If implemented, flawed caps will cause irreparable harm to rural consumers and the carriers of last resort that serve them
WASHINGTON (June 28, 2012) – The National Telecommunications Cooperative Association (NTCA) today filed a motion in the U.S. Court of Appeals for the 10th Circuit seeking a stay of the FCC’s flawed regression analysis-based caps on Universal Service Fund (USF) support.
NTCA and three allied rural associations filed an Application for Review and Petition for Stay of the quantile regression formulas and resulting caps on federal USF support with the FCC on May 25. The caps were developed pursuant to the FCC’s USF “Transformation” Order last fall to “create structural incentives for rate-of-return companies to operate more efficiently and make prudent expenditures.”
As the court filing, application for review and petition for stay explain, numerous technical and legal flaws in the model adopted by the FCC and implemented by the bureau prevent the caps from achieving their purpose and will frustrate sustainable broadband deployment in rural areas contrary to law and good policy. In bringing this case before the court, NTCA seeks an immediate stay of implementation of the new caps, which are set to begin taking effect July 1, on the grounds that the methodology for limiting rural carriers’ cost reimbursement through the USF’s high-cost program is, among other things, riddled with data errors and fails to provide predictable support. If granted, the stay would remain in effect until the court could complete a full review of the caps and other aspects of the Transformation Order on the merits.
The errors identified in the court filing include:
- Adoption of a capping methodology over objections that the model, as implemented, would violate the commission’s statutory mandate to deploy “specific, predictable and sufficient” mechanisms to advance universal service;
- Implementation of the caps even with acknowledged inaccuracies in the data set used to designate geographic boundary areas and to compute the formulas’ coefficients;
- Applying the caps as of July 2012 to retroactively limit reimbursements for investments and expenses incurred in prior years.
“NTCA recognizes the need for modernization of the universal service and intercarrier compensation regimes, which is why we made significant efforts last year to reach a consensus with other industry sectors on suggested updates to those programs,” said Shirley Bloomfield, NTCA’s chief executive officer. “But these specific caps don’t achieve the purpose of modernization. To the contrary, the unpredictable, ever-changing and retroactive nature of these caps are already frustrating routine business planning, setting back investment in rural broadband, and will lead to declining service quality and higher prices for rural Americans.”
Today’s filing marks the second time in less than a year that NTCA has appealed for judicial review of the FCC’s attempts at USF reform. The association filed a petition for review of the FCC’s “transformation” order with the U.S. Court of Appeals for the 4th Circuit on December 9, 2011. That petition and several others filed by a variety of interested parties have been consolidated in the 10th Circuit court and are currently awaiting review.
The National Telecommunications Cooperative Association is the premier association representing more than 570 locally owned and controlled telecommunications cooperatives and commercial companies throughout rural and small-town America. NTCA provides its members with legislative, regulatory and industry representation; meetings; publications and educational programs; and an array of employee benefit programs. Visit us at www.ntca.org.