NARUC Panelists: ROR Order Leaves Questions Unanswered

July 26, 2016–NASHVILLE – Although the FCC through its recent rate-of-return reform efforts has sought to provide clarity to carriers regarding their future levels of support, some panelists said today that order has left a lot of questions unanswered. The National Association of Regulatory Utility Commissioners’ (NARUC) Telecommunications Committee today participated in a panel discussion on the FCC’s rate of return proceeding.  Wireline Competition Bureau Deputy Chief Carol Mattey explained the FCC’s recent rate of return order and said that the decision was meant to give current rate of return carriers options, while modifying the legacy high-cost support to provide support for broadband-only lines.

According to Ms. Mattey, several of the reforms put in place were the recommendation of the industry.  “This was not an effort to shove something down the throats of the companies, but instead we worked together on how we can achieve goals.”

“There was a give and take.  But we really wanted this to be something that we would work through in a non-adversarial kind of way,” she added.  “And we did not have anyone take us to court on this one, which I view as a personal victory.”

The FCC in its decision adopted a “voluntary path under which rate-of-return carriers may elect model-based support for a term of 10 years in exchange for meeting defined build-out obligations.”  Carriers that choose to remain regulated under the legacy system for rate-of-return will also be subject to specific broadband deployment obligations.

Keith Oliver, senior VP-corporate relations at Home Telecom, said that the FCC’s order is “extremely complex” and will have as much impact on the telecom market as the 1984 breakup of the Bell system and the adoption of the 1996 federal Telecommunications Act.  He said that the order will not ensure that broadband is being built out to all rural areas, but will instead redistribute existing federal funding.  According to Mr. Oliver, some rural companies that are already deploying broadband are going to lose funding under this order. “We also need to keep in mind that the traditional ROR mechanism has failed,” he said.  “The order does nothing to repair the existing ROR mechanism. And I’m concerned about those flaws getting left behind. It’s paradoxical if we’re trying to increase broadband, why would the first step be to reduce funding?”

He added, “I am not a proponent of the continued rate of return mechanism in this current budget.  ROR is a great mechanism if it’s regulated properly and if the budget is right, but as a budget allocation tool, it doesn’t work. … I’m very concerned that if I stay on the ROR, I do not control my future and I am dependent on what the other carriers are going to do.”

Mr. Oliver agreed that funding should be targeted to where broadband is needed the most, and that order “does not represent the end, it represents the beginning of the process that we will go through.  The downside is that the decision still doesn’t provide the necessary stability and clarity of funding.”

“I don’t have a clue what my support is going to look like three to four years down the road,” he said.  “We have to take into consideration cost per line. Trying to calculate what’s going to happen is almost impossible.”

Lynn Follansbee, VP-law and policy at the U.S. Telecom Association, agreed with Mr. Oliver that contribution reform needs to be part of this discussion or order to “get the budget to whether it has to be.”  She said that the order has provided certainty for some carriers, “but not the level of certainty that everyone was looking for.”  She said that since the carriers are all uniquely situated, it has made the process challenging. And while the “predictability factor of the model is great, we don’t know how many people will choose the model and that will affect the funding,” she said.

Mr. Oliver also pointed out that that rate of return “is becoming a residual budget” and it’s “not getting any money.”  The current budget is not sufficient, but “the FCC is not magical; they can’t create something out of nothing.  And nothing is the exact amount of funds that is going to be left for rate-of-return carriers,” he asserted. – Carrie DeLeon, carrie.deleon@wolterskluwer.com

Courtesy TRDaily