Skip to main content

Small Cable’s Problem With Current Telco Plan

Matt Polka, president of the American Cable Association — which represents small and
midsized independent cable operators — joined the National Cable & Telecommunications
Association in trying to convince rulemakers that the Federal Communications Commission’s
reform of the Universal Service Fund, created in 1997 to meet universal telephone service
goals set by Congress, should not favor the telco incumbents. He detailed those objections to
Multichannel News Washington bureau chief John Eggerton.

MCN: What is your biggest problem
with the telephone companies’ ABC

Matt Polka: There are two overriding
problems with the ABC Plan, and
they’re connected.

First, in achieving universal broadband
connectivity, Americans deserve
a fiscally responsible plan. With
the ABC Plan, there’s no durable cap
on the growth of the $4.5 billion fund.
Second, it continues to provide money
in areas where funding isn’t necessary
and only contemplates allocating
funding to telephone companies,
when cable operators may be able to
provide consumers a better service at
a lower price.

In other words, the large phone
companies have proposed rules that
will skew the market in their favor,
giving them a first shot at billions of
dollars in new broadband support
even though other segments of the
industry are interested and capable of
serving these areas too. This would, if
unchanged, mean billions of dollars
earmarked for rural broadband services
will be spent inefficiently.

MCN: What would be the impact on
your members if the FCC went with the
ABC Plan as currently constituted?

MP: ACA believes the FCC understands
that the telecom landscape has changed
tremendously in the past decade, with
cable and wireless providing real and
extensive competition to the local telephone
companies. This is especially the
case when it comes to providing broadband
service, where cable companies
have a larger share of the market and
generally provide higher-performing

In other words, cable competitors can
be a real force for universal broadband
deployment. However, if the FCC were to
give the incumbent telcos an unfair advantage,
it would slow the development
of competition. It also would make inefficient use of government funds.

MCN: Are you saying the plan is a nonstarter?

MP: ACA believes the ABC Plan is fixable. For example,
the FCC must distribute broadband funds on a competitively
neutral basis. It must eliminate or limit any access
replacement mechanism for the larger incumbent
telcos. And it must accelerate the phase-out of legacy
price cap support mechanisms. Finally, the FCC needs
to impose a permanent cap on providing support in
high-cost areas.

MCN: What is the most important thing for the FCC not
to do?

MP: To assume we are operating in the old monopoly
telecom world and just adopt the plans submitted by
the incumbent telcos. Instead, the FCC needs to base its
plan on realities of the 2011 market, where competitive
entry is widespread. In fact, this is the foundation AT&T,
Verizon and others urge the FCC to build upon when it
comes to reform of the intercarrier compensation regime.
By operating from this foundation, the FCC will
give more rural consumers higher-speed broadband at
lower cost. The FCC also should not rush the transition
for smaller, incumbent (rate-of-return) Local Exchange
Carriers (LECs) from current High-Cost Fund support,
who are more dependent on this funding than larger

MCN: Which is the bigger issue, USF reform or intercarrier
comp, or can’t they be separated?

MP: The two issues have always been intertwined,
and they continue to be. As I said previously, when
it comes to fashioning new policies for both, the FCC
must ensure they are competitively neutral and fiscally