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Nationwide Competitive
Local Exchange Carrier


Tele-Tech Updates

July 2013

Winners & Losers Becoming More Apparent as USF/ICC Reform Advances

One year ago, local exchange carriers (LECs) completed one of the first major steps of the FCC's Universal Service Fund (USF) and Intercarrier Compensation (ICC) Reform Order, by cutting intrastate terminating switched access rates to one half the difference between its current level and the interstate rate.

LECs completed yet another step July 1, 2013, by bringing intrastate rates to parity with interstate rates. Carriers will make incremental cuts each year, until the FCC realizes its ultimate goal of a bill-and-keep regime, when providers will no longer bill each other for completing calls on the others' network.

For price cap carriers, this bill-and-keep framework becomes effective July 1, 2018; for rate-of-return carriers, July 1, 2020. The Commission adopted the reform order in late 2011, in an effort to simplify billing systems and reduce costs for subscribers.

Critics question whether this new regime will indeed benefit all consumers.  A whitepaper released last month by telecom advisors Michael Balhoff and Bradley Williams suggests that many rural subscribers will inevitably see their telephone services disappear.

The 2011 order not only reformed intercarrier compensation, it also replaced the USF, which had been funding high-cost voice service in rural areas. The Commission instead implemented the broadband-focused Connect America Fund (CAF). CAF is funding initial broadband buildout and will provide ongoing support for eligible telecommunications carriers. However, Balhoff and Williams believe CAF is severely underfunded and will not be able to support its mandate of expanding high speed internet to millions of rural Americans.

As a result of uncertainty surrounding the funding mechanism, Balhoff/Williams assert that local telephone companies will eventually scale back or eliminate investment in rural areas, which will mean the loss of services for those customers.

Not only are rural carriers losing matching per-line support from the USF, they are also losing revenue from reductions in intercarrier compensation. This presents a serious challenge for short-term profitability, as companies face immediate revenue losses.

It's no wonder the bulk of petitioners seeking reprieve from a federal appeals court are associated with rural LECs (RLECs).

Initially, thirteen groups filed Petitions for Review; among them the National Telecommunications Cooperative Association (NTCA), the National Association of State Utility Consumer Advocates (NASUCA), the Ohio, Pennsylvania and Vermont utility boards, Choctaw Telephone Company, Core Communications and AT&T. A judicial panel consolidated all petitions into one case, to be heard before the Tenth Circuit Court of Appeals, Case Number 11-9900. A shared complaint among petitioners is that the Commission exceeded its authority.

CenturyLink, Windstream, the Rural Independent Competitive Alliance, tw telecom, and dozens of RLECs have since joined the appeals process.

By the time the court delivers a ruling, carriers will have spent countless hours implementing an order they hope to have overturned.

Numerous briefs have already been filed. There's no indication when the court will make a decision.


FCC Boosts Broadband Buildout with Additional $300 Million

The FCC has announced a second round of Connect America Fund (CAF) Phase I support, which aims to accelerate the buildout of broadband in rural America.

Last year, the largest price cap carriers rejected $185 million, an amount the Commission plans to disburse a second time. An additional $300 million is also being added, bringing the total second round investment to $485 million.

CenturyLink, Frontier Communications and Windstream have committed to match, with their own investment capital, any CAF Phase I funding received in 2013.

Any money that is not accepted during this second round will be added to CAF Phase II, which provides annual support to eligible carriers.

Phase I originally set aside $300 million in funding but only $115 million was disbursed. Both Verizon and AT&T turned down their shares of $19.7 and $47.8 million.

In a letter, AT&T said it is completing its own rural broadband strategy. The company also expressed concern that CAF participation could affect the company's efforts to be relieved of outdated legacy obligations.

Verizon said it was a relatively small amount of money.

Carriers have 75 days from the release of the order (May 22, 2013) to make their decisions.

View a map of the current buildout here.


Tom Wheeler Nominated to be FCC Chairman

Members of the Senate Commerce Committee in mid-June heard testimony from Tom Wheeler, during his confirmation hearing for FCC Chairman.

The committee must take a final vote before the nomination process heads to the full Senate. That vote has yet to be scheduled.

Julius Genachowski left the top post in May 2013, after serving four years. Commissioner Mignon Clyburn is acting chairperson until the Senate confirms a permanent replacement.

Wheeler is well known for his prior work as a wireless and cable industry lobbyist. He served as president of the National Cable and Telecommunications Association (NCTA) from 1979 to 1984; then ran the Cellular Telecommunications and Internet Association (CTIA) from 1992 to 2004.

He is currently a managing director of Core Capital Partners, a D.C. based venture capitalist firm.

Wheeler also raised campaign money for President Obama's election and re-election efforts.


NANPA Q2 Recap

NPA 782 to overlay NPA 902, effective November 30, 2014.

NPA 440 jeopardy status rescinded.

724 NPA-NXX Codes exhausted.
NPA 272 to overlay NPA 570, effective October 21, 2013.

NPA 346 to overlay NPA 281-713-832, effective July 1, 2014.

Q3 Contribution Factor 

The proposed Universal Service Fund contribution factor for Third Quarter 2013 is 15.1 percent, down from 15.5 percent in the previous quarter.


2013 Tele-Tech Customer Survey

Thanks to all who completed our annual survey!

We know it's not the most exciting thing to do, but just a few minutes of your time helps us gauge how we're doing and what improvements need to be made, to provide you with the best products and services.

Speaking of which, respondents gave us a perfect score In terms of our overall product line and customer service.  We're glad to see so many satisfied customers!

We also asked what results were achieved using our data. The top three responses were improved accuracy, improved processes and saved time.

We'd like to see more suggestions on new products or services you want Tele-Tech to offer.

What would help you attract new clients? We'd like to help.

Email your ideas to Kim Russo: krusso@telecomdb.com.

KFR News