Introduction and Summary

The Information Technology and Innovation Foundation appreciates the opportunity to comment on Intercarrier Compensation (ICC) Reform.[1] ICC is a vestige of the morass of policies erected around the unique regulatory history of the telephone network, and it is now a barrier to the consumer benefits that would come about from truly market-rate service on IP-based networks.

Therefore, the Federal Communications Commission should eliminate all ICC payments, including legacy ICC, Connect America Fund (CAF) ICC, and any other government funding to rural telephone companies. At the same time, the Commission should remove all regulatory measures that regulate consumer prices.

The Commission Should Eliminate, and Not Replace, All Vestiges of ICC

The days of Commission micromanagement of payments for traffic flows should end. The Commission has already taken substantial steps toward this end by transitioning most charges to a bill-and-keep structure, but some legacy ICC payments and CAF ICC payments remain. These payments use American consumers’ dollars, paid through USF, to prop up less capable networks in a way that slows the transition to more capable networks. That’s a bad deal for Americans that the Commission should unwind to achieve a fully bill-and-keep regime as soon as possible. The NPRM correctly notes that “further delaying the transition to bill-and-keep may continue to result in market distortion and hinder the transition to all-IP networks.”[2]

While the Notice envisions a “thoughtful and gradual approach” to encourage carriers to upgrade their networks, the Commission’s primary goals should be to protect American households from unnecessary USF fees and distorted competition.[3] All companies have had the opportunity to invest in up-to-date networks; the fact that some have not done so is not cause for delay. Indeed, many competitors that do not receive ICC now serve rural areas precisely because they have been investing in better technology for years.[4] The NPRM’s reasoning for a “gradual, multi-year transition of the remaining access charges to bill-and-keep” revolves around protecting recipients’ networks, business models, and revenue. But the goal of coddling out-of-date networks for years to come is in tension with the acknowledgment that ICC distortions, and the USF contributions that fund them, exact harm every day they persist. The Commission should foreground consumer interests in lower contribution factors and fair market competition, rather than treating rural ISPs’ bottom lines as of paramount concern.

The Commission should be careful to in fact eliminate all ICC payments and not simply allow them to change form by being made up for by other programs. In particular, the Commission should not allow legacy or CAF ICC recipients to make up for funds lost by the elimination of those programs through Broadband Loop Support (BLS). That outcome would be perverse and undermine the very consumer benefits the updated ICC policy would deliver. The Commission should also ensure other USF or other federal programs do not increase spending in response to the transition to bill-and-keep.[5] It should not indulge a subsidy merry-go-round in which the demise of one type of handout becomes a reason to increase another.

The Commission Should Enable Market Prices to Prevail

Bespoke support for wireline telecom companies distorts the market for broadband Internet access service. The Commission should not close its eyes to the reality of the IP transition and the dramatically more competitive landscape it brings.[6] There is no longer any case for treating legacy telephone companies as a favored class that gets taxpayer funding not available to their competitors in the communications marketplace. Rather, the Commission should take opportunities such as this proceeding to permanently remove subsidies to ISPs and let prices adjust to the market-clearing level. To be sure, these prices may be higher than currently subsidized prices, but the subsidy has only masked the true cost, which is now borne by everyday Americans through USF fees. Moreover, expensive service to an expensive area is not necessarily a policy problem. Instead, it is a profit opportunity that other ISPs can seize to provide better service at lower prices. Already, LEO broadband service for rural areas costs less than what rural broadband providers indicated would be their true price absent USF handouts.[7] The Commission should let all providers compete for customers on a level playing field, not subsidize the economically non-viable competitors to economically viable new technologies.

And if market prices remain unattainable for low-income households, the Commission should address those affordability problems on the consumer side, not the ISP side. Vouchers, such as those provided through a reformed Lifeline program, would make market prices affordable for low-income households without distorting market prices and favoring one technology or business model over others. The goal should be to support American families, not to indefinitely prop up one group of ISPs that, in real terms, is more expensive than satellite alternatives.

Conclusion

Untangling and eliminating High-Cost Fund programs should be a central goal of the Commission’s efforts to reform and recalibrate USF to match technological and economic realities. Today, lack of deployment is not a significant cause of the digital divide, and new technologies, including LEO satellites and fixed wireless access, can now serve areas previously unreachable by wireline service. The Commission should put consumers in the driver’s seat, allowing them to make their own broadband choices and not forcing them to prop up failing ISPs.

Thank you for your consideration.

Endnotes