Allband Seeks 12-Year Extension on its Three-Year Waiver of USF Limits
Allband, the first telco to get a waiver of new rules limiting universal service support in high-cost areas, said a three-year waiver isn’t enough to prevent loss of voice and broadband service throughout its service territory. The rural Michigan cooperative asked the FCC Wireline Competition Bureau (WCB) to extend the time period of the waiver of the $250 per-line-per-month cap to 15 years because it can’t reduce its expenses to meet the cap, it said in an application for review Friday (http://xrl.us/bnm2w5). Absent the extension, Allband will “soon be forced to again file a waiver” in late 2013 or early 2014, at an estimated cost of $50,000, and a drain on FCC staff time of “many hours” to review the petition, Allband said. The telco also requested a waiver of the regression-based caps on high cost loop support. The bureau had found this request moot, because under the quantile regression methodology ultimately adopted, Allband was not capped (CD July 27 p6).
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"Allband appreciates the WCB’s approval of a three (3) year waiver of section 54.302 of the Commission’s rules,” without which it would have been unable to continue making payments on its Rural Utilities Service loan, or to provide voice or broadband service to its customers, it said. But the “very short three year period of the waiver” is “insufficient,” Allband wrote. A 15-year waiver will give Allband “sufficient and predictable support” to continue to deliver voice and broadband services, it said. “While a three year waiver has halted an immediate cessation of Allband’s operations, the WCB appears to have a number of misconceptions about the ability of Allband to (a) reduce its expenses within that three year timeframe, or at any foreseeable future time, to meet the $250 cap, or (b) to increase its penetration level to a level sufficient to reduce support per-line to meet the cap or (c) generate sufficient additional revenue to be less reliant on federal support revenues, or (d) renegotiate RUS loan terms.” A 15-year extension would take Allband through the year 2026, when its RUS loan would be repaid, it said.
Even complete elimination of all non-fixed expenses would not enable Allband to meet the $250 cap in three years, it said, saying it can’t reduce its fixed expenses to a level that will bring it below the monthly cap. And with only 212 customers in its service area, even increasing its voice penetration from the current 69 percent to 100 percent would only bring in revenue from additional 65 customers, Allband said. The FCC apparently assumes that revenue from additional voice and broadband customers could help offset the need for support, it said: “This analysis unrealistically assumes that Allband already has facilities constructed to all of the homes that currently do not have service, when in fact some new drops and distribution plant would be needed to provide such service.”
Allband also asked the commission to grant a 15-year waiver of the regression caps, which limit reimbursable support for capital and operating expenses. “While Allband notes that the benchmark rule does not currently place a cap on Allband, this does not render as moot Allband’s waiver request,” it said. As the benchmarking rule significantly reduces Allband’s support funding over time, Allband will be affected, it said. “Net investment reductions due to depreciation reduce Allband’s reliance on support (a good thing),” it wrote. “But under the perverse nature of the benchmarking model as presently structured, Allband is penalized and will almost certainly ‘fall back’ into the caps in the near future."
"The FCC will likely stick to its guns and the three year-extension,” said Michael Spead, senior technical specialist at ICF International and former senior manager of the Universal Service Administrative Co. high-cost program. “The FCC has no reason to grant a waiver for 15 years and to do so would not only be outside of the norm, but also out of line with the goals of the recent reforms,” he said. “This would send the wrong message and other companies would use this as a precedent of sorts, resulting in a very slippery slope."
Allband’s 15-year request underscores that “you're dealing with something that requires a long term view of cost-recovery,” said Michael Romano, National Telecommunications Cooperative Association senior vice president. When telcos put networks in the ground, “it’s not a two or three year cost-recovery problem to solve; it’s a multi-year and a multi-decade question of, how do I recover the cost of this network over time, and how do I repay the lender?” he said. “The question is whether the waiver should have been time limited at all.”