Source: http://ecfsdocs.fcc.gov/filings/2010/12/16/6016064617.html
Timestamp: 2013-05-24 15:28:49
Document Index: 700653711

Matched Legal Cases: ['§ 254', '§ 254', '§ 254', '§ 254', '§ 254', '§ 254', '§ 254', '§ 254', 'art 18', '§ 254', '§ 254', '§ 254', '§ 254']

ECFS Filing: USA Coalition (10-208) - 12/16/2010
Proceeding: 10-208 Name of Filer: USA Coalition Author: Todd D. Daubert Lawfirm: SNR Denton US LLP View Filing:
USA Coalition Comments (31)
Type of Filing: COMMENT Exparte Presentation: NO Date Received: 12/16/10 Date Posted: 12/17/10 12:09 PM Address: 1301 K Street, N.W.
Before the FEDERAL COMMUNICATIONS COMMISSION Washington, DC 20554 ) In the Matter of ) ) Universal Service Reform ) WT Docket No. 10-208 ) Mobility Fund ) ) COMMENTS OF THE USA COALITION Todd D. Daubert Aaron M. Gregory SNR DENTON US LLP 1301 K Street, N.W., East Tower, Suite 600 Washington, DC 20005 (202) 408-6400 (202) 408-6399 (facsimile) todd.daubert@snrdenton.com Counsel for the USA Coalition Date: December 16, 2010 SUMMARY - i - The USA Coalition applauds the Federal Communication Commission?s recognition of the value of mobile services and the imperative for additional build-out of wireless networks in rural and high cost areas. As the Commission correctly notes, the lack of adequate wireless coverage in rural and high cost areas of the country imposes ?significant disadvantages on those who live, work, and travel in these areas.? Indeed, the lack of comparable wireless service selection at reasonably comparable rates in certain areas of the country is the very problem that the universal service provisions of the Communications Act of 1934, as amended, (the ?Act?) were intended to address. While technology continues to evolve, the fundamental approach mandated by the Act remains sound and the Act, as it stands today, continues to govern the Commission?s universal service efforts, including the mandates of reasonable comparability of services and technological and competitive neutrality. The Mobility Fund is billed as among the first of a series of Commission rulemakings aimed at reforming and modernizing the universal service program. While the USA Coalition shares the Commission?s enthusiasm for wireless broadband deployment, the proposed Mobility Fund ? though well-intentioned ? unfortunately would do little to close the Nation?s wireless broadband connectivity gap. Even worse, the subsidization of a single mobile broadband provider through the Mobility Fund, as proposed by the Commission, would: ? Inhibit, or even destroy, competition for non-broadband wireless services ? which are also crucial to consumers and businesses ? in areas where the Commission subsidizes a single broadband wireless service provider; ? Risk stranding the facilities subsidized by the Mobility Fund since the Commission has not provided for a guaranteed, ongoing funding source for operating expenses, which are just as high, or higher, than up-front capital expenses for wireless service providers; ? Substantially delay the development of competition for broadband wireless services in subsidized areas, if competition is able to develop at all; ? Waste precious universal service resources by using a distribution mechanism that would be disproportionately expensive and complex to install and administer - ii - compared with the small size and insufficient amount of support proposed to be distributed; and ? Siphon away the Commission?s time and resources from the larger task of truly comprehensive universal service reform. For these reasons, the USA Coalition urges the Commission to refrain from implementing piecemeal reform initiatives like the Mobility Fund until a comprehensive replacement mechanism is installed. If the Commission ultimately decides to move forward with the Mobility Fund, as proposed, there are several specific shortcoming that the Commission must address. First, transitional measures like the Mobility Fund must be considered in conjunction with the long-
term distribution mechanism that will replace the existing distribution mechanism. The Mobility Fund cannot rationally be considered in isolation or before the Connect America Fund (?CAF?) is finalized, as the Commission seeks to do here, because parties can only speculate how the Mobility Fund will be implemented in conjunction with the transition away from the existing high cost support system and to the CAF. Second, the Commission must ensure that the Mobility Fund, and indeed any universal service reform proposal, is rooted firmly within the Act?s requirements, including the mandates of technological and competitive neutrality. As proposed, many aspects of the Mobility Fund, including the proposed single-winner reverse auction distribution mechanism, are fundamentally inconsistent with the Act. Third, absent ongoing operating expense support, the Mobility Fund likely will fail to meet its objectives, since operating expenses constitute a substantial portion of the total cost of providing wireless service in low density areas. Fourth, at its proposed size, the Mobility Fund would result in only a few hundred additional cell sites, doing little to bridge the Nation?s connectivity gap. Finally, the source of funding earmarked for the Mobility Fund is legally deficient and is, therefore, an unreliable funding source for any new program. TABLE OF CONTENTS - iii - COMMENTS OF THE USA COALITION .................................................................................. 1 I. The Mobility Fund, As Currently Proposed, Is Inconsistent with the Act?s Universal Service Requirements............................................................................ 2 A) The Assumptions Underlying the Proposed Mobility Fund Are Not Consistent With the Letter or the Spirit of the Act .................................... 3 (i) The Act Requires the Commission to Follow the Lead of Residential Consumers When Determining Which Services Universal Service Mechanisms Will Support, Not to Make Choices on Their Behalf ................................................................ 5 (ii) The Act Requires the Commission to Facilitate Competition for the Benefit of Consumers.................................... 5 (iii) The List of Supported Services Is Key To Ensuring that Support is Available Where Needed And Distributed in a Competitively Neutral Way ........................................................... 6 (iv) The Recommendations of the NBP, including the Mobility Fund, Are Not Consistent With the Act?s Universal Service Mandates ........................................................................................ 8 B) The Mobility Fund Would Have Serious Anti-Competitive Consequences........................................................................................... 11 (i) Limiting Support to a Single Provider Would Harm Competition.................................................................................. 11 (ii) Defining Unavailability Solely in Terms of Advanced 3G Services Would Harm Existing Competition............................... 15 (iii) The Commission Should Adopt the USA Coalition?s Alternative Distribution Proposal ................................................ 16 C) Limiting Support to a Single Provider Would Not Be Technologically Neutral........................................................................... 17 II. Transition Measures Like the Proposed Mobility Fund Cannot Rationally Be Considered Until After the Replacement Distribution Mechanism Has Been Adopted....................................................................................................... 18 III. The Mobility Fund Will Have Little To No Impact On The Wireless Connectivity Gap ................................................................................................. 20 A) The Mobility Fund?s Lack of Continuing OpEx Support is a Fundamental Flaw.................................................................................... 20 B) The Costs and Burdens of Implementing the Proposed Mobility Fund Are Not Justified by the Few Hundred New Cell Sites that it Could Fund............................................................................................... 23 C) Competition, Not Commission Mandates, Will Spur Wireless Broadband Deployment in High Cost Areas ........................................... 24 IV. The Commission?s Proposed Source of Funding for the Mobility Fund Is Legally Deficient ................................................................................................. 25 CONCLUSION............................................................................................................................ 27 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, DC 20554 - 1 - ) In the Matter of ) ) Universal Service Reform ) WT Docket No. 10-208 ) Mobility Fund ) ) COMMENTS OF THE USA COALITION The Universal Service for America Coalition (?USA Coalition?), by its attorneys, hereby submits these comments in the above-captioned proceeding to address key issues raised by the Notice of Proposed Rulemaking released by the Federal Communications Commission (?Commission?) on October 14, 2010.1 The USA Coalition is dedicated to advancing regulatory policies that will enable Americans to enjoy the full promise and potential of wireless communications, regardless of where they live and work. The Coalition seeks to ensure that our nation?s universal service programs are technologically and competitively neutral, which ultimately will facilitate competition that benefits consumers. The USA Coalition applauds the Commission?s recognition of the value of mobile services and of the imperative for additional build-out of wireless networks in rural and high cost areas. Unfortunately, the flawed structure and inadequate size of the proposed Mobility Fund would do little to close the wireless connectivity gap. Worse yet, the Mobility Fund, as currently proposed, would have unintended consequences that harm consumers and businesses. Even in the best case scenario, the development and implementation of the proposed Mobility Fund would merely siphon the Commission?s time and resources from the larger task of truly comprehensive universal service reform. 1 In the Matter of Universal Service Reform; Mobility Fund, WT Docket No. 10-208, Notice of Proposed Rulemaking, FCC 10-182 (rel. Oct. 14, 2010) (?Mobility Fund NPRM?). - 2 - In any event, implementing a transition mechanism like the Mobility Fund prior to establishing a statutorily sound replacement distribution mechanism puts the cart before the horse. Indeed, without knowing the long-term distribution mechanism to which the Mobility Fund would facilitate transition, it is impossible for anyone, including the Commission, to determine whether the Mobility Fund will effectively bridge the Nation?s wireless connectivity gap or represent merely a poor investment of limited resources - the Commission?s own ?Bridge to Nowhere.? Therefore, the Coalition respectfully urges the Commission to focus instead on long-term and permanent universal service reform, rather than wasting time and resources on an inadequate, and ultimately harmful, transition measure like the proposed Mobility Fund. I. THE MOBILITY FUND, AS CURRENTLY PROPOSED, IS INCONSISTENT WITH THE ACT?S UNIVERSAL SERVICE REQUIREMENTS The Mobility Fund was proposed as a part of the larger set of recommendations set forth in the National Broadband Plan (?NBP?).2 While Congress directed the Commission to create the NBP, it did not provide the Commission with any additional authority to implement the NBP?s recommendations. Accordingly, the Commission?s efforts to reform the universal service program remain governed by the Communications Act of 1934, as amended (the ?Act?) as it currently exists. Thus, the proposed Mobility Fund, like every universal service reform measure, must comply with the letter and the spirit of the Act. In the words of Commissioner Baker, the Commission must ?focus on living within the statute as it exists? rather than focusing on what an ideal new regime would look like.3 Regardless of the merits of any given reform proposal, the 2 Mobility Fund NPRM, ¶ 2; accord Federal Communications Commission, Connecting America: The National Broadband Plan, 144-146 (rel. Mar. 16, 2010). 3 Remarks of Commissioner Meredith Attwell Baker, Making the 90s Work: Governing Within the 1996 Act, speech given before the Federal Communications Bar Association (Nov. 17, 2010), available at: http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-
302869A1.pdf. - 3 - Commission can implement the proposal only if it is fully consistent with the Act as it exists today. A) The Assumptions Underlying the Proposed Mobility Fund Are Not Consistent With the Letter or the Spirit of the Act The Mobility Fund NPRM requests comment on the Commission?s legal authority to create and administer the Mobility Fund.4 The universal service provisions that govern the Commission?s current reform efforts were adopted by Congress as part of the Telecommunications Act of 1996 (the ?1996 Act?), which amended the Act. Congress defined universal service in the 1996 Act as ?an evolving level of telecommunications services that the Commission shall establish periodically under this section taking into account advances in telecommunications and information technologies and services.?5 However, Congress expressly mandated that the selection and eventual evolution of supported services be guided by residential consumers through their actual market choices, not by the Commission through its own conclusions about what consumers should choose, or eventually will choose.6 In this manner, the 1996 Act seeks both to preserve existing telecommunications services to which a ?substantial majority? of the nation?s residential customers have subscribed and to advance those same services in areas where, due to market failure, they are unavailable for adoption. The Mobility Fund NPRM, as well as many of the NBP?s universal service recommendations, turn the Act?s consumer-driven framework on its head by proposing that universal service programs be used to support services selected by the Commission based upon its upon its own aspirational broadband goals, rather than based upon the actual choices of residential consumers, in determining which services will ultimately be supported. Specifically, 4 Mobility Fund NPRM, ¶ 12. 5 47 U.S.C. § 254(c)(1); accord Mobility Fund NPRM, ¶ 12. 6 See 47 U.S.C. § 254(c)(1)(B) - 4 - the Commission cannot simply abandon the structure and the goals of the current system in order to focus all funding and efforts solely on bringing broadband services to unserved areas. Unless the Commission hews tightly to the requirements of the Act as it exists today, universal service reform efforts will be mired for years in litigation and the resulting uncertainty and cost will certainly delay broadband deployment. To be clear, the USA Coalition supports the goals of facilitating broadband deployment and ensuring that the universal service contribution and distribution mechanisms do not inadvertently create additional obstacles to deploying the fastest services possible throughout the Nation. As the USA Coalition has explained in past filings, many of the NBP?s underlying objectives can be achieved within the letter and spirit of the Act as it stands today. For example, the USA Coalition has urged the Commission to facilitate mobile broadband deployment by explicitly permitting wireless carriers to use existing high cost support funds for broadband deployment. For this reason, the USA Coalition enthusiastically embraces language in the Mobility Fund NPRM which clarifies that existing support may be used for current and next-
generation technologies ?even though supported services could be based on earlier technologies.?7 Indeed, by recognizing that wireless networks are an integrated facility capable of providing both supported telecommunications services as well as information services, the Commission facilitates the evolution of wireless networks and removes an impediment to further wireless broadband deployment. The USA Coalition respectfully urges the Commission to continue to embrace a similar approach to facilitating broadband deployment by eliminating the obstacles that have prevented deployment in a manner that reflects the requirements of the Act. 7 Mobility Fund NPRM, ¶ 37, n. 47 (explaining that universal service support may be provided for advanced technologies and need not be strictly limited to providing the particular services designated for support). - 5 - (i) The Act Requires the Commission to Follow the Lead of Residential Consumers When Determining Which Services Universal Service Mechanisms Will Support, Not to Make Choices on Their Behalf Congress structured the universal service program to provide for universal service support in geographic areas where the market has failed to meet the needs of consumers. Specifically, the Act mandates that support be made available in geographic areas where, in the absence of a subsidy, consumers would not have access to services reasonably comparable to those enjoyed by urban residents at reasonably comparable rates. In determining which services to support, Congress mandated that the Commission, with the assistance of the Joint Board, focus solely on services actually subscribed to by residential consumers in areas where support was not necessary in order to determine where subsidies are necessary because the market had failed. Indeed, until a service has, ?through the operation of market choices by consumers, been subscribed to by a substantial majority of residential customers,?8 the service is irrelevant for universal service purposes: the lack of access to the service in an area cannot trigger an obligation to provide subsidies in the area, and subsidies cannot be used by an eligible telecommunications carrier (?ETC?) to fund the provision solely of this service. Thus, actual consumers, not the Commission, are the ultimate driving force behind what services are supported by universal service mechanisms. (ii) The Act Requires the Commission to Facilitate Competition for the Benefit of Consumers In recognition of the fundamental importance of competition, the facilitation of which is the cornerstone of the 1996 Act, Congress also designed the universal service provisions to ensure that the government?s interference in the market by providing universal service support is no greater than necessary. Thus, all subsidies must be explicit and available only in areas where consumers lack reasonably comparable access to supported services at reasonably comparable 8 47 U.S.C. § 254(c)(1)(B) (emphasis added). - 6 - rates. Where the explicit subsidies are necessary, they must be provided in a way that neither inhibits competition nor inadvertently creates additional barriers to market entry, including with respect to both supported and non-supported services. For these reasons, the Commission explicitly added the principle of competitive neutrality pursuant to Section 254(b)(7) and determined that, where support is necessary, every ETC providing supported services to the area should receive the same amount of support.9 The Commission has the discretion under the Act to determine whether support should be the same in terms of overall amount, percentage of forward-looking costs or actual costs. However, the subsidization mechanism cannot skew the marketplace by granting some providers or technologies an unfair advantage as a result of regulatory choices made by the government, which would be fundamentally inconsistent with the Act?s mandate that the Commission follow the lead of residential consumers. (iii) The List of Supported Services Is Key To Ensuring that Support is Available Where Needed And Distributed in a Competitively Neutral Way The key to the 1996 Act?s universal service reform is the creation and maintenance of a single list of supported services for which ETCs would receive high cost universal service subsidies to provide supported services in areas where reasonably comparable access to such services is not available at reasonably comparable rates.10 The concept of a single list of supported services in the high cost fund is based upon the recognition that the factors which lead to the need for a subsidy in a particular geographic area (i.e., low population density and/or higher cost to provide service due to geographic characteristics of the area) affect all services and, generally, do not vary on a service-by-service basis, particularly if services are defined on a 9 Contra Mobility Fund NPRM, ¶ 11 (proposing to provide Mobility Fund support to at most one provider in any given unserved area). 10 47 U.S.C. 254(a)(1); 47 U.S.C. 254(b). - 7 - technologically and competitively neutral basis. Technological and competitive neutrality are crucial to ensuring that the subsidy program does not inadvertently create disincentives to implementing the most efficient technologies available or unduly influence the evolution of wireless technologies over time. By creating the list in the manner required by the Act and ensuring that ETCs are able to use the most efficient technology available to provide the supported services, the Commission will efficiently facilitate the deployment of broadband services without inadvertently harming consumers by interfering with competition. Before the Joint Board recommends, and the Commission adds, new services to the supported services list, both are required to ?consider the extent to which? the services being considered for addition to the list ?have, through the operation of market choices by consumers, been subscribed to by a substantial majority of residential customers.?11 Similarly, the Joint Board and the Commission are instructed to consider the extent to which the service is ?being deployed in public telecommunications networks by telecommunications carriers.?12 The Joint Board and the Commission must also determine the extent to which the services are ?essential to education, public health, or public safety? and that the services are ?consistent with the public interest, convenience, and necessity.?13 To the extent mobility is defined as a separate supported service, rather than as a means to provide other supported services, basic mobility unquestionably meets the standard for addition to the list.14 However, it is also clear that broadband services, even for wireline-
deployed broadband, have not yet ?through the operation of market choices by consumers, been 11 47 U.S.C. § 254(c)(1)(B). 12 47 U.S.C. § 254(c)(1)(C). 13 47 U.S.C. § 254(c)(1)(A),(D). 14 See Mobility Fund NPRM, ¶ 9; accord High-Cost Universal Service Support; Federal-
State Joint Board on Universal Service, Recommended Decision, 22 FCC Rcd 20477 (2007) (?Recommended Decision?) - 8 - subscribed to by a substantial majority of residential customers?15 as the Act requires before a service is added to the list of supported services. Indeed, according to the Commission?s recent Internet Access Services report, 58% of Internet access connections were below 3 Mbps advertised download speeds16 ? far below the Act?s ?substantial majority? adoption threshold and for a lower speed than the NBP?s 4 Mbps actual downstream target. Thus, adding ?broadband? to the list of supported services ? or replacing all of the existing supported services with broadband services as proposed in the NBP ? would be fundamentally inconsistent with the Act?s clear mandate to base supported services upon the choices of the substantial majority of residential consumers. (iv) The Recommendations of the NBP, including the Mobility Fund, Are Not Consistent With the Act?s Universal Service Mandates Even assuming that the substantial majority of residential customers had, through operation of market choices, subscribed to broadband services, the Commission could not, consistent with the Act, radically amend the list of supported services by adding broadband services while simultaneously removing all other services currently on the list of supported services, as the Commission proposed in the NBP and now proposes in the Mobility Fund NPRM. Specifically, triggering the need for support under the Mobility Fund based solely on broadband mobile services is the functional equivalent of: ? adding broadband mobile services to the supported service list under Section 254(c), which is the only way that the Commission could use universal service funding to support mobile broadband services in the manner proposed;17 and 15 47 U.S.C. § 254(c)(1)(B). 16 Federal Communications Commission, Wireline Competition Bureau, Internet Access Services: Status as of December 31, 2009, December 2010 at 2, Figure 1(a) (rel. Dec. 8, 2010). 17 47 U.S.C. § 254(c)(1) (directing Commission and Joint Board to establish a list of defined services requiring support). - 9 - ? eliminating all other services from the supported services list, which is the only way that the Commission could refuse to provide universal service support for all other services in the manner proposed.18 It is clear that the Commission could not remove, consistent with the requirements of Section 254, all of the services from the current supported services list because these services ?have, through the operation of market choices by consumers, been subscribed to by a substantial majority of residential customers.? Nothing has changed since the Commission found that the basic telecommunications services are: widely ?deployed in public telecommunications networks by telecommunications carriers,?19 ?essential to education, public health, or public safety?; and ?consistent with the public interest, convenience, and necessity?20 and there has been no Commission finding that support for this service is no longer necessary. In short, the myopic focus of the proposed Mobility Fund on enhanced 3G wireless services, which makes sense only in the context of the NBP?s recommendations to eliminate all support for non-broadband services, is not consistent with the letter or the spirit of the universal service provisions of the Act. The Commission likewise has failed to follow the procedures mandated by the Act to amend the list of supported services. The Federal-State Joint Board did recommend, on November 20, 2007, that the Commission create a Mobility Fund,21 which the Commission subsequently released for comment on January 29, 2008,22 but the Joint Board?s recommendation was radically different than the Mobility Fund now proposed by the Commission. Indeed, apart 18 47 U.S.C. § 254(b)(5) (requiring that support for established universal services be ?specific, predictable and sufficient to preserve and advance? such supported services once the Commission adds that service to the defined list of supported services). 19 47 U.S.C. § 254(c)(1)(C). 20 47 U.S.C. § 254(c)(1)(A), (D). 21 Recommended Decision, 22 FCC Rcd 20477 22 High-Cost Universal Service Support; Federal-State Joint Board on Universal Service, WC Docket No. 05-337, CC Docket No. 96-45, Notice of Proposed Rulemaking, 23 FCC Rcd 1531 (2008). - 10 - from the name, the two proposals share little else. The Mobility Fund proposed now differs from the Federal-State Joint Board?s Recommended Decision in several crucial ways, including: ? A myopic focus on 3G wireless service versus basic wireless services;23 ? Limited funding of CapEx versus full funding of CapEx and OpEx;24 and ? Funding of a sole provider identified via reverse auction versus funding multiple providers.25 As part of its recommendation to create a Mobility Fund, the Federal-State Joint Board recommended that the Commission add basic (i.e., non-broadband) ?mobility? services to the list of supported services. In so doing, the Joint Board adhered to the statutorily prescribed manner in which additional supported services are required to be added to the list of supported services.26 Although the Commission now claims to be acting consistently with the Joint Board?s 2007 recommendation, the Mobility Fund proposed by the Commission here, by contrast, is radically different, supporting only advanced third generation (or ?3G?) mobile wireless services that includes voice telecommunications services as well as information services such as e-mail and Internet access. Specifically, although the Joint Board originally recommended that basic wireless voice services be supported by the universal service fund, it did not specify required speeds or other performance characteristics. Yet, the Mobility Fund proposed here ?would make available non-recurring support to providers to deploy 3G or better networks where these services are not currently available.?27 Because funding would be limited solely to providers who reach certain speeds, the necessary analysis by the Joint Board and the Commission should have been on broadband mobility services, not basic mobility services. Accordingly, neither the 23 Recommended Decision at 26; Cf. Mobility Fund NPRM at ¶ 11. 24 Id.; Cf. Mobility Fund NPRM at ¶ 11. 25 Id. at ¶¶ 15,18, 46; Cf. Mobility Fund NPRM at ¶ 11. 26 Compare Recommended Decision, ¶¶ 64-67 with 47 U.S.C. § 254(c)(1)(A)-(D) (recommending creation of a new supported mobility service, but carefully adhering to the statutorily required procedure for defining a new supported service). 27 NPRM at ¶ 11 (emphasis added). - 11 - Joint Board nor the Commission has followed the procedures necessary to add broadband mobility services to the list of supported services, as proposed in the Mobility Fund NPRM, while forsaking all other supported services. B) The Mobility Fund Would Have Serious Anti-Competitive Consequences The Act recognizes that competition, not regulation, will propel affordability and innovation. Rather than ignoring the Act?s competitive mandate in the name of controlling fund size, which will create monopolies that require support indefinitely, the Commission should embrace policies that facilitate competition. In turn, competition will reduce fund size over time so long as the Commission adopts a distribution mechanism that efficiently reduces support over time as it is found to be no longer necessary in a given area. Even if competition does not actually develop in some areas, the threat of competitive entry is crucial to ensure that the sole support recipient does not abuse its market power at the expense of its customers. Otherwise the Commission and (depending upon the technology used by the supported provider) the relevant state regulatory authorities would have to return to the days of extensive regulation to protect customers. For these reasons, it is crucial that the Commission ensure that the distribution mechanism does not inadvertently create additional burdens to market entry or harm competition that already exists. (i) Limiting Support to a Single Provider Would Harm Competition The Commission?s proposal to limit support to only one provider in each area is not only fundamentally inconsistent with the Act, but it is also an unwise policy. Indeed, subsidizing a single provider would prevent competition from ever developing in areas where support is necessary today. Specifically, if the conditions in a particular market are such that subsidies are necessary to bring one provider to the area, limiting subsidies to a single provider would only increase market entry barriers and insulate the subsidized provider from competition. Under - 12 - these circumstances, the subsidized provider would have little to no incentive to become more efficient or to provide better service over time. Consequently, consumers would suffer and continued support likely would be necessary in the area indefinitely. The USA Coalition and other industry members have consistently challenged the creation of a single-winner reverse auction subsidy system as plainly inconsistent with the requirements of the Act and the Commission?s own precedent.28 Any proposal that would award support to only one auction winner is fundamentally inconsistent with the Act?s goal of promoting competition and technological innovation.29 Indeed, by its own terms, any mechanism that limits support to a single carrier would ultimately award a regulatory monopoly to the supported provider, which is an anti-competitive result that is fundamentally inconsistent with the letter and the spirit of the Act. As explained in detail in the USA Coalition?s Comments to the Commission?s April 2010 Notice of Inquiry and Notice of Proposed Rulemaking,30 a single-winner reverse auction would also artificially insulate the supported carrier from market forces that would otherwise compel the carrier to become more efficient over time and would thereby harm consumers.31 The pricing power enjoyed by the winning provider would essentially preclude competition in supported 28 See Comments of the USA Coalition, WC Docket Nos. 10-90, 05-337, GN Docket No. 09-51 at 34-40 (filed July 12, 2010) (?USA Coalition Comments to NBP NOI/NPRM?); Reply Comments of the USA Coalition, WC Docket Nos. 10-90, 05-337, GN Docket No. 09-51 at 15-20 (filed Aug. 11, 2010); Comments of Rural Cellular Association, WC Docket Nos. 10-90, 05-337, GN Docket No. 09-51 at 14 (filed July 12, 2010) (?RCA Comments to NBP NOI/NPRM?); Reply Comments of SouthernLINC Wireless, WC Docket Nos. 05-337, 03-109, 04-36, CC Docket Nos. 96-45, 99-200, 96-98, 01-92, 99-68 at 9-11 (filed Dec. 22, 2008). 29 See Preamble, Telecommunications Act of 1996, P.L. 104-104, 100 Stat. 56 (1996) (purpose of the 1996 Act is ?to promote competition ? regardless of where [Americans] live and work.?). 30 Connect America Fund, A National Broadband Plan for Our Future, High-Cost Universal Service Support, WC Docket No. 10-90, GN Docket No. 09-51, WC Docket No. 05-337, Notice of Inquiry and Notice of Proposed Rulemaking, FCC 10-58 (rel. April 21, 2010). 31 See USA Coalition Comments to NBP NOI/NPRM at 34-40 (filed July 12, 2010). - 13 - areas, resulting in lower standards of service and higher prices. Indeed, the reverse auction system creates perverse incentives for participating carriers, who may be willing to temporarily serve an area at a loss, in the expectation of receiving additional support or resorting to monopoly pricing. To prevent this from happening, the Commission and, depending upon the technology at issue, the relevant state authorities would have to monitor subsidized providers and, in some cases, engage in intrusive and burdensome regulation regarding performance characteristics, service quality, and rates.32 The pricing power enjoyed by the winner of a single-winner reverse auction is best illustrated with an example. For the purposes of this example, assume that carriers A, B, C, and D are all ETCs providing supported services in a rural high-cost service area. Within the area, there currently are 1,000 USF supported lines. Carrier D, the ILEC in the region, serves 500 lines at a total cost of $7,500, resulting in a per-line cost of $15. Under the current identical support rule, each of the three remaining ETCs receive $15 in support for each line they serve in the area. As such, the fund currently provides a total of $15,000 in support for the area ($7,500 in ILEC costs plus 500 lines x $15 per line). For the sake of simplicity, this example assumes that competition has driven all of the ETCs to charge a monthly rate of $1. The current per-line support level of $15 suggests a reasonable ?reserve price? for any reverse auction. ? Under a single-winner reverse auction, only the winning bidder ? Carrier A in this example ? is eligible for support. Bidding begins at the reserve price of $15, and concludes at the end of all bidding rounds (using $1 bid increments) with Carrier A?s final bid of $10. For this example, assume that the final bids of Carriers B, C and D were $11, $12 and $15 per line, respectively.33 32 See Mobility Fund NPRM, ¶¶ 35, 37-38 (requesting comment on how to reconcile proposed single-carrier support mechanism with baseline performance expectations and requirement that rates for such services remain reasonably comparable to rates charged in urban areas). 33 The final bids reflect each carrier?s best estimate of the minimum amount of support necessary for them to serve the auction area. - 14 - ? Carriers B, C, and D now must increase the prices they charge consumers to uncompetitive levels or cease providing service altogether. Denied support, Carriers B, C, and D must pass on their full costs to consumers, and they are no longer competitive with winning Carrier A, which receives $10 support for each line served. ? Carrier A can now charge customers up to $11, reaping almost $5 more per line than under the current system. Carrier A can increase its price to maximize its profit potential (regardless of the consumers served)34 up to $11, which represents the next lowest bidder?s costs (i.e., Carrier B, which determined that it needed $11 of support to serve the area, will enter the market and provide service at $12).35 ? As a result, the benefits of USF support would flow solely to Carrier A in the form of increased profits rather than to rural consumers in the form of lower rates and more choices among service providers, services and devices. Assuming all consumers switch to the winning bidder with the cheapest available rate (i.e., Carrier A), the USF fund would distribute a total of $10,000 in support to Carrier A, which represents a savings of $5,000 per month for the USF in that area. However, rural consumers would see a price increase of $10 per month, from the previous $1 per month to the new rate of $11 per month. Carrier A would also see an increase in revenue of $5 per line (i.e., $21 - $16 = $5 from Table). Instead of reverting to an outdated monopoly system with all of its inherent drawbacks, the Commission should recognize, as Chairman Genachowski noted in his statement accompanying the release of the Commission?s Fourteenth Wireless Competition Report, that 34 Some consumers may choose to forgo service at the rates that Carrier A will charge. If enough consumers choose to forgo the $11 service rate that Carrier A?s profits begin to decline, Carrier A will reduce its rate to the point that its profits are maximized. 35 Carrier B?s minimum service price can be calculated by adding the $1 charged to the end user with the subsidy ($11) necessary to provide service. Revenue Comparison A?s Revenues Under the Identical Support Rule A?s Revenues As the Winner of a Reverse Auction Customer charge: USF Support A?s Total Revenue: $ 1 + $ 15 $ 16 Customer charge: USF Support: A?s Total Revenue: $ 11 + $ 10 $ 21 - 15 - ?[c]ompetition in the wireless voice market over the past 15 years has spurred investment, innovation, and in many cases higher quality for lower prices for American consumers.?36 The Commission should heed the lessons of its own regulatory experience that competition, not monopolistic regulation, will propel the affordability and innovation of wireless services in high cost areas. Therefore, the Commission should ensure that every distribution mechanism facilitates competition by refusing to limit support to a single provider. (ii) Defining Unavailability Solely in Terms of Advanced 3G Services Would Harm Existing Competition The Commission?s proposal to define unavailability solely in terms of advanced 3G services37 would also have a devastating impact on providers of basic mobile services in the area, particularly if the Commission, as proposed in the NBP, phases out support to providers of basic mobile services altogether.38 Specifically, the Commission proposes to provide support from the Mobility Fund to areas that are not served by providers of advanced 3G services.39 However, just because an area is not served by any providers of advanced 3G services does not mean that the area is not being served by providers of basic mobile services, which are very important to consumers in such areas. Indeed, the statistics cited by the Commission suggest that many areas that currently do not enjoy access to advanced 3G services do enjoy access to basic mobile services provided by multiple providers. 36 Statement of Chairman Julius Genachowski, Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993, Annual Report and Analysis of Competitive Market Conditions with Respect to Mobile Wireless, including Commercial Mobile Services, WT Docket No. 09-66. 37 See Mobility Fund NPRM, ¶ 21. 38 NBP at 147 (?the FCC should phase out the remaining legacy High-Cost support for competitive ETCs?). 39 Mobility Fund NPRM, ¶ 11 (proposing to provide non-recurring support for ?3G or better networks where those services are not currently available?). - 16 - Providers of basic mobile services would find it difficult, if not impossible, to compete with a subsidized provider of advanced 3G services, particularly if all subsidies for basic mobile services are phased out. Consequently, the recommendations of the NBP, including the Mobility Fund, would trade competition for basic mobile services for monopoly-provided mobile broadband services. Such a choice is not permitted by the Act. Even if the Commission were authorized by the Act to make this tradeoff, the Commission should refrain from harming the public interest by destroying existing competition or making it nearly impossible for competition to develop in the future. (iii) The Commission Should Adopt the USA Coalition?s Alternative Distribution Proposal The Mobility Fund NPRM seeks comment on ways to structure distribution programs so that funding is directed to those areas where deployment of advanced wireless services is otherwise not likely to happen.40 In past filings, the USA Coalition has proposed an alternative distribution mechanism that would obviate the need to rely upon anti-competitive reverse auctions and would make support for both telecommunications and information services explicit, while minimizing distinctions based on technology platform, competitive status, or speed of service.41 Given the record developed in prior comment cycles, the USA Coalition will not reiterate its positions here other than to say that the USA Coalition?s proposed approach is a technologically neutral method of distributing USF support that offers consumers in rural, insular, and high-cost areas access to a competitive and robust market for communications services, including both broadband and narrowband services. 40 Mobility Fund NPRM, ¶ 11. 41 USA Coalition Comments to NBP NOI/NPRM at 41-54 and attachment. - 17 - C) Limiting Support to a Single Provider Would Not Be Technologically Neutral. The Commission?s proposed single-winner reverse auction system would not be technologically neutral. Advanced 3G wireless services can be provided using a variety of different technologies and spectrum bands. Subsidizing a single provider also places a thumb on the scale in favor of that provider?s particular technology and spectrum band, even if the subsidized solution is not the most efficient solution. Indeed, the single-winner reverse auction system could inadvertently tip the scales towards a less efficient technology if the majority, or even a substantial portion, of the reverse auctions are won by carriers utilizing a technology that is best suited for the reverse auction system, but is not necessarily the most promising or efficient technology. Wireless technologies that once seemed to hold significant promise for evolving levels of speed and performance have been relegated to the dustbin of history.42 Other existing technologies, like WiFi mesh, cognitive radio, as well as additional technologies not yet developed may eventually becomes the preferred wireless broadband solution in high cost areas and the rest of the Nation. By conferring an artificial advantage upon carriers utilizing specific radio frequencies and associated technologies through the regulatory process, the Commission would distort the natural evolution of wireless technologies. Accordingly, the Commission should be wary of disrupting the dynamics of technological adoption, particularly with respect to wireless services where technological innovation and competition have driven adoption of increasingly efficient solutions. 42 See, e.g., the case of Ultra Mobile Broadband (?UMB?) technology, which is no longer being developed and has been abandoned in favor of either WiMAX or LTE. Federal Communications Commission, Omnibus Broadband Initiative, The Broadband Availability Gap, at 123, n. 11 (?OBI Technical Paper?). - 18 - II. TRANSITION MEASURES LIKE THE PROPOSED MOBILITY FUND CANNOT RATIONALLY BE CONSIDERED UNTIL AFTER THE REPLACEMENT DISTRIBUTION MECHANISM HAS BEEN ADOPTED The Mobility Fund, as described in the NBP and the NPRM, is a transition measure in preparation for Connect America Fund (?CAF?), which is the permanent distribution mechanism recommended in the NBP as a replacement for the current distribution mechanism.43 Specifically, the Mobility Fund purportedly is designed to facilitate the participation by providers of mobile broadband services in the reverse auctions for the CAF as recommended in the NBP.44 As envisioned in the NBP, existing high cost support mechanisms are to be replaced by a broadband-focused fund ? the CAF ? that would provide ongoing support for the operation and maintenance of broadband networks. By contrast, the Mobility Fund would provide only one-
time support and only in those areas currently ?unserved? by 3G wireless. However, it is far from clear how the CAF will work in tandem with the Mobility Fund, much less whether the CAF will be adopted in a modified form, or even if the CAF will be adopted at all.45 Indeed, if the Commission moves forward with the Mobility Fund based on the assumption that it will subsequently adopt the CAF as recommended in the NBP, but the Commission ultimately does not choose to implement the CAF, then the resources, both in terms of time and money, devoted to implementing the Mobility Fund will have been wasted. The potential for waste is particularly acute since, as currently proposed, the Mobility Fund does not provide for ongoing OpEx support. 43 See NBP at 144-146. 44 Id. 45 Indeed, as the USA Coalition has pointed out in prior filings, there is a genuine question as to whether the Commission possesses the authority to eliminate all support for Title II telecommunications services in order to support only Title I information services. See USA Coalition Comments to NBP NOI/NPRM at 11-13; Reply Comments of the USA Coalition, WC Docket Nos. 10-90, 05-337, GN Docket No. 09-51 at 5-7 (filed Aug. 11, 2010). - 19 - Until the Commission adopts long-term reform, it cannot establish appropriate transition mechanisms, like the Mobility Fund, or even the appropriate timeframe for the transition. Thus, the Mobility Fund should not be considered in isolation but, instead, as a part of the larger, comprehensive universal service reform effort. Indeed, without knowing how the CAF would work in practice, it would be nearly impossible for a carrier to develop an informed bid regarding its participation in the Mobility Fund. Take, for example, the interplay of universal service funding and the Lifeline/Linkup program. Under the current high cost program, ETCs are required to offer Lifeline/Linkup service as a condition of being certified an ETC. If a similar Lifeline obligation will attach to the CAF, potential bidders must consider the accompanying burdens, and opportunities, when formulating a bid for the area. Otherwise, the bids will be higher than necessary (which would unnecessarily increase the size of the fund) or lower than necessary (which could result in unsustainable services for the area). Absent sufficient clarity, carriers would be forced to base their bids on little more than guesses, just as commenting parties in this proceeding are forced to base their input on little more than guesses about the form and timing of long-term reform. Thus, as a transitional measure, the Mobility Fund must be considered only after the CAF has been proposed, and adopted no sooner than until after the CAF is adopted. To do otherwise would be arbitrary and capricious because neither the Commission nor the public could make rational decisions about the appropriateness of the proposed Mobility Fund or how it could be modified to better serve the public interest without knowing the distribution mechanism to which the Mobility Fund would facilitate transition. In sum, because the Mobility Fund, the existing high cost support mechanism, and the CAF are inextricably linked, the Commission should step back and concentrate on finalizing the CAF before proposing, or taking further action regarding, any transition mechanism like the Mobility Fund. - 20 - III. THE MOBILITY FUND WILL HAVE LITTLE TO NO IMPACT ON THE WIRELESS CONNECTIVITY GAP The Mobility Fund, as proposed, provides far too little capital expenditure (?CapEx?) support to make an appreciable dent in the nation?s wireless connectivity gap. This fundamental flaw is further compounded by the lack of ongoing operating expense (?OpEx?) support.46 Moreover, since the CAF has yet to be finalized, it is impossible to gauge whether the Mobility Fund, as currently proposed, would serve the public interest as a transition mechanism that effectively prepares wireless carriers for participation in the replacement mechanism, presumably, the proposed CAF mechanism outlined in the NBP. A) The Mobility Fund?s Lack of Continuing OpEx Support is a Fundamental Flaw Compared to wireline carriers, wireless carriers typically incur higher operating costs in providing customers with service. These costs relate to higher recurring backhaul expenses, maintenance, and customer support, all of which increase as wireless networks are extended into areas with low population density.47 The Commission itself has recognized that the vast majority of the ?investment gap? associated with wireless networks is attributable to ongoing OpEx costs.48 Despite these facts of wireless economics, the Mobility Fund underestimates the need for ongoing OpEx support. The Commission?s own analysis in the Omnibus Broadband Initiative Technical Paper Series suggests that the investment gap for broadband wireless networks is $12.9 billion in present value terms.49 The total cost to close the connectivity gap would be approximately $18.3 46 Mobility Fund NPRM, ¶ 5 (proposing to provide only non-recurring support). 47 It should be noted, however, that these costs grow less quickly than wireline-based technologies as density falls, making wireless technology a lower cost solution in many unserved and underserved areas. See OBI Technical Paper at 61. 48 OBI Technical Paper at 78, Exhibit 4-W ($11.0 billion of estimated $18.3 total cost of closing wireless broadband gap in present value terms attributable to operating expenses). 49 Id. - 21 - billion, of which $5.3 billion could be recouped through revenues. The total costs are estimated to be split between initial CapEx of $6.3 billion, $0.9 billion in ongoing CapEx, and $11.0 billion of ongoing OpEx. Accordingly, OpEx support is a critical component of the wireless network cost structure that cannot be ignored. In short, the Commission?s own analysis demonstrates the inadequate level of Mobility Fund size and the error in allocating funds entirely to CapEx in order to appreciably close the wireless connectivity gap. Under the current high cost support mechanism, both capital and operating expenses are subsidized in those areas where the private business case for a purely carrier funded build-out is lacking. As a result, wireless CETCs have been able to invest in their networks in rural areas with the confidence that their operating expenses associated with serving a high cost area would be offset by a subsidy sufficient to justify providing service to that area. The Interim Cap Rules have already created significant uncertainty by making support increasingly less predictable, which has chilled investment in wireless buildout in rural areas, made financing more difficult to obtain, and raised serious questions regarding the long-term viability of existing assets in low-
density areas.50 The Mobility Fund threatens to undermine further the confidence of carriers, because the level of ongoing support of operating expenses is highly uncertain. Of equal concern to the rural wireless industry is the fact that OpEx support may be withdrawn from wireless carriers under the CAF or phased out from the high cost fund. Many wireless carriers depend on ongoing OpEx support in order to provide ongoing service in areas where there would otherwise be no rational business case to do so, having already made the CapEx investment. The reduction or removal of OpEx support would be calamitous for many areas that are currently served, threatening the survival of these existing networks. Simply put, 50 See RCA Comments to NBP NOI/NPRM at 9. See also Letter from David A. LaFuria and Todd B. Lantor to Chairman Genachowski, CC Docket No. 96-45, WT Docket No. 05-337 (dated July 23, 2009) (explaining how Carolina West Wireless canceled plans to build eight cell sites in its licensed service area as a result of USF funding reductions). - 22 - in the absence of ongoing OpEx support either from the high cost fund or the CAF, wireless coverage in many rural areas is likely to contract ? widening the wireless connectivity gap rather than bridging it. The imperative for ongoing OpEx support was clearly recognized by the Joint Board when it proposed the initial prototype for the Mobility Fund. Rather than create a program that only funded initial capital expenditures, the original Mobility Fund proposal recommended that funds be made available to provide continuing operating subsidies to carriers ?where service is essential but where usage is so slight that a plausible business case cannot be made to support construction and ongoing operations, even with a substantial construction subsidy.?51 The Commission?s proposal to exclude ongoing OpEx support from the Mobility Fund is fundamentally flawed. The failure to guarantee ongoing OpEx support is likely to discourage many carriers from participating in the reverse auctions (or compel them to participate with less aggressive bids), which, of course, would reduce the supposed benefits of using a reverse auction in the first place. Moreover, with no guarantee that the winner of the reverse auction in the Mobility Fund will be eligible for ongoing OpEx subsidies from the CAF, there is a substantial risk of stranded assets. Indeed, the NBP calls for the CAF to provide support only to a single broadband provider in those areas where 4 Mbps actual download speeds are unavailable. Only those few ?winners? of the CAF subsidy would be eligible for ongoing operating expense support; and, given the specifics of the NBP?s single-winner reverse auction proposal, it is highly uncertain whether many wireless carriers would, in fact, actually win support from the CAF and, thus, receive OpEx support. Absent ongoing OpEx support, there is little business case for building out wireless networks into high cost areas that likely would be eligible for support from the Mobility Fund, 51 Recommended Decision, ¶ 16 (emphasis supplied); cf. Mobility Fund NPRM, ¶ 9. - 23 - even with the possibility of one-time Mobility Fund support. Accordingly, the Commission is unlikely to achieve the goals of the Mobility Fund unless potential participants have more certainty regarding OpEx and the relationship between the Mobility Fund and existing, as well as proposed, ongoing support measures. Thus, the Commission should determine the scope and treatment of wireless carriers under the CAF and current high cost fund before proposing, or seeking comment on, the Mobility Fund or a similar program. B) The Costs and Burdens of Implementing the Proposed Mobility Fund Are Not Justified by the Few Hundred New Cell Sites that it Could Fund The additional wireless broadband coverage to could be gained from a fund of only $100 million to $300 million would be insubstantial. Without any guarantee of ongoing OpEx, participants in the proposed reverse auctions would likely bid to receive the full cost of constructing new sites, choosing to reserve their own funding for the higher OpEx costs they would incur to serve the unprofitable areas. The Commission has estimated that the total cost of constructing and maintaining a greenfield cell tower is between $350,000 and $450,000 per site (not including the cost of spectrum, which cannot appropriately be ignored).52 Accordingly, in the best case scenario in which the full $300 million is distributed to providers who are able to construct new sites for only $350,000, the Mobility Fund would result in the construction of only 857 new sites. In the more realistic scenario in which $100 million is distributed to providers who incur $450,000 to construct new sites, the Mobility Fund would result in the construction of only 222 new sites. For the sake of perspective, there were a total of approximately 250,000 cell sites nationwide as of June 2010.53 As such, the Mobility Fund, as proposed, would likely increase 52 OBI Technical Paper at 81-82. 53 See CTIA, The Wireless Association, ?Wireless Quick Facts: Mid-Year Figures?, available at http://www.ctia.org/advocacy/research/index.cfm/aid/10323 (251,618 cell sites as of June 2010). - 24 - the total number of cell sites in the United States by only 0.08 to 0.3 percent, which would have a negligible impact on the wireless broadband gap. This negligible impact would not be worth the costs and burdens associated with implementing reverse auctions to distribute the funding, particularly since doing so would distract the Commission and industry participants from long-
term universal service reform. Given the lack of OpEx support for Mobility Fund networks and the minimal impact the Mobility Fund will likely have on 3G build-out in unserved areas, the Commission should stop straining at gnats and turn its attention to the larger question of systemic universal service reform. C) Competition, Not Commission Mandates, Will Spur Wireless Broadband Deployment in High Cost Areas As the Commission has frequently recognized, competition results in lower prices, greater innovation, and better services for consumers. Regarding mobile broadband deployment in particular, the Commission recently noted that ?broadband deployment is a key priority for the Commission? which will be driven by carrier competition.54 Indeed, the Commission made it clear that it sought to ?foster competition and the development of mobile data services with seamless and ubiquitous coverage? since ?competition will help to promote investment and innovation and protect consumer interests.?55 The Commission should continue to recognize the role that competition will play in speeding the deployment of wireless broadband networks into as-yet unserved areas of the country. Much like the original deployment of early broadband technologies like DSL, it was competition that spurred innovation and deployment. While relatively inexpensive DSL technology had been available to communications carriers for years, large telecommunications 54 Reexamination of Roaming Obligations of Commercial Mobile Radio Service Providers and Other Providers of Mobile Data Services, 25 FCC Rcd 4181-83, ¶ 3 (2010) (?Roaming Order?). 55 Id. - 25 - firms resisted deploying broadband due to concerns that DSL would cannibalize the profits generated by dedicated T-1 lines.56 However, it was only with the advent of intermodal competition with cable modem technology in the mid-1990s, along with the realization that cable modem technology was poised to overtake the telecommunications firms in the broadband market, that DSL technology was rolled out in earnest. The Commission played a vital role in the development and deployment of early broadband technologies by removing the regulatory barriers to competition, rather than raising them as proposed here. Indeed, the Commission noted competition between technology platforms played in the explosive growth of broadband deployment and committed to reducing any ?barriers to competition? that might arise in the future.57 In this fashion, the Commission?s regulatory restraint resulted in a virtuous cycle of competition, whereby greater and greater broadband speeds are offered by both information and telecommunications service providers across a growing subscriber base. The Commission should heed the lessons of its own past experience and enable, rather than dismantle, competition in the nation?s remaining unserved areas. IV. THE COMMISSION?S PROPOSED SOURCE OF FUNDING FOR THE MOBILITY FUND IS LEGALLY DEFICIENT As the USA Coalition and SouthernLINC Wireless demonstrated in their Petition for Partial Reconsideration of the Corr Wireless Order, the Commission lacks the authority to ?reserve? the funding earmarked for the Mobility Fund.58 Prior to the Corr Wireless Order, the Commission?s rules regarding calculation of the contribution factor and the requirement that 56 See Congressional Research Service, Telecommunications Act: Competition, Innovation, and Reform, Library of Congress (2006) at 18. 57 Federal Communications Commission, FCC Issues Report on the Deployment of Advanced Telecommunications Capability to All Americans, CC Docket No. 98-146 (rel. Jan. 28, 1999). 58 See Petition for Partial Reconsideration of SouthernLINC Wireless and the USA Coalition, WC Docket No. 05-337, CC Docket No. 96-45 (filed Sep. 29, 2010) (?Petition for Reconsideration?). - 26 - USAC use all funds within the following quarter served the critical function of ensuring that the universal service fund is consistent with the requirements of the Act and the Origination and Taxing Clauses of the United States Constitution. Specifically, these rules ensured that the mandatory contribution requirement is a fee, rather than a measure to raise revenues or a tax, by ensuring that the universal service contribution and disbursement mechanisms function as a ?pass-through? system, whereby contributions are expressly tied to expenses of particular programs, and any excess funds collected on an incidental basis are used to reduce the next quarter?s contributions, rather than ?held in reserve? for use at some unspecified future time. As discussed in detail in the Petition for Reconsideration, the ?reservation? of ?surrendered? universal service funds mandated by the Corr Wireless Order exceeds the Commission?s authority because it establishes a pool of funds to be used for an unspecified purpose at an indeterminate point in the future. Further, the Corr Wireless Order retroactively amended the Commission?s rules without providing sufficient notice and opportunity for interested parties to comment and was arbitrary and capricious in that it failed to apply the identical support rule in refusing to distribute the ?surrendered? support to CETCs. As such, the Commission lacks the authority to ?reserve? the funds earmarked for the Mobility Fund, calling into question the amount of funding that will actually be available to fund this new program. Before creating the Mobility Fund, the Commission must address the serious questions raised by the USA Coalition and SouthernLINC Wireless?s Petition for Reconsideration regarding its authority to fund this program with universal service funds ?reserved? from voluntarily forfeited support. Otherwise, the Commission risks undermining its own efforts to implement sustainable universal service reform and risks inciting contentious litigation that would slow 3G network deployment by creating unnecessary regulatory uncertainty. - 27 - CONCLUSION For the reasons set forth above, the USA Coalition urges the FCC to adopt rational and sustainable long-term universal service reform that operates on a fair and technologically neutral basis in order to ensure that people throughout the United States will have access to reasonably comparable telecommunications and information services at reasonably comparable rates. Unfortunately, the proposed Mobility Fund represents a harmful distraction from long-term reform rather than a positive step in the right direction. Moreover, the USA Coalition respectfully urges the Commission to refrain from implementing piecemeal transitional reform initiatives like the Mobility Fund until a replacement mechanism is installed. Respectfully submitted, Todd D. Daubert Aaron M. Gregory SNR DENTON US LLP 1301 K Street, N.W., Suite 600 East Tower Washington, DC 20005 (202) 408-6400 (202) 408-6399 (facsimile) todd.daubert@snrdenton.com Counsel for the USA Coalition Date: December 16, 2010