Pai Hints at Rural Phone 'Rate Floor' Hike Stay, Wait-and-See on More FCC USF Support

FCC Chairman Ajit Pai voiced sympathy for blocking a rural phone "rate floor" increase scheduled for July, and is committed to taking broader action to benefit rural consumers. Speaking at an NTCA legislative conference Monday, Pai said he hopes the commission can issue a fall public notice on further details of a planned Connect America Fund subsidy auction for fixed broadband services. Questioned by NTCA CEO Shirley Bloomfield, he was noncommittal about providing more FCC funding for rural telco USF mechanisms, but repeated his support for Congress including broadband through USF in any infrastructure bill.

NTCA's primary ask for Congress is to "provide sufficient resources for USF," with rate-floor relief among the rural telco group's other concerns, said Senior Vice President Mike Romano. NTCA members will head to Capitol Hill Tuesday to lobby for signatures on pending USF-focused letters to the FCC led by Rep. Kevin Cramer, R-S.D., in the House and Sens. Deb Fischer, R-Neb., and Amy Klobuchar, D-Minn., in the Senate. Vice President-Legislative Affairs David Hoover mentioned both letters during a panel of Hill staffers, which included an aide to Cramer. About 500 attended the conference, with over 100 meetings scheduled for Tuesday with members of Congress and FCC staff.

Pai compared work on the rate-floor issue to a "bad episode of The Walking Dead -- these zombies keep coming up and just attacking you. Didn't we just deal with this a few years ago? But we didn't." Pai said it's "bizarre" the FCC required rural phone companies to increase voice rates due to the rate floor, comparing it to a tax increase. He said the policy complicates the agency's mandate to ensure rural rates and service are reasonably comparable to urban rates and service. Incomes in many rural counties are significantly less than in a metropolitan area such as Washington, he said.

Pai welcomed Commissioner Mignon Clyburn's call for a stay of the rate floor increase. "I think she recognizes, as I do, that this goes to the basic question of affordability: should rural consumers, who are least able to afford it, actually have their rates increase by regulatory fiat?" he said. "This is going to be a commission-level decision, so I can’t forecast exactly what the commission is going to do. What I can tell you is that I’ve asked the Wireline Competition Bureau at the FCC to look into this issue very carefully and try to figure out what actions we can take in the near term, and just conceptually in the broader sense, what should be the future of the rate floor." He said he wants action that "will do right by rural consumers.”

Asked about his agenda, Pai said, "Front and center is rural broadband deployment. I’m going to be to the end of my days a rural Kansan at heart." He noted his calls for legislative tax incentives for creating rural and urban gigabit empowerment zones and his efforts to use FCC high-cost USF mechanisms: "Broadband deployment is not a Republican issue; it's not a Democratic issue; it's an American issue.”

The planned CAF Phase II fixed broadband subsidy auction is very complex in terms of design and IT systems, Pai said. “I’m hopeful that in the fall -- sometime in that time frame -- we’ll be able to put out a public notice that will help tease out some of these issues, let the public know what it is we’re planning, and at some point thereafter move to an auction, which in one way or the other will be sequenced with the [Mobility Fund] II auction," he said. "A lot of work ahead of us, but I know it’s important and I’m committed to getting it done.”

Budget Concerns

Asked about NTCA's USF budgetary concerns, Pai didn't commit to new funding for either a broadband model-based mechanism or updated stand-alone broadband mechanism. "I’m happy we set up a model. I know that there’s an openness to additional funds that the commission expressed back then, and so we’ll see where things proceed," he said. On the stand-alone mechanism, he's hopeful the FCC can simplify a cumbersome 11-step administrative process. Romano said the model-based mechanism needs an additional $110 million annual funding and the stand-alone mechanism needs at least $140 million yearly.

Pai again backed including broadband in any infrastructure bill and using USF for channeling additional funding. "We have a pretty good system," he said. "It could use a few tweaks, but we have an established system, and so hopefully, that would help us address some of these issues.”

A draft of the NTCA-backed House letter said signers are “concerned that the lack of sufficient resources” in some USF programs “may be undermining the desired effect of the [USF] reforms and falling short of the statutory mandate that reasonably comparable services at reasonably compared rates be available to rural and urban Americans alike.” That letter urges the FCC provide “sufficient resources” and has a signing deadline of April 26. The draft Senate letter, with an April 7 signing deadline, makes a similar reference to resources and encourages the FCC “to consider any changes to the High-Cost mechanism that may be necessary to ensure it can achieve the goal of making affordable broadband available to Americans in high-cost rural areas.” Both letters refer to “frustration” over the difficulties of making stand-alone broadband service available to many Americans.

Hill Panelists

Hoover’s questioning included the possibility of lawmakers taking on an update to the Telecom Act, a return to video policy issues such as retransmission consent, and how broadband could factor into a bigger infrastructure package. He brought up a video proposal from the 113th Congress called Local Choice and expressed interest in Congress “bringing some light” to the area of retrans.

Adam Jorde, who directs communications for Cramer and has handled telecom legislative matters, said he thinks any “more comprehensive” overhaul of the 1996 act would be “tough” given the state Congress is in. Both Senate and House Commerce committees seem to be in “lockstep” on FCC process matters, he said. On other issues such as Communications Act Title II reclassification of broadband, “that’s going to be more divisive,” Jorde said.

Hopefully, the infrastructure package will have “significant funding” for broadband, said Kevin Cummins, senior legislative assistant to Sen. Tom Udall, D-N.M. “You should find a bipartisan consensus.” He and other aides pointed to other legislative tweaks to help broadband deployment. Put fiber under electric wire, Cummins said, also citing common form applications for federal permitting. The administration’s hiring freeze “doesn’t help,” he added.

“The big question is how to pay for” infrastructure, said Daniel Hillenbrand, a legislative assistant for Sen. Jim Inhofe, R-Okla. He noted merits of addressing siting overhaul to maximize the value of the money. On broader legislative efforts, he referred to smaller bills as “legislative building blocks” that Congress can look to if there’s a push for more comprehensive legislation. He cited frustration over the amount of delegated authority to the FCC in the 1996 act.

One “major challenge” in broadband infrastructure questions is committee jurisdiction, said Scott Rasmussen, legislative assistant to Rep. Jared Huffman, D-Calif., predicting lots of work for both the Commerce and Transportation committees. Agencies also need “skin in the game” to incent some of the work Congress asks, or matters can be “languishing for years,” Rasmussen said. He said member education about video policy issues tends to be rather low and there’s no pressing need for focus since satellite TV reauthorization isn’t required until the end of 2019: “We should probably start” on one-off smaller bills so lawmakers are “well prepared” by the time to act.