December 17, 2014 Ex Parte Notice Ms. Marlene H. Dortch, Secretary - - PDF document

december 17 2014 ex parte notice ms marlene h dortch
SMART_READER_LITE
LIVE PREVIEW

December 17, 2014 Ex Parte Notice Ms. Marlene H. Dortch, Secretary - - PDF document

December 17, 2014 Ex Parte Notice Ms. Marlene H. Dortch, Secretary Federal Communications Commission 445 12 th Street, S.W. Washington, D.C. 20554 Re: Federal-State Joint Board on Universal Service , CC Docket No. 96-45; Universal Service


slide-1
SLIDE 1

NTCA–The Rural Broadband Association 4121 Wilson Boulevard, Suite 1000, Arlington, Virginia 22203 (703) 351-2000 (Tel) ● (703) 351-2001 (Fax)

December 17, 2014 Ex Parte Notice

  • Ms. Marlene H. Dortch, Secretary

Federal Communications Commission 445 12th Street, S.W. Washington, D.C. 20554 Re: Federal-State Joint Board on Universal Service, CC Docket No. 96-45; Universal Service Contribution Methodology, WC Docket No. 06-122; A National Broadband Plan for our Future, GN Docket No. 09-51 Dear Ms. Dortch: On Monday, December 15, 2014, the undersigned, on behalf of NTCA–The Rural Broadband Association (“NTCA”), delivered the enclosed presentation regarding universal service contributions reform at a meeting of the South Dakota Telecommunications Association in Sioux Falls, South Dakota. Commissioner Chris Nelson of the South Dakota Public Utilities Commission, who also serves as Vice Chairman of the Federal-State Joint Board on Universal Service, and Rolayne Wiest, South Dakota Public Utilities Commission Counsel, who also serves as staff to the Joint Board, were in attendance during the presentation. In the presentation, consistent with prior advocacy by NTCA, I discussed the need and potential paths forward to address dramatic and continuing declines in the base of assessable revenues that support the Federal Universal Service Fund and the resulting dramatic and continuing increases in the program’s “contribution factor.” See also, e.g., Comments of NTCA, et al., WC Docket No. 06-122; GN Docket No. 09-51 (filed July 9, 2012), at 2-47. In particular, given the evolution of IP-enabled communications services and the fact that universal service distribution programs are specifically being repositioned to support broadband and voice telephony without regard to underlying technology, I suggested that the “contribution base” should be expanded in corresponding fashion to include broadband Internet access services and non-interconnected VoIP. I also noted, consistent with the above-referenced prior filings, that these steps could be undertaken easily and immediately based upon the substantial record already amassed in the above-referenced proceedings without the need to wade into thorny “reclassification” debates or to otherwise alter the regulatory treatment of the services in question. Finally, I suggested that, while a revenues- based assessment may provide the most administratively simple way of implementing any such changes, policymakers and other stakeholders should be open to other units of assessment in order to move reform forward and cease the troubling and inequitable reliance on yesterday’s communications services to enable universal service policies built for a broadband world.

slide-2
SLIDE 2

Marlene H. Dortch December 17, 2014 Page 2 of 2 Thank you for your attention to this correspondence. Pursuant to Section 1.1206 of the Commission’s rules, a copy of this letter is being filed via ECFS. Sincerely, /s/ Michael R. Romano Michael R. Romano Senior Vice President – Policy Enclosure cc: Commissioner Chris Nelson Rolayne Wiest, Esq.

slide-3
SLIDE 3

Perspectives on USF Contributions Reform

December 2014 Mike Romano Senior Vice President – Policy NTCA

slide-4
SLIDE 4

4000 4200 4400 4600 2007 2008 2009 2010 2011 2012 2013 2014

Distributions (in millions)

Demand – High Cost ($4.5B Cap)

slide-5
SLIDE 5

90 110 130 150 170 190 210 230 250 2007 2008 2009 2010 2011 2012 2013 2014

Distributions (in millions)

Demand – Rural Health Care ($400M Cap)

slide-6
SLIDE 6

750 950 1150 1350 1550 1750 1950 2150 2350 2007 2008 2009 2010 2011 2012 2013 2014

Distributions (in millions)

Demand – Low-Income (No Cap)

slide-7
SLIDE 7

1900 2100 2300 2500 2700 2900 3100 3300 3500 3700 2007 2008 2009 2010 2011 2012 2013 2014 2015?

Distributions (in millions)

Demand – E-rate ($3.75B Cap + inflation index)

slide-8
SLIDE 8

50000 55000 60000 65000 70000 2007 2008 2009 2010 2011 2012 2013 2014

Contribution Base (in millions)

Supply

slide-9
SLIDE 9

10 11 12 13 14 15 16 17 2007 2008 2009 2010 2011 2012 2013 2014

Assessable % of Revenues

Contribution Factor

slide-10
SLIDE 10

45000 50000 55000 60000 65000 70000

Contribution Base (in millions)

Supply without Reform Going Forward

(assumes avg. of last 3 years as continued annual reduction)

slide-11
SLIDE 11

Fixing USF Supply

  • We can dramatically improve the Supply

equation – effective immediately – by expanding the Contribution Base just to include:

– Fixed & Mobile Retail Broadband Internet Access Revenues – Est. $122B Market combined in 2012* – Texting Revenues – Est. $20B Billion Market** – Non-Interconnected (1-way) VoIP Service Revenues

Sources: * ABI Research (Feb. 2013); Chetan Sharma (Mar. 2013) ** Time Magazine (Nov. 2012)

slide-12
SLIDE 12

50000 100000 150000 200000 250000

Contribution Base (in millions)

Supply with Reform Going Forward

(assumes avg. of last 3 years as continued annual reduction, plus inclusion

  • f new revenues as of 2015 with 2.5% annual increase therein thereafter)
slide-13
SLIDE 13

Broadening the Base Has To Mean Something

  • Quarterly factors have fluctuated wildly – between 12.9%

and 17.8% just since 2010

  • Sends bad signals to purchasers of services and

unsustainable as a matter of policy

  • If we had Supply with Reform tomorrow, and assumed no

increase in USF distributions, the Quarterly Contribution Factor for Q1 2015 could be approx. 1.4% rather than 16.8%.

  • Average customer’s broadband assessment would equal:
  • For 10/1 = $1.20 per month
  • For 4/1 = $1.04 per month
  • Meanwhile, average customer’s voice assessment would

reduce from $3.43 to $0.28 (or even lower)

slide-14
SLIDE 14

What Now?

  • Joint Board
  • 2012 repeat or something more?
  • Industry Politics
  • Telecom segments
  • Net-centric businesses
  • Consumer groups
  • What Can’t Happen – Nothing . . .
slide-15
SLIDE 15

45000 50000 55000 60000 65000 70000

Contribution Base (in millions)

Supply without Reform Going Forward

(assumes avg. of last 3 years as continued annual reduction)

slide-16
SLIDE 16

So What are the Options (Other than Nothing)?

  • Revenues
  • Pros: Simple to administer; builds upon existing system
  • Cons: Politics; builds upon existing system . . .
  • Connections
  • Pros: Gets to heart of network use
  • Cons: Not as easy to administer – speed, capacity, intercarrier?
  • Numbers
  • Pros: Really simple to administer
  • Cons: Backward-looking, especially in an IP/BB world
  • Hybrids?