Advancing NTCA's advocacy agenda in 2009.

The 2008 election certainly was about change, as most of the presidential candidates and many congressional candidates tried to outdo one another in terms of who represented the best hope for bringing change to our country. Along with new faces in the administration, there are many new representatives in the 111th Congress, which gets under way in January.

While much of the early focus in 2009 will be on the economic turmoil our nation is facing, a number of telecommunications-related issues should receive attention this year on Capitol Hill. The most immediate issue in this realm will be the DTV transition on February 17, when most analog television signals will cease to broadcast and will be replaced exclusively with digital signals. The fear of many members of Congress is that a botched DTV transition will cause many of their constituents to blame them for interfering with their television signal--not a good place for a politician to be.

With the Obama-Biden administration settling in, there obviously will be new appointees in the executive branch driving policy from that end of Pennsylvania Avenue. On the other end, an increased Democratic majority on Capitol Hill will probably mean that many of President Obama's policies will have a warmer reception than President Bush's did in a Democratically controlled Congress.

Over the past two years, the Democratically controlled Congress spent a great deal of time focusing its attention on tough oversight of an unpopular administration. Since the new administration is of the same party as Congress, less attention will be paid to oversight; rather, the emboldened Democratic majority will focus on working with President Obama to enact his policy goals.

Expanded Majority

In the Senate, where, at press time, the Democrats had increased their majority by seven seats from the 51--49 split last year, Robert C. Byrd (D--W.Va.) stepped down as the chairman of the powerful Senate Appropriations Committee. This caused a series of dominos to fall. Sen. Daniel K. Inouye (D-Hawaii) was next in line to chair the committee, and he laid claim to the gavel. This, in turn, opened up the chairmanship of the Senate Commerce, Science and Transportation Committee. Sen. John (Jay) Rockefeller (D--W.Va.) gave up the top slot on the Senate Select Committee on Intelligence and now chairs the commerce committee.

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During Rockefeller's years on the commerce committee, he has been an advocate for the need for universal service and broadband deployment. He was one of the original authors of the e-rate program, has been the leading sponsor of legislation to exempt the Universal Service Fund (USF) from the Anti-Deficiency Act, and has pushed legislation to provide tax incentives to encourage the buildout of broadband to hard-to-serve areas. In 2007, Rockefeller, along with then-Sen. Barack Obama, introduced a resolution in the Senate calling for a national goal that by 2015 a next-generation broadband network capable of transmitting data at 100 Mbps should be available across the country.

Rockefeller has been a strong critic of how the FCC conducts its business and may focus on revamping the basic structure and governance of the agency to ensure more transparency before he focuses on any specific issues. However, it's likely Rockefeller will direct a lot of the committee's attention to how to get broadband deployed universally.

The longest serving Republican senator in history, Ted Stevens (R-Alaska), lost his bid for re-election in November. Shortly before the election, a federal jury found Stevens guilty of seven felony counts of lying on disclosure forms about accepting gifts. Over his many years of service on the commerce and appropriations committees, Stevens worked closely with NTCA on a number of important issues of concern to small, rural telecommunications providers.

Sen. Kay Bailey Hutchison (R-Texas) had temporarily taken over as the ranking member of the commerce committee when Stevens stepped down from that position last summer. Hutchison is now the permanent ranking member of the committee for the 111th Congress. Hutchison has played a key role in ensuring the DTV transition goes smoothly and has been extremely helpful in working with NTCA members to ensure the recent USF audits are conducted in a way that is fair and not overly burdensome to small providers. Hutchison has expressed interest in possibly running for governor of Texas in 2010, and that may be a factor in the role she has as the ranking member of the committee.

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Waxman In, Dingell Out

On the House side, Democrats increased their majority by more than 20 seats. In a bitter fight after the November elections, the long-time leading Democrat on the House Energy and Commerce Committee, Rep. John Dingell (D-Mich.) was challenged and defeated by Rep. Henry Waxman (D-Calif.) to chair the committee.

Previously, Waxman was the chairman of the House Oversight and Government Reform Committee, which afforded him the opportunity to oversee almost any federal program, including USF. Last summer, Waxman sent letters to 24 telecommunications providers, representing the largest total recipients and the largest per-line recipients of USF funds, asking very detailed questions seeking to justify the use and amount of USF support received. Waxman also introduced legislation last fall that would have required carriers receiving USF support to offer automatic roaming services to any technically compatible carrier. While NTCA has had a strong working relationship with Dingell, it also has cultivated a good working relationship with Waxman's telecommunications staff through NTCA member contact with his office via the association's adopt-a-member program.

Rep. Joe Barton (R-Texas) will remain as the ranking member of the House Energy and Commerce Committee. For years, Barton has been a vocal critic of USF and has proposed legislation to limit the program to voice-only, to impose reverse auctions and to cap the size of the fund. While NTCA has opposed Barton's bill, it retains a good working relationship with his staff on the many important issues that come before the committee.

Given the committee's vast jurisdiction and the new chairman's priorities, it remains unclear how much attention telecommunications issues will receive this year. It is expected that the committee will focus heavily on health care reform, energy independence and global warming--all issues that are high priorities for President Obama and Chairman Waxman. For the past two years, the committee under the leadership of Dingell and Barton has conducted an aggressive investigation and oversight of the FCC's decision-making process. Barton has been interested in pushing through a comprehensive overhaul of the FCC, and such legislation may gain traction this year.

Four Important Issues

Net neutrality, broadband deployment, universal service and video issues remain important NTCA priorities on both sides of the Capitol. While the new administration and many in Congress support net neutrality legislation, the FCC's action on the issue last year seems to have taken away some of the momentum behind efforts to enact legislation. However, if the courts rule that the FCC overstepped its authority, there will be a renewed effort to pass net neutrality legislation. Differing opinions of what "net neutrality" means and rapidly changing technology makes it a difficult issue to address, and NTCA continues to remind policy-makers how important it is for rural carriers to be able to manage their networks.

Policy-makers continue to wrestle with how to achieve ubiquitous broadband deployment and drive consumer demand for high-speed connections. Congress last year adopted legislation to map broadband availability, and will continue pushing that effort as a necessary tool to help them enact policies to spur more broadband availability. NTCA members are out in front on deploying broadband, and the association continues to educate members of Congress that new mandates can have unintended negative consequences that may hinder, not help, broadband deployment.

Efforts to reform USF and interrelated intercarrier compensation (ICC) issues will remain of high interest to many members of Congress. Various legislative reform initiatives have been introduced for many years, but Congress has seemed willing to allow the FCC to take the first steps in reforming USF and the ICC system. Legislation in this area almost certainly will be introduced again in the 111th Congress, but any congressional action likely will be dependent upon Congress' reaction to how the FCC addresses these issues. In any case, NTCA staff continues to work with congressional offices to encourage USF reform that strengthens the program and allows small, rural telcos the ability to recover their costs for investing in infrastructure to meet the expanding communications needs of today and tomorrow.

The frustrating challenges many NTCA members face in being able to offer affordable video programming also will remain a priority. NTCA will continue educating members of Congress and pushing for legislation that will address the problems members face, including tying and bundling, nondisclosure clauses, shared head-end restrictions, exclusive contracts and predatory pricing.

Health Benefits

Census reports show that this country has more than 45 million people without health insurance, which is why health care is expected to be a priority of the administration during the first session of the 111th Congress. Retirement/saving is not expected to be a high priority of Congress or the administration. However, if it does surface, the focus will most likely be on preserving and strengthening 401 (k)s and retirement plans. Our objective at NTCA will be to ensure that the strength of our health and retirement plans is maintained as policy-makers work to provide similar benefits to Americans currently without such benefits.

As you can see, the 111th Congress will be busy, and NTCA's government affairs division will be aggressively representing our members' interests on a wide-range of issues important to ensure rural providers can continue to exceed the needs of their customers and meet new challenges to providing quality, affordable communications services. As always, please do not hesitate to contact any of the NTCA government affairs staff if you have questions about what is happening on Capitol Hill or need assistance in contacting your senators or representative.

The FCC: ICC and USF Reform Loom Large

NTCA's regulatory agenda for the coming year is dominated by, but not limited to, two issues: ICC and USF reform.

The possibility that the FCC could adopt a comprehensive ICC and USF support reform order is very real. At stake is $2 billion in annual ICC revenues, $3 billion in annual USF support and $5 billion in total annual rural ILEC regulated revenues. Unfortunately, FCC Chairman Kevin Martin's ICC and USF reform proposal would, in essence, cap and freeze high-cost USF support, exempt interconnected VoIP services from paying access charges, eliminate rate-of-return regulation, eradicate the National Exchange Carrier Association pools, and create a fire sale of rural telephone plant through the use of reverse auctions.

Given these conditions, it is not surprising NTCA opposes the chairman's proposal and his proposed harmful provisions, which should not be adopted when the commission takes up these issues, possibly at its January 2009 meeting.

Another element that will affect commission decisions in the coming year--and one that looms over all industries in the United States as we enter 2009--is the economic downturn. NTCA Economist Rick Schadelbauer said the economy's effect on NTCA member companies would not be short-lived.

"All indicators point to the recession lasting well into the coming year," Schadelbauer said. "Rural companies won't have the same access to capital and may need to drastically modify their long-term business plans. Any downsizing will likely cause customer service to suffer."

Schadelbauer, who authored the "NTCA 2008 Broadband/Internet Availability Survey Report" (see related story on p. 46), said that the economic crisis underlines one of the report's conclusions--that uncertainty, in all its forms, is a major concern for all survey respondents as they look to the future.

"Rural telcos may not be able to continue to deploy broadband at their current pace, and could be forced to cut back on their deployment plans." Schadelbauer said. "With the commission's new definition of basic broadband now in place (768 Kbps, rather than 200 Kbps), how difficult will it be for rural companies to bring their customers up to the new benchmark?" Schadelbauer expects more definitive answers to this question after he receives the results from NTCA's next broadband survey, which will be distributed later in the year.

Karlen Reed, NTCA's regulatory counsel, said that in light of the Obama administration's announced focus on bringing broadband to all Americans and the FCC Office of Inspector General's recent reports on audits of the universal service program, she anticipates commission discussion on Universal Service Administrative Co. audits and broadband to top the list of issues after universal service and intercarrier compensation reform.

Also in NTCA's playbook are intermodal LNP (local number portability), pole attachments, VoIP and tower siting/lighting. NTCA will participate in oral arguments at the U.S. Court of Appeals for the District of Columbia on intermodal LNP in January. NTCA is questioning the FCC's efforts to comply with the Regulatory Flexibility Act regarding how small rural carriers are required to meet the challenges of implementing intermodal LNP.

Pole attachments is a long-term issue that arises periodically among NTCA's members, and the FCC has an open docket examining the pricing, terms and conditions for broadband connections, in addition to other pole attachment issues. Finally, cell tower siting and lighting requirements also are both pending at the FCC as separate dockets. "NTCA has been active in these areas and will continue to monitor, advise and advocate on these matters for its members," Reed said.

Jill Canfield, senior regulatory counsel for the association, will be watching for commission action on wireless and spectrum issues. "We expect and look forward to the commission dealing with roaming issues, and we hope for more realistic spectrum opportunities from the new commission," Canfield said.

Whatever happens, NTCA will continue to lobby for the commission to focus on providing sufficient, sustainable and predictable USF support for broadband services throughout the high-cost, rural areas of the United States. NTCA believes that the single most influential factor in stimulating the economy and establishing this nation as a global leader in broadband is to invest in additional USF support to build and maintain our broadband networks. The one place the United States should be willing to invest its resources is in the building, maintaining and operating this nation's broadband infrastructure, particularly in rural areas, so that broadband is affordable to all consumers and businesses.

NTCA will communicate this to the new FCC, and will do everything in the association's power to help Congress enact laws and the FCC implement regulations that enable this to happen.

Adam Healy in NTCA's senior government affairs representative. He can be reached at [e-mail]. Daniel Mitchell is NTCA's vice president of legal of industry affairs. He can be reached at [e-mail].

RELATED ARTICLE: NTCR RECOMMENDS THE FCC ADOPT THE FOLLOWING PROPOSALS EARLY IN 2009:

1. Implement a rule that IP/PSTN traffic, specifically interconnected VoIP traffic, is required to pay applicable tariffed interstate access rates, intrastate access rates, and reciprocal compensation rates, until such time as there is no longer a public switched telecommunications network.

2. Allow the state commission to voluntarily reduce, on a company-by-company basis, intrastate originating and terminating access rates to interstate access rate levels over a reasonable period of time.

3. Establish and implement a restructure mechanism, before access rate reductions take place, to allow rate-of-return carriers to recover lost access revenues not recovered in end-user rates, through increases in the interstate common line support mechanism.

4. Continue the use of the embedded cost methodology for setting small rate-of-return rural ILEC access rates, because this methodology is best suited to the unique economic, geographic and topographic needs of these carriers and for the sustainability of the NECA pools.

5. Include broadband in the future definition of universal service, and regulate broadband under Title II of the Telecom Act.

6. Expand the USF contributions base to include all broadband service providers and special access service providers.

7. Refrain from imposing any caps or freezes on high-cost USF support for rural carriers.

8. Eliminate the identical support rule, and base future CETC support on actual costs.

9. Reject the application of reverse auctions to universal service distributions.

10. Adopt rules to address phantom traffic.

The commission should adopt the above items, and a new chairman appointed by President Obama should either dismiss or reconsider the harmful items proposed by Chairman Martin.

--Daniel Mitchell