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ACA Supports Creation Of FCC Connect America Fund For Broadband Infrastructure

FCC Proposal Needs To Be Balanced With Proper Transition Mechanisms To Protect Most Vulnerable Consumers Aided By High Cost Fund

PITTSBURGH, July 12, 2010 - The American Cable Association is endorsing the Federal Communications Commission's tentative plan to overhaul the Universal Service Fund (USF), including the effort to create a first-ever broadband deployment fund financed by capping and reforming the $4.4 billion High Cost Fund.  At the same time, ACA believes the FCC must establish proper transition measures for the High Cost Fund so that truly small providers in rural areas can continue their mission of providing quality service to their consumers.

"Like the FCC, ACA is convinced that the time has come for the USF to focus on the infrastructure technology of the future: Broadband. In doing so, however, the FCC should allow small companies -- those serving fewer than 100,000 access lines -- to continue to rely on the High Cost Fund during a transition period to prevent a destructive spike in phone rates for millions of consumers living in the most economically challenging areas to provide service," ACA President and CEO Matthew M. Polka said.

The FCC has begun conducting USF reform proceedings in response to the National Broadband Plan's call in March for the creation of a broadband subsidy program, called the Connect America Fund (CAF), which would likely receive financial support from funds previously intended for the voice-centric High Cost Fund.

The ACA generally agrees with this approach (see comments attached), convinced that the size of High Cost Fund needs to be capped at 2010 levels and reformed to eliminate a host of costly inequities and inefficiencies well-known to FCC leaders and industry stakeholders for many years. Problems with the High Cost Fund range from the large growth in the size of the fund, which has resulted in unsustainably high taxes on monthly consumer phone bills, to the wasteful receipt of hundreds of millions of dollars in support by very large telecommunications carriers that face direct competition from upstart providers that are unable to receive a dime of USF support.

"Sustainable competition can't be achieved if government is inappropriately absorbing the operating costs of providers that face effective competition or have been freed from price regulation in their study areas," Polka added. "If that is allowed to continue, the High Cost Fund will only grow in size, the tax burden on consumers will only worsen, and vastly wealthy rent-seeking large incumbents will only fight harder to defeat reform every step of the way."

ACA's approach to USF reform dovetails in key respects with that of the FCC as outlined in various public notices released by the agency. But ACA -- which because of the business and geographic diversity of its membership has a keen knowledge of the value of the High-Cost fund to these providers -- believes that abrupt, major changes to USF reform could unintentionally harm smaller, rural companies. Affordable phone service for every America has been a bedrock commitment for decades and shouldn't be cast aside as the broadband subsidy program takes form.

"Allowing smaller phone providers to choose when they move from their traditional method of support to the CAF helps assure that the move to broadband will not threaten universal accessibility to wireline voice services at comparable rates. Once the smaller telephone company accesses the CAF, the company's traditional High Cost support should be eliminated in that area," Polka said.

About the American Cable Association

Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 900 smaller and medium-sized, independent cable companies who provide broadband services for more than 7 million cable subscribers primarily located in rural and smaller suburban markets across America.  Through active participation in the regulatory and legislative process in Washington, D.C., ACA's members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business.  For more information, visit http://www.americancable.org/

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