December 9, Re: Request for Action Regarding Connect America Fund, WC Docket No

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1 Brett Kilbourne Vice President and Deputy General Counsel Direct Line: December 9, 2013 Ms. Marlene H. Dortch Secretary Federal Communications Commission th Street, S.W. Washington, D.C Re: Request for Action Regarding Connect America Fund, WC Docket No Dear Ms. Dortch: The Utilities Telecom Council ( UTC ) hereby respectfully submits comments and a request for action in response to the Federal Communications Commission s ( Commission ) conclusion in the USF/ICC Transformation Order that to the extent Connect America Fund ( CAF ) Phase I incremental support for deployment of broadband by price cap carriers and their rate-of-return affiliates is declined, incremental support may be used in other ways to advance the Commission s broadband objectives pursuant to its statutory authority. 1 Specifically, the Commission should streamline or expedite the process by which a utility or other critical infrastructure industries ( CII ) entity can access CAF as a certified eligible telecommunications carrier ( ETC ), and make available funds that are unused by price cap carriers for serving unserved and underserved areas. This would remove barriers that discourage or prevent electric utilities and other CII from accessing CAF to provide broadband to unserved and underserved areas. 2 By removing these barriers, the Commission would promote broadband deployment to unserved and underserved areas by electric utilities and other CII. This would advance the Commission s policy goals by promoting access and competition in the broadband marketplace. It would also increase the effectiveness of CAF, which has been limited to the extent that price cap carriers have declined to accept available funds. Thus, by enabling and encouraging utilities to access unused CAF funds, the Commission can promote broadband access and competition in areas that are currently unserved and underserved by price cap carriers. This simple change can release market forces that are unnecessarily restrained under legacy requirements from the Universal Service Fund that have been carried over and made applicable to the CAF. Further, this simple change can be accomplished consistent with the Commission s statutory authority and state primary jurisdiction over ETC status. 1 See Connect America Fund et al., WC Docket No et al., Report and Order and Further Notice of Proposed Rulemaking, 26 FCC Rcd at at 138 (2011), pets. for review pending sub nom. In re: FCC , No (10th Cir. filed Dec. 8, 2011) (hereinafter USF/ICC Transformation Order ). 2 This submission is made coincident with a related letter filing by Midwest Energy Cooperative ( Midwest ) in this docket. UTC considers Midwest an ally in this quest and consider the relief requested in both filings to be consistent with each other. 1

2 I. Introduction and Background Created in 1948, UTC is the international trade association for the telecommunications and information technology interests of electric, gas and water utilities, pipeline companies and other CII. Its members include large investor-owned utilities that serve millions of customers across multi-state service territories to relatively smaller municipal and cooperative utilities that may serve thousands of customers in isolated towns, cities and low density rural areas. It is particularly these cooperative and municipal utilities that are uniquely positioned to provide broadband to rural, unserved and underserved areas, because they have the resources, relationships, the expertise, and the commitment to provide broadband where no other providers will. They are responding to the demand for broadband from their customers who in the case of municipal and cooperatives are referred to as constituents and members. They recognize that the economic, social, political and educational well-being and vitality of their communities depends on access to affordable, high-quality, broadband services. They also understand that broadband deployment provides benefits to their utilities as well as their communities. As such, they are interested in providing broadband services to their communities, but they need access to CAF in order to offset the high-cost of deploying networks into the unserved and underserved parts of their service territories. While utilities are uniquely positioned to provide broadband to rural America, they still face high costs to deploy networks and provide services in their existing service territories. This is the biggest barrier for utilities. To be sure, utilities have extensive infrastructure, relationships and resources that can be leveraged to deploy broadband networks and provide services, but they still need access to federal and state funds to economically afford to do so. Many of the utilities that are offering broadband or are considering doing so have obtained funds that are available, such as from the Rural Utilities Service. Access to grants under CAF is necessary to provide supplemental funding to make deployment economically feasible for many utilities and many hard to serve areas. In order to access CAF, the Commission requires that broadband providers obtain ETC status. By statute, the states, along with the Commission, are empowered to designate common carriers as ETCs. 3 The process for obtaining certification as an ETC can be time consuming, and the Commission itself has recognized that ETC processing time can be an issue for entities seeking access to CAF. 4 Given this issue, utilities are understandably concerned that they may not obtain ETC status in time to obtain access to CAF in one of the discrete rounds of funding in Phase I or throughout ongoing Phase II funding. In addition, the cost of obtaining ETC status can also be significant and daunting, particularly given the uncertainty of whether the funds will be available by the time they are ETCs and whether they will ultimately succeed in accessing CAF in the event that the funds are still available. As such, ETC status represents a barrier that discourages utilities and other CII from access to CAF. UTC submits that the Commission should remove this barrier to CAF by streamlining the ETC process. UTC understands and accepts that ETCs must satisfy various service obligations, consistent with the public interest, including the provision of voice services as well as other regulatory requirements. As such, UTC does not seek to avoid ETC status, but simply suggests that the Commission streamline the process by which eligibility may be satisfied in order for an entity that is otherwise 3 Generally, the states have primary jurisdiction to designate ETCs; the Commission designates ETCs where states lack jurisdiction. See 47 U.S.C. 214(e). 4 USF/ICC Transformation Order, 26 FCC Rcd 17663, at 390 (2011)(recognizing the roughly comparable time required for the FCC and the states to process a request for ETC status and advising that parties contemplating requesting new designations as ETCs for purposes of participating in the mobility fund auction should act promptly to begin the process. ) 2

3 qualified to obtain access to CAF, as more fully described below. II. The Commission Should Streamline the ETC Process to Enable and Encourage Utilities to Access CAF and the Commission Should Allow Access to CAF Contingent on Achieving ETC Status. UTC respectfully requests that the Commission streamline the process for ETC status so that utilities and other CII can be eligible to access CAF during the rounds of funding that are made available. Specifically, UTC suggests that the Commission permit entities whose applications for ETC designation are still pending (and who are otherwise eligible) to be eligible to obtain access to CAF through its Phase I or Phase II funding mechanisms. That way, an entity that succeeds in applying for CAF to serve a certain unserved study area can become an ETC after it has successfully obtained access to CAF funds. This will remove the uncertainty and delay in the current process, which can discourage utilities from participating in CAF. There is precedent for this relief. The Commission has permitted Tribally-owned or controlled entities that have a pending application for ETC designation to participate in the auctions to obtain general and Tribal Mobility Fund Phase I support for eligible census blocks in their own lands. 5 The Commission explained that this would afford Tribes an increased opportunity to participate at auction, in recognition of their interest in self-government and self-provisioning on their own lands, and it noted that allowing such participation at auction in no way prejudges the ultimate decision on a Triballyowned or controlled entity s ETC designation and that support will be disbursed only after it receives such designation. 6 It also cautioned that [a] Tribally-owned or controlled entity that does not obtain and provide the required ETC designation will not be entitled to any support payments and may ultimately be in default in accordance with the rules. 7 Similarly, the Commission should extend this relief to utilities, particularly to cooperative utilities and municipal utilities in recognition of their interest in self-provisioning to their members and the communities that they serve. These cooperative and municipal utilities are accountable to their members and their constituents, and as such, the same implicit safeguards inherent in the Commission s decision to extend preliminary eligibility to Tribal authorities apply with equal force to cooperative and municipal utilities, who are self-provisioning and self-governing in response to demands for broadband access from their members and constituents that they serve. There are several reasons why the Commission should extend this preliminary eligibility to utilities particularly cooperative utilities and municipal utilities even though the Commission previously refrained from doing so generally. 8 In contrast to the Commission s concerns about injecting uncertainties that could interfere with speedy deployment of networks by those that are awarded support, permitting utilities with pending applications for ETC designation to be able to access CAF would remove uncertainties that discourage utilities from attempting to access CAF and thereby deploying broadband. Also in contrast to the Commission s concerns about ensur[ing] that the pool of 5 Id. at Id. 7 Id. at n Id. at 439 (stating we require any entity bidding for Mobility Fund support to be designated an ETC prior to the Mobility Fund auction short-form application deadline. ) See also Id. at 392 (stating we decline to adopt the alternative of allowing parties to bid for support prior to being designated an ETC, provided they have an application for designation pending. ) 3

4 bidders is serious about seeking support and meeting the obligations that receipt of support would entail, providing preliminary eligibility for utilities with pending applications for ETC designation would open up the pool of bidders in a reverse auction who are serious and who are committed to providing broadband to the members and the communities that they serve. Therefore, extending preliminary eligibility to utilities in this way is distinctly different and would be narrowly tailored to avoid the concerns that caused the Commission to refrain from providing preliminary eligibility in general. Moreover as a policy matter, providing preliminary eligibility to utilities would promote competition to serve unserved and underserved areas, which would not only promote access to broadband, but would drive down the cost of service and increase the quality of service to those areas that are currently unserved and underserved. As the Commission is painfully aware, price cap carriers have declined funding for many of their unserved and underserved areas and they have tended to accept funding primarily in underserved areas at the fringe of their existing service territories. Moreover, they are often barely meeting the minimum performance requirements in those areas. By contrast, utilities have demonstrated that they are eager to provide broadband into truly unserved and underserved areas and provide services that exceed the Commission s minimum performance requirements. 9 Competitive market forces brought on by these utilities are likely to spur price cap carriers to deploy into unserved and underserved areas, drive down their prices, and improve the level of services they are providing. 10 For these and other policy reasons, the Commission should streamline the ETC process by allowing utilities and other CII to access CAF, while their application for ETC designation is pending. III. The Commission Should Make Unused CAF Funds Available for Broadband to Unserved and Underserved Areas. In its USF/ICC Transformation Order, the Commission established its framework for Phase I and Phase II of CAF. In Phase I, funds would only be made available to incumbent price cap carriers, and if price cap carriers refused to accept the funds that were available in their study areas, the unused funds would be rolled over into subsequent rounds of Phase I. In Phase II, funds would similarly be made available to price cap carriers, but if they refused to accept the funds that were available, the remaining amounts would be made available through competitive bidding by other eligible entities. 11 UTC suggests that the Commission accelerate the process by which other entities could access unused funds from CAF Phase I and Phase II. These funds should be put to good use immediately. They should not be rolled back into another round of funding, which would likely result in price cap carriers refusing the money yet again. In the first round of Phase I, there was $185 million that was left over after price cap carriers refused to accept available funds. In the second round of Phase I, there was $100 million that was left over. If these funds were made available to utilities and CII, it would enable them to deploy broadband in unserved and underserved areas. There are several mechanisms that the Commission could use by which the unused funds could be made available. One suggestion has been already made: to make the unused funds available as part of 9 For example, Co-Mo Electric Cooperative, a utility serving approximately 2,300 square miles in a remote part of Central Missouri, has deployed a hybrid fiber optic network that provides broadband through its subsidiary, Co-Mo Connect, offering various different levels of affordable Internet services, ranging from 5/3 mbps for $39.95/month to $99.95 for 100/25 mbps, as well as affordable voice and video services. Co-Mo recently announced that it will be offering 1 Gbps service. Co-Mo Connect Announces Gigabit Internet at 10 Similarly, utilities could provide additional data to help the FCC with its Connect America Cost Model. 11 USF/ICC Transformation Order at

5 Gigabit Cities Race to the Top Program, and award funds to certain projects that met the criteria of the program. 12 UTC supports the concept of this proposal, and its recommendations to expand eligibility to include non-etcs for access to those funds. Another suggestion would be to make the funds available through a reverse auction, consistent with the Commission s framework, but on an accelerated timeframe. Instead of necessarily waiting for Phase II to conduct a reverse auction using unused funds, the Commission could make the funds available immediately for other entities that are interested in providing broadband to unserved and underserved areas. Again, the Commission could choose to make these funds available to non-etcs, similar to the proposal by the FTTH Council -- or as UTC has suggested above, streamline the ETC process by providing preliminary eligibility to entities that have applied to be designated as ETCs and whose applications are pending. CONCLUSION Wherefore, the premises considered, UTC respectfully requests that the Commission streamline the ETC process in order to enable utilities and other CII to access CAF, and to make unused CAF funds available on an expedited basis for use by electric utilities and CII, through either a targeted program or through competitive bidding to promote broadband to rural, unserved and underserved areas. Respectfully submitted, Utilities Telecom Council Brett Kilbourne Deputy General Counsel Utilities Telecom Council th Street, NW Suite 350 Washington, DC December 9, 2013 Cc: Chairman Thomas Wheeler Commissioner Mignon Clyburn Commissioner Jessica Rosenworcel Commissioner Ajit Pai Commissioner Michael O Rielly Jonathan Chambers Carol Mattey 12 See Fiber-to-the-Home Council Americas Petition for Rulemaking to Establish a Gigabit Communities Race-tothe-Top Program, WC Docket No (filed Jul. 23, 2013)(hereinafter FTTH Council Petition ). See also, Consumer and Governmental Affairs Bureau Reference Information Center Petition for Rulemaking Filed, Public Notice, Report No (Aug. 12, 2013). And see Statement of the Utilities Telecom Council in WC Docket No (filed Sept. 11, 2013)(supporting the FTTH Council Petition proposal to make unused funds available for use by non-etcs, and suggesting expanding the program to include truly rural areas). 5