1 / 38

Beyond “The Order” – The New Regulatory Horizon for Rural Carriers

Beyond “The Order” – The New Regulatory Horizon for Rural Carriers. Bob Schoonmaker, President GVNW Consulting, Inc. August 7, 2012. Overview. Long-term FCC objectives Items implemented Items not implemented Longer-term impact of items implemented. Long-term FCC Objectives.

adora
Download Presentation

Beyond “The Order” – The New Regulatory Horizon for Rural Carriers

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Beyond “The Order” – The New Regulatory Horizon for Rural Carriers Bob Schoonmaker, President GVNW Consulting, Inc. August 7, 2012

  2. Overview • Long-term FCC objectives • Items implemented • Items not implemented • Longer-term impact of items implemented

  3. Long-term FCC Objectives • Bill and keep for access “compensation” • Increase broadband availability in rural areas (including price cap rural areas) • Increase broadband capability (speed) • Continue to encourage replacement of wireline service with wireless • Budget control on USF – no increase • Transform TDM network to IP • Efficiency

  4. Steps toward bill and keep • Implemented first step for terminating rates – end game • Price cap companies by 2018 • ROR companies by 2020 • Originating rates – FNPRM – unknown • IntraMTA CMRS – Effective July 1, 2012 • Recovery Mechanism – PC – 6 years, ROR 10+ years

  5. Increased Broadband Availability • Price Cap Carriers • Frozen support • 3 year phase in - 2013 – 2016 to 100% use for broadband in unserved areas • CAF I - $300 million incremental to unserved broadband locations - $775/location • CAF II – Start 1/1/2013 or later – Initially model based – Reverse auctions in five years

  6. Increased Broadband Availability • Rate of return • CAF for broadband delayed until FNPRM • ROR carriers have responsibility to provide 4 Mbps/1 Mbps upon reasonable request

  7. Increased Broadband Speed • Initial requirement - 4mbps/1mbps “actual” • ETC reporting requirement starting by July 1, 2013 (actual measurements) • CAF II – indicates a future requirement potential of 6 mbps/1.5 mbps

  8. Broadband Provisioning • FCC Projection – US Avg • 4 Mbps in 2015 • Akami - 4th Qtr. – 2011 report - US Avg. - 5.8 Mbps

  9. More wireless • “White spaces” availability • Moves to provide more spectrum (500 MHz, 300 MHz in 5 years) • Mobility I fund • Reverse auction – late 2012 • 3G or greater to areas unserved by 3G • Service over 75% of road miles in area • $300 million one-time support • Broadcast spectrum voluntary auction

  10. Budget Control • FCC implemented budget controls for $4.5 billion – Specified amounts by fund type • Core Wireless reserve to help fund overruns • If less than quarterly amount, hold the remainder in reserve • USAC reports to FCC within 75 days of how to correct overrun

  11. Transform TDM network to IP • Transition ICC to bill and keep • Facilitate IP to IP interconnection • FNPRM – Should CAF recipients be required to offer IP to IP interconnection? • Some have proposed specific “shut-off” dates for TDM

  12. Efficiency • Corp. Oper. Exp. Cap for HCL and ICLS • Regression analysis for HCL and ICLS • $250/month/line cap on ROR USF • Only one recipient per area – phase out of CLEC and CETC support • Reverse auctions for some funds • Price cap existing funds to broadband construction in unserved areas

  13. Items Implemented • ETC Reporting Requirements • Urban rate floor at $10 • Corporate Operations Cap–HCL and ICLS • Intrastate Access Reductions – Step 1 • $250/month/line USF limit • Regression analysis for HCL • Recovery Mechanism and ARC rates • CLEC USF Phase-out

  14. Items Implemented (cont.) • LSS shift into Recovery Mechanism • Safety Net Additive-elimination begun

  15. Items Yet to be Implemented • Regression analysis for ICLS • Change in rate-of-return • Broadband CAF for ROR companies • Transition of originating and transport access to bill and keep • Phase out of Recovery Mechanism • IP to IP interconnection • Broadband speed testing

  16. Items Yet to be Implemented • Loss of USF where unsubsidized competitor serves substantial portion of area (but less than 100%)

  17. Short term Focus–ETC Reports • ETC Requirements – July 1, 2013 • Five-year plan including: • Maps showing planned upgrades (by wire center or census block) • Describe with specificity planned improvements and areas • Estimate the area and population that will be served by upgrades • Service to Anchor Institutions • May want to include appropriate caveats related to funding

  18. Short term Focus–ETC Reports • ETC Requirements – July 1, 2013 – (most by voice and broadband separately) • Outage Reporting • Complaints • Network Performance Reports (not defined) • Unfulfilled requests for service • Price offerings • Audited financial Reports • Lines under Urban Benchmark-$14-6/1/2013

  19. Longer Term Focus • Financial Planning • Operating expense control • Capital expense control – efficiency • Broadband expansion • Area and customers covered • Capability • Area covered by an unsubsidized competitor (75% of households possibly)

  20. Billed Access Impact (6% minute loss)

  21. RM Impact (6% minute loss)

  22. RM Impact (2% minute loss)

  23. RM Impact (10% minute loss)

  24. Impacts – Corp. Ops. Cap • Impacts vary by company size • Current difference between actual & max • Examples: • Assume 3.0% growth in corp. op. expense • Assume -5.0% loss in access lines

  25. Corp Ops. Exp. – Small Co.

  26. Corp. Ops. Exp. – Med Co.

  27. Corp. Ops. Exp. – Large Co.

  28. Regression Analysis • April 25, 2012 – Impacts only 100 companies instead of 400+ - (2 in AR, 1 in MO) only two parameters – Op. Exp. and Cap. Exp. • Continued industry concern re: unpredictability and variability, some coefficients don’t comport with reason • Need to verify inputs, particularly sq. miles, exchange boundaries, & road miles

  29. Op. Expense – Possibilities • Consortiums and/or consolidations • Shared management • Shared technicians • Past due or early retirements • Depreciation expense (cap. in regression) • Employee benefits • Energy use

  30. Op Expense – Term Access for LD • July 3, 2012 – Missouri (est.) • AT&T - $0.015 reduction – 49% • Windstream - $0.016 reduction – 22% • CenturyLink - $0.03 reduction – 42% • RLECs - $0.02 to $0.06 – 20% to 40% • July, 2013 – Similar $ amounts – larger % reductions from 2012 rates

  31. New Revenue Sources • Increase Broadband penetration • Broadband speed and “volume” increases • Expand technology offerings • Backhaul for wireless (incl. mini-cell sites) • “White Spaces” offerings • “Smart meter/energy control” • “Smart home” offerings

  32. Unknown Impacts • Regression analysis – longer term • Rate of return reduction • Originating and Transport Access • ROR CAF for Broadband • Loss of USF in competitive areas • Competition from cable, wireless & satellite • Changes in technology

  33. 10th Circuit Court of Appeals • Several issues under appeal • Smith vs. Illinois Bell • Bill and Keep • Regression analysis • Preemption of states • Court denied FCC request to delay until FCC answered all questions • Briefing schedule for most of the remainder of 2012

  34. Future Regulatory Horizon • Uncertainty – unanswered questions • Financial challenges from current revenue sources • Need to move toward a broadband service model • What will it the future horizon be like?

  35. THANK YOU!! HAVE A GREAT DAY!! • Bob Schoonmaker • 719-594-5809 • bschoonmaker@gvnw.com

More Related