Members answered yes to the first question and 21% answered yes to the second question. “These results are significant because they indicate that the FCC’s Order has had the opposite affect than they intended”, commented MTA President/CEO Brent Christensen, “USF has worked to deploy advanced Broadband services in rural Minnesota! The FCC has totally missed the mark by implementing the Connect America Fund on the fly. It has caused a lot of uncertainty, which is not good for the future of fiber in Minnesota”.

Completing the survey, many MTA members commented on why they answered the way they did. Comments, like: “An investment need to be made in plant but we’ve been waiting for three years for the FCC to get their act together to see if our project will cash-flow” and “Yes, as a result of the FCC order, efforts to expand broadband to our customs has been delayed and in some cases even canceled due to the fact that USF funds to help support these endeavors may not be in place thus putting serious financial burden on the company as a whole.” are typical of the responses received in the survey.

The survey results will be used in meetings with regulators and legislators at both the State and Federal level to stress the importance of universal service to rural Minnesota. The MTA would like to thank all of our members who participated. The high response level is indicative of the serious impact the FCC Transformation Order is having on MTA members.

Some definitions:

  • FCC Transformation Order: I found a nice (if you want detailed) explanation of the Transformation Order from a legal website (Bingham McCutchen). I’ll super abbreviate to say as the policy moves from one where telecom providers charge each other to terminate their calls to a bill and keep model (no longer charges termination fees) providers will phase out charges. The transition is intended to make it easier to absorb the change in business model.
  • Bill and Keep: a pricing arrangement for the interconnection (direct or indirect) of two telecommunications networks under which the reciprocal call termination charge is zero. That is, each network agrees to terminate calls from the other network at no charge.
  • USF (Universal Service Funds): is the federal money used to build phone lines to everyone (some of those lines also brought broadband)
  • Connect America Fund (CAF): is the new federal fund intended to build broadband  – wired and wireless
  • Local Exchange Carrier (LEC): a regulatory term in telecommunications for the local telephone company.
  • Incumbent Local Exchange Carrier (ILEC): a local telephone company in the United States that was in existence at the time of the breakup of AT&T into the Regional Bell Operating Companies (RBOCs), also known as the “Baby Bells.”
  • Competitive Local Exchange Carrier (CLEC): is a telecommunications provider company (sometimes called a “carrier”) competing with other, already established carriers (generally the  (ILEC)).

And a little context:

One of the big issues for the incumbent providers, especially  has been the uncertainty of the phased changes. (Some coming from beyond the industry.) It’s difficult to create a business plan when you don’t know what the next round of changes will mean. There are discussions on how the changes have had an impact based on specific provider (are they are teleco, wireless, are the rate of return, price cap…). As the answers above indicate they may have hit some rural telecommunications companies hard; the wireless folks may have a different view.

One of the most interesting discussions I heard on the topics was at a CLE (Continuing Legal Education) event last May. The panel discussed the impact of the Order on ILECs, CLECs and wireless carriers. At the time, the CLEC seemed to feel that they got the short end of the stick – they were paying into a system which would not payout to them. CenturyLink was still on the fence on whether CAF was positive or not. (In July, they did accept CAF funding.) And the wireless guys admitted that they had been winner in the game.

This entry was posted in FCC, MN, Policy, Rural, Vendors by Ann Treacy. Bookmark the permalink.

About Ann Treacy

I have a Master’s Degree in Library and Information Science. I have been interested or involved in providing access to information through the Internet since 1994, when I worked for Minnesota’s first Internet service provider. I am pleased to be a part of the Blandin on Broadband Team. I also work with MN Coalition on Government Information, Minnesota Rural Partners, and the American Society for Information Science and Technology.

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