Before the Federal Communications Commission Washington, D.C ) ) ) ) ) ) ) OPPOSITION OF GENERAL COMMUNICATION, INC.

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1 Before the Federal Communications Commission Washington, D.C In the Matter of Connect America Fund Application for Review of ACS ) ) ) ) ) ) ) WC Docket No OPPOSITION OF GENERAL COMMUNICATION, INC. SUMMARY General Communication, Inc. ( GCI ), hereby opposes the Application for Review filed by the Alaska Communications Systems Holding Group-owned incumbent local exchange carriers ( ACS ), 1 which seeks to overturn Paragraph 41 of the Bureau s Phase II Service Obligations Order. 2 ACS argues that the Bureau lacked delegated authority to even set a structure to permit data to be filed that might, at a future date, support a request to waive a strict interpretation of what constitutes an unsubsidized competitor. ACS request is premature in essence challenging a waiver not yet granted but it also ignores, and entirely fails even to cite, the Commission s broad delegation of authority to the Wireline Competition Bureau to revise the rules adopted in the Universal Service/Intercarrier Compensation Transformation Order. 3 1 Application for Review, WC Docket No (filed November 26, 2013) ( Application for Review ). 2 Connect America Fund, Report and Order, DA , FCC Rcd. 15,060, 15, ( Phase II Service Obligations Order ). 3 Connect America Fund, et al., Report and Order and Further Notice of Proposed Rulemaking, FCC , 26 FCC Rcd. 17,663 (2011) ( Universal Service/Intercarrier Compensation Transformation Order or Transformation Order ).

2 Moreover, ACS hyperbolic protestations that denying it subsidies to overbuild GCI would mean substantial unserved areas both ignores the fact that the Commission will auction support in any Census block should ACS not exercise its statewide election and lacks any support in actual data which ACS carefully excludes from its Application for Review. Alaska has substantial universal service needs, but what ACS proposes is unfocused and is not a good use of scarce high-cost dollars. The plain fact is that in most of the ACS ILEC study areas, GCI already provides far more robust broadband than ACS, at more reasonable rates and it will continue to do so even after its legacy wireline CETC support is entirely phased out during the five-year initial term of the Connect America Fund Phase II support. And in those Census blocks that are wholly unserved, or in which ACS is the only broadband and voice provider, those blocks are eligible for Connect America Fund Phase II support irrespective of how the Commission addresses CETCs that are phasing out high-cost support. The Commission should deny ACS Application for Review, and reconfirm that the Bureau may collect data and grant waivers of the unsubsidized limitation where appropriate. 2

3 I. BACKGROUND In its Universal Service/Intercarrier Compensation Transformation Order, the Commission refocused high-cost universal-service support to promote broadband as well as voice service, and it established new mechanisms to do so, to which carriers transition from legacy mechanisms. In crafting a new long-term high-cost support mechanism for fixed broadband and voice services the Connect America Fund Phase II ( CAF Phase II ) the Commission provided for highly targeted support for service to census blocks with costs exceeding an estimated cost threshold to be determined by a model and below a second, upper limit. The Commission also, however, states that, the CAF will only provide support in those areas where a federal subsidy is necessary to ensure the build-out and operation of broadband networks, 4 and that support would be available to those areas that are unserved through the operation of market forces. 5 To implement this limitation, at least in part, the Commission precluded CAF Phase II support to census blocks served by unsubsidized competitors. 6 Moreover, while the Commission expressly addressed the timing of its unsubsidized competitor determinations, it never defined the temporal component of the definition of an unsubsidized competitor, i.e., unsubsidized by when, in the context of an order that also phases out wireline CETC support entirely. In its recent Phase II Service Obligations Order, from which ACS seeks Commission review, the Bureau presumed that the Transformation Order defined unsubsidized as of the date of the eligibility determination one possible 4 Transformation Order Id Id. 24,

4 interpretation but also provided a mechanism for the Bureau to receive data in order later to consider whether to waive the unsubsidized limitation as it had interpreted it. 7 The question of whether the Commission intends to provide continuing five-year highcost support to census blocks in which support is not necessary to ensure the continued provision of voice and broadband services is the core issue presented by ACS Application for Review. GCI and ACS compete head-to-head throughout ACS s territory, which includes: the three largest cities of Anchorage, Fairbanks and Juneau, the Kenai Peninsula south of Anchorage, Kodiak Island, Sitka, and a number of smaller communities. Particularly in those communities located in the fiber-connected Alaska Railbelt or along the fiber-served corridors in southeastern Alaska, GCI and ACS both offer robust broadband Internet access services. In all of these communities, under the Commission s current rules, GCI will become wholly unsubsidized within either two years (Anchorage, Fairbanks and Juneau) or four years (all other areas). 8 7 See Phase II Service Obligations Order Precise timing depends upon the completion of the Mobility Fund and Tribal Mobility Fund Phase II processes. 4

5 The National Broadband Map documents, as of December 31, 2012, the extent to which GCI has already built out to provide broadband service to substantial portions of the ACS ILEC service areas. Table 1 National Broadband Map Percentage of Population with Access to Broadband by Study Area/Census Place and Provider Total 3M/768 K (A) GCI 3M/786K (B) ACS 3M/768K (C) Served by ACS but not GCI* (A-B) Served by GCI but not ACS* (A-C) Unserved by Either GCI or ACS* Study Area ACS of Anchorage 99.8% 99.3% 76.6% 0.5% 23.2% 0.2% ACS of Fairbanks 97.2% 79.7% 75.6% 17.5% 21.6% 2.8% -Fairbanks Census Place 100.0% 100.0% 87.7% 0.0% 12.3% 0.0% ACS of Alaska Juneau and Greatland 98.9% 97.2% 84.7% 1.7% 14.2% 1.1% - Juneau Census Place 99.1% 98.2% 89.9% 0.9% 9.2% 0.9% ACS of Northland Sitka and Glacier State 85.1% 58.0% 63.5% 27.1% 21.6% 14.9% -Sitka Census Place 98.0% 98.0% 92.3% 0.0% 5.7% 2.0% -Kenai Census Place 100.0% 91.8% 78.7% 8.2% 21.3% 0.0% -Soldotna Census Place 100.0% 97.5% 94.6% 2.5% 5.4% 0.0% -Homer Census Place 99.5% 97.8% 71.8% 1.7% 27.7% 0.5% -Kodiak Census Place 100.0% 100.0% 99.8% 0.0% 0.2% 0.0% -Kodiak Station Census Place 100.0% 100.0% 87.9% 0.0% 12.1% 0.0% Source: National Broadband Map (data as of 12/31/2012) * Computed from National Broadband Map data 5

6 As Table 1 shows, in the ACS of Anchorage, ACS of Fairbanks, ACS of Alaska-Juneau and ACS of Alaska-Greatland study areas, the wholly unserved population is extremely small, and in each of these study areas, the population served only by GCI exceeds the population served only by ACS. Even in the ACS of the Northland-Sitka and ACS of the Northland-Glacier State study areas, there are many communities with few wholly unserved and in which the population served only by GCI exceeds the population served only by ACS. Moreover, ACS of the Northland includes many of the nearly 50 off-road, satellite-served communities that ACS has already told the Commission will likely not qualify for CAF Phase II support. 9 9 Letter from Karen Brinkmann, Counsel for ACS, to Marlene H. Dortch, Secretary, FCC, Attachment at 3 (filed November 29, 2013). 6

7 Moreover, when compared head to head, GCI s services of at least 100 GB included usage are both capable of higher speeds and are more affordable than those of ACS. Table 2 10 Download Speed GCI (Anchorage) Upload Speed Incl. Usage 10 Mbps 1 Mbps 10 GB 12 Mbps 1 Mbps 60 GB 15 Mbps 1 Mbps 18 Mbps 1.5 Mbps 22 Mbps 2 Mbps 100 Mbps 5 Mbps 100 GB 150 GB 200 GB 500 GB Rate (stand -alone) $29.99 ($39. 99) $49.99 ($59. 99) $59.99 ($69. 99) $79.99 ($89. 99) $ ($ ) $ ($ ) Download Speed 320 kbps 1 Mbps 3 Mbps 4 Mbps 7 Mbps 10 Mbps Upload speed "Up to 1 Mbps" "Up to 1 Mbps" "Up to 1 Mbps" "Up to 1 Mbps" "Up to 1 Mbps" "Up to 1 Mbps" ACS Incl. Usage Overage Rate (standalone $0.005 per MB ($0.01 per MB) $0.004 per MB ($0.008 per MB) $0.003 per MB ($0.006 per MB) $0.002 per MB ($0.004 per MB) $0.001 per MB ($0.002 per MB) $ per MB ($0.001 per MB) Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Overage Rate Rate None $49 None $69 None $89 None $89 None $99 None $ Within ACS price cap incumbent LEC service areas, GCI offers these same plans and rates in Fairbanks, Juneau, Kenai/Soldotna, Girdwood, Homer, and Kodiak, and at slightly higher rates in Sitka. GCI s 100 Mbps offering is available in Anchorage, Fairbanks and Juneau, within ACS service area. ACS rates are available from the ACS website: and (last accessed December 11, 2013). 7

8 That GCI offers greater capacity services is not surprising, because GCI uses a DOCSIS-based, cable Internet network, while ACS uses xdsl. As this Commission has noted, DOCSIS services are more robust than DSL. 11 Even though GCI delivers superior service with superior value, the Universal Service/Intercarrier Compensation Transformation Order grants ACS, as the ILEC, a right-offirst refusal to elect, on a statewide basis, to be the exclusive recipient of CAF Phase II support within its service areas. 12 ACS gets this preferential status even if other ETCs, such as GCI, would be capable of delivering the specified voice and broadband services at a lower cost and with greater future capabilities for higher speed services. Only if ACS declines to elect to receive this support will GCI be able to bid to receive CAF Phase II high-cost support. This situation, in which there are two wireline ETCs, is rare. If the Commission were simply to utilize a very strict definition of unsubsidized competitor that ignored the fact that GCI will become unsubsidized during the five year initial term of CAF Phase II support, the Commission would be calculating and providing high-cost support to ACS to build out its broadband networks in areas already served by GCI including all of Anchorage, Fairbanks and Juneau, as well as smaller communities and which will remain served by GCI following the end of the legacy CETC support transition. Such as result, as advocated by ACS, fails to achieve the Commission s goal of targeting forward-looking high-cost support only to those areas where 11 See 2013 Measuring Broadband America February Report: A Report on Consumer Wireline Broadband Performance in the U.S., FCC Office of Engineering and Technology and Consumer and Governmental Affairs Bureau, at 52, available at America-feb-2013.pdf. 12 See Transformation Order 171 8

9 a federal subsidy is necessary to ensure the build-out and operation of broadband networks. 13 A much better targeting is achieved by eliminating those census blocks in which GCI has service that it will continue to serve, and to focus on those census blocks in which neither GCI nor ACS serve, or which would only be served with continued high-cost support. II. ACS OBJECTIONS TO PARAGRAPH 41 ARE PREMATURE. ACS Application for Review is striking because, at bottom, ACS is objecting to the Bureau structuring the process that it would use to consider requests for waiver of the definition of an unsubsidized competitor, if such are necessary. 14 As ACS itself acknowledges, the Commission always has authority to waive its own rules for good cause shown, 15 and parties such as GCI are entitled to seek such a waiver pursuant to 47 C.F.R The Bureau has taken no definitive action other than to structure a process with respect to waivers that might be considered in the future. It is, of course, in the interest of orderly function and disposition of issues for the Bureau to make clear how and when it wishes to receive information relevant to the consideration of such a waiver. ACS actions are akin to filing an Application for Review of a comment schedule. ACS, of course, really objects to the action that might be taken, i.e., to deny it or any other ETC support for areas in which GCI will, by some point during the five-year initial CAF Phase II term, be providing services that meet the Commission s minimum requirements for 13 Id In paragraph 41, the Bureau establishes a waiver process because it presume(s) that any recipient of high-cost support at the time the challenge process is conducted does not meet the literal terms of the definition. Phase II Service Obligations Order 41. The Bureau did not, however, actually decide that such a recipient would not meet the terms of the definition of unsubsidized competitor. 15 Application for Review at

10 supported broadband without the assistance of any high-cost support. The proper time to seek review of such an action would be after it has been taken, when the Commission will have the benefit of a full factual record. That time has not yet come. For this reason alone, the Commission should dismiss ACS application for review although at this point to preclude later disputes, the Commission should ratify the Bureau s process, which would cure any lingering issues with respect to delegated authority. III. PARAGRAPH 41 WAS WITHIN THE BUREAU S BROAD, DELEGATED AUTHORITY. ACS vociferously argues that the Bureau has exceeded its delegated authority in issuing Paragraph 41. Insofar as all the Bureau has done to date is to structure a process for the consideration of potential waivers, that action cannot possibly exceed the Bureau s delegated authority. Furthermore, 47 C.F.R gives the Bureau the authority to [a]ct on requests for interpretation or waiver of rules. In any event, ACS fails even to mention Paragraph 1404 of the Universal Service/Intercarrier Compensation Transformation Order. In that paragraph, the Commission gives the Wireline Competition Bureau, among others, sweeping authority to make any further rule revisions as necessary to ensure that the reforms adopted in [the Universal Service/Intercarrier Compensation Transformation Order] are properly reflected in the rules, including correcting any conflicts between the new or revised rules and existing rules as well as addressing any omissions or oversights. 16 This delegation is clearly broader than the Commission s ordinary delegation rules: the Bureau, for example, has used this delegation to 16 Transformation Order

11 permit ILECs to raise intrastate terminating access rates for specific elements, even when the rules initially precluded raising specific rates. 17 Here, the Universal Service/Intercarrier Compensation Transformation Order has multiple provisions to be reconciled, including: Paragraph 24 s statement that the CAF will only provide support in those areas where a federal subsidy is necessary to ensure the build-out and operation of broadband networks 18 Paragraph 116 s statement that support would be available to those areas that are unserved through the operation of market forces; 19 Paragraph 170 s statement that In determining the areas eligible for support, we will also exclude areas where an unsubsidized competitor offers broadband service that meets the broadband performance requirements described above, with those areas determined by the Wireline Competition Bureau as of a specified future date as close as possible to the completion of the model; 20 The CETC legacy support phase-out specified in Paragraphs 519 and , and 47 C.F.R (e) 21 ; The lack of any time specified in the definition of unsubsidized competitor in 47 C.F.R as to by when a facilities-based provider of residential fixed voice and 17 See Connect America Fund, et al., Order, DA , 27 FCC Rcd. 5986, (2012). 18 Transformation Order Id Id Id. 519,

12 broadband service must no longer be receiv[ing] high-cost support in order to be an unsubsidized competitor. ACS posits one potential reconciliation that the competitor must not be receiving support at the time that the determination of eligible service areas is made. But that is not the only potential reconciliation: Paragraph 170 can also be read to refer to the time at which the competing provider s broadband offerings are judged to be meet the broadband performance requirements, rather than the time at which all support must be eliminated or foregone, which could be a different and later date. 22 This latter reading better serves the goal of targeting support than does ACS. The Universal Service/Intercarrier Compensation Transformation Order thus did not clearly resolve the interplay between the unsubsidized competitor definition, the legacy support phase-down, and the Commission s objective to direct CAF Phase II support to areas that do not have any service meeting the Commission s performance requirements. Paragraph 1404 delegates the authority to the Bureau to do so. IV. MEETING THE COMMISSION S OBJECTIVE OF TARGETING SUPPORT TO AREAS THAT WOULD HAVE NO COGNIZABLE BROADBAND SERVICE WITHOUT SUPPORT REQUIRES HARMONIZING THE APPLICATION OF THE UNSUBSIDIZED COMPETITOR TEST WITH THE CETC LEGACY PHASE-OUT. The National Broadband Map data makes clear that the Commission gains little in advancing broadband deployment by allowing ACS to receive support even in areas where GCI offers broadband service at a minimum of 4 Mbps down and 1 Mbps up. As shown in Table 1, above, according to the National Broadband Map, in Anchorage, just 0.2% of the population lacks access to 3 Mbps/768 Kbps broadband service, but 23.2% of the population are in areas 22 See Letter from John T. Nakahata, Counsel to GCI, to Marlene H. Dortch, Secretary, FCC (filed May 7, 2013). 12

13 served by GCI and not by ACS. It makes little sense to provide ACS with high cost support to overbuild the 23.2% served by GCI in order to reach the 0.2% that are unserved. ACS of Fairbanks and ACS of Alaska-Juneau and Greatland show a similar situation. Providing ACS with support so that it overwhelmingly overbuild GCI with only modest potential coverage gains does not only provide support in those areas where a federal subsidy is necessary to ensure the build-out and operation of broadband networks. What ACS seeks primarily is high-cost support for overbuilding GCI. It is GCI, not ACS, that is already offering services at speeds exceeding 6 Mbps down and 1.5 Mbps up. If the Commission reads Paragraph 170 as creating an entitlement in the ILEC to high-cost support whenever a competitor is an ETC phasing out high cost support which is how ACS reads it then the Commission will be providing support in many areas in which it is not necessary to sustain the offering of those services. This is because, as the National Broadband Map reflects, there are only two wireline voice and broadband providers in the ACS ILEC service areas. If all of GCI s broadband offerings are disregarded through ACS interpretation of unsubsidized competitor or because of a lack of waiver of the unsubsidized constraint, then the result will necessarily be support for overbuilding networks that will be provided on an unsubsidized basis at the end of the legacy CETC support transition. Rather than overwhelmingly supporting overbuilding, the best approach is for the Commission is to focus on extending service to those persons that are, in fact, unserved by any provider, or that would become unserved in the absence. Those areas exist in Alaska indeed, within the ACS footprint and GCI has no objection to ACS electing to receive CAF Phase II support for those areas. However, those are not the census blocks in which GCI is today offering broadband services at 4 Mbps down and 1 Mbps up, and faster. The best way to do this is, 13

14 through rule interpretation or waiver, to exclude from eligible areas those census blocks in which GCI will be providing broadband service meeting the Commission s broadband performance requirements, and where GCI s legacy support will sunset prior to the end of the initial five-year CAF Phase II term; the Commission should then also set a higher alternative technology cutoff for Alaska, which would support extension of broadband into communities without 4 Mbps/1 Mbps broadband service; the Commission accordingly should not only deny ACS Application for Review, but it should also clarify that the Bureau should implement the unsubsidized competitor test in this manner that only provide[s] support in those areas where a federal subsidy is necessary to ensure the build-out and operation of broadband networks, as contemplated by the Universal Service/Intercarrier Compensation Transformation Order. V. ACS HYPERBOLE FAILS TO DEMONSTRATE ANY LIKELY HARM TO UNIVERSAL SERVICE. ACS asserts, If the Bureau succeeds in rendering ineligible for support those Alaska census blocks that are partially served by a subsidized competitor today, ACS believes that many customers in those areas are unlikely ever to receive broadband service. 23 The National Broadband Map casts significant doubt upon that claim. In the ACS of Anchorage service area, as well as in the Fairbanks and Juneau Census Places, there are few, if any, people who are actually unserved. 24 Even on the Kenai Peninsula, in communities such as Kenai, Soldotna and Homer, as well as in Sitka, there are few, if any, unserved consumers. 25 In light of the National Broadband Map data, ACS must back up its sweeping claims that many consumers will remain unserved with actual facts and data. It is important to recognize 23 Application for Review at See Table 1, supra. 25 Id. 14

15 that this is not merely showing that there are some consumers within, for example, ACS of the Northland-Glacier State, who are in census blocks served only by ACS. Census blocks in those communities, such as Sterling on the Kenai Peninsula, will be eligible for support in any event. Nor is this about the off-road, satellite-served communities that ACS believes will be above the upper threshold for model-based support, as those are excluded from CAF Phase II and will be supported from the Remote Areas Fund. The harm ACS posits can only exist in census blocks partially served by GCI, if neither GCI nor ACS will seek to expand their network footprint in the absence of support. Some of those areas may exist but the National Broadband Map data do not suggest that these cover a significant number of unserved consumers. And this is really no different than in other areas in the country in which never-subsidized competitors serve part, but not all of a census block; in those areas, there is also a possibility that there will be some consumers left unserved because the Commission will not permit challenges below the level of the census block. 26 ACS sweeping claims of harm to universal service thus are wholly unsubstantiated. Alaska does need additional high-cost support. However, rather than supporting ACS overbuilds of GCI, the Commission should adopt a higher alternative technology cutoff for Alaska. This would promote greater terrestrial broadband deployment, including in the middle mile. 26 See Connect America Fund, Report and Order, DA , 28 FCC Rcd. 7211, (2013). 15

16 VI. CONCLUSION Accordingly, the Commission can reject ACS Application for Review without fearing that it will leave many Alaskans unserved. To the contrary, the Commission will focus CAF Phase II in Alaska on reaching consumers who do not have access to broadband meeting the Commission s performance requirements, rather than on funding ACS overbuilding areas where GCI already offers such services. Thus, the Commission should deny ACS Application for Review and confirm that the Bureau should exclude areas in which legacy CETC support will sunset during the five-year initial CAF Phase II term, but where the CETC will continue to provide service on an unsubsidized basis. Respectfully submitted, Chris Nierman Adam Taylor GENERAL COMMUNICATION, INC I Street, N.W., Suite 1260 Washington, D.C (202) John T. Nakahata WILTSHIRE & GRANNIS LLP th Street, NW Suite 1200 Washington, D.C (202) jnakahata@wiltshiregrannis.com Counsel for General Communication, Inc. December 11,

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