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ACA Troubled By FCC USF Order

While FCC Chairman Julius Genachowski said Thursday that the FCC's Universal Service Fund/Intercarrier compensation reform order was not a rubber stamp for any proposal, small cable operators saw it as tilted too much in favor of incumbent phone companies.

American Cable Association President Matthew Polka said that the order, which the chairman outlined in a speech Thursday, "locks in a sole-source contract worth billions of dollars for over 10 years to a handful of incumbent large telecom companies to deploy broadband at maximum speeds that are below average."

Polka said the plan "excludes thousands of broadband providers willing, able and eager to compete to provide service to consumers living in rural areas where government support is provided."

That is because, according to a cable attorney speaking on background, the FCC order gives those telcos right of first refusal on broadband subsidies over a years-long transition to competitive bidding. Both ACA and the National Cable & Telecommunications Association had asked the FCC not to grant, or at least to limit, that right of first refusal, saying that precluded cable ops who might be able to provide cheaper, better service.

Genachowski outlined the order, which is being circulated to the other commissioners Thursday, in a speech, but did not get into specifics on the right of first refusal issue.

"It appears there are going to give the price cap carriers a right of first refusal, and only later create a competitive bidding process," said the attorney. Those telcos in their USF/ICC reform proposal had pitched the FCC on giving them $1.8 billion to provide broadband in high-cost areas over 10 years. The attorney said that based on the speech and their understanding of the FCC order, the price cap carriers would be getting billions in subsidies over years before the competitive bidding process kicks in.

Genachowski did say in the speech that in some areas it would take years for that bidding process to be instituted and that, in the mean time, "our goal of getting robust, scalable broadband-with capacity and latency comparable to urban broadband-over broad geographies in rural price cap areas as quickly as possible may be best achieved through a phased approach that ensures accountability."

The attorney said that there would, without a doubt, be a right of first refusal worth billions of dollars going to the big telcos that cable operators, even though they are interested and willing to bid for, will be locked out of.

It is a particularly big issue for small cable operators, who are the ones in the rural areas where the telcos will be getting that right.