STATE MEMBERS OF THE FEDERAL-STATE JOINT BOARD ON UNIVERSAL SERVICE And the FEDERAL-STATE JOINT BOARD ON SEPARATIONS 1101 Vermont Avenue, N.W. Suite 200 Washington, D.C. 20005 April 22, 2013 Ex Parte Ms. Marlene Dortch Secretary Federal Communications Commission 445 12 th Street, SW Washington, D.C. 20554 RE: Written Ex Parte Communications from four State Members of the Federal State Joint Board on Universal Service and four State Members of the Federal State Joint Board on Separations, 1 filed in the proceeding captioned: Dear Ms. Dortch: In the Matter of the Petition of USTelecom for Forbearance Under 47 U.S.C. 160(c) From Enforcement of Certain Legacy Telecommunications Regulations, WC Docket No. 12-61 The State Members serving on the Federal-State Joint Board on Universal Service and on the Federal-State Joint Board on Separations respectfully submit this written ex parte to respond to the numerous in-person meetings between the USTelecom Association (USTA) and certain of its members with Commissioner Offices and other staff of the Federal Communications Commission (FCC or Commission) regarding substantive matters in this pending proceeding while reportedly an internal draft Order is in circulation. The State Members are deeply concerned about the process, the substantive content of these contacts, and the weight that the Commission is or is not prepared to accord to the record established through the formal submission of initial and reply comments particularly those formal comments that comprehensively refute USTA s arguments in favor of eliminating continuing property records and the Part 32 Uniform System of Accounts (USOA). 1 The Universal Service Joint Board includes four State commissioners nominated by the National Association of Regulatory Utility Commissioners (NARUC) and one State-appointed utility consumer advocate nominated by the National Association of State Utility Consumer Advocates. The members are Commissioner James H. Cawley, Pennsylvania Public Utility Commission (State Chair), Commissioner Anne C. Boyle, Nebraska Public Service Commission, Commissioner Randy Mitchell, South Carolina Public Service Commission, Commissioner Stephen Michael Bloom, Oregon Public Utility Commission, and Consumer Counsel William Levis, Colorado Office of Consumer Counsel. The four State members of the Separations Joint Board are Commissioner John Burke, Vermont Public Service Board (State Chair), Commissioner Orjiakor Isiogu, Michigan Public Service Commission, Commissioner Larry Landis, Indiana Utility Regulatory Commission, and Commissioner Betsy Wergin, Minnesota Public Utilities Commission.. Eight of the nine State members of these two federal advisory boards specifically voted to endorse these comments. All but Commissioner Mitchell specifically endorsed the filing of this pleading. Commissioner Mitchell took no position on the arguments presented herein.
Page 2 of 5 The Petition for Forbearance has the potential to affect or otherwise create legal conflict with the intrastate regulation of USTA member or affiliate incumbent local exchange carriers (ILECs). The outcome of USTA s Forbearance Petition can also impact the outcome of other crucial proceedings currently pending before the Commission. 2 Because the FCC has not reached out to the appropriate Federal-State Joint Boards in this matter, the State Members feel obliged to make this submission. 1. In accordance with 47 U.S.C. 160(c) and via Order of the Commission s Wireline Competition Bureau, the deadline for reviewing the pending USTA Forbearance Petition in this proceeding was extended for a period of ninety (90) days. 3 The Commission ruled on certain and limited aspects of the USTA Forbearance Petition with an Order that was released on February 28, 2013. 4 2. Since the Commission s February 28, 2013 Order, USTA, its members and affiliates, as well as other interested parties have engaged in numerous ex parte in-person meetings with FCC Staff and Commissioner Offices regarding disputed substantive issues. The Office of FCC Chairman Genachowski internally circulated a draft Order on the remaining issues raised by USTA s original petition on April 4, 2013. 5 The oral ex parte contacts between USTA, its members and affiliates, and the Commission and its Staff have been ongoing ever since that circulation occurred. 6 This continuous and less than transparent USTA advocacy is designed to materially influence the text of the draft Order in circulation. 3. The State Members express deep concern that the mere disclosure of these ex parte inperson meetings that is provided does not provide adequate due process to the numerous parties that participated in the formal comment and reply comment cycle, including but not limited to State public utility commissions, an individual State public utility commissioner, and NASUCA. Reliance on these late ex parte in-person meetings and written submissions undermines the Commission s decision making process and unnecessarily degrades the significance and merits of the formally submitted initial and reply comments. These USTA-FCC ex parte in-person meetings during or after the April 2 See generally In re AT&T Petition to Launch a Proceeding Concerning the TDM-to-IP Transition, Petition of the National Telecommunications Cooperative Association for a Rulemaking to Promote and Sustain the Ongoing TDM-to-IP Evolution, GN Docket No. 12-353; In re Petition of USTelecom for Declaratory Ruling that Incumbent Local Exchange Carriers Are Non-Dominant in the Provision of Switched Access Services, WC Docket No. 13-3. 3 In re Petition of USTelecom For Forbearance Under 47 U.S.C. 160(c) From Enforcement Of Certain Legacy Telecommunications Regulations, WC Docket No. 12-61 (FCC Wireline Competition Bureau, Rel. Feb. 7, 2013), Order, DA 13-172. 4 In re United States Telecom Association Petition for Forbearance Under 47 U.S.C. 160(c) from Enforcement of Certain Legacy Telecommunications Regulations, WC Docket No. 12-61, (FCC, Rel. Feb. 28, 2013), Order, FCC 13-23. 5 Lynn Stanton, Telecommunications Reports Daily, Chairman Circulates Draft Order to Address USTelecom Forbearance Plea, April 5, 2013. 6 See generally USTA ex parte submissions at WC Docket No. 12-61 of April 8, 2013 (April 4, 2013 inperson meeting with FCC Staff and USTA substantive 27-page attachment), April 10, 2013 (April 8 2013, in-person meeting with FCC Office of Chairman Genachowski and FCC Staff), April 11, 2013 (April 9, 2013 in-person meeting with Office of FCC Commissioner Pai). See also Verizon et al. ex parte submission of April 15, 2013 (April 11, 2013 in-person meeting with Office of Chairman Genachowski and FCC Staff).
Page 3 of 5 4-5, 2013 period appear to be of a comprehensive advocacy and not simply confined to limited responses to largely technical inquiries propounded by the FCC Staff. 7 4. A number of State public utility commissions, an individual State public utility commissioner, and NASUCA opposed the USTA Forbearance Petition on numerous grounds. 8 Their formal initial and reply comments are already part of the record and refute many of the allegations that continue to be made in support of forbearance. We will not repeat at length the arguments already laid out by these initial and reply comments. Rather, the primary focus of this written ex parte, is on USTA s insistence that Part 32 USOA regulations for price cap ILECs, as well as other accounting and reporting requirements, be eliminated. 5. A number of State commissions and a State public utility commissioner have timely and actively opposed USTA s request for the elimination of the Part 32 USOA requirements for price cap ILECs. The State Members submit the following: a. Elimination of the Part 32 USOA regulations undermines the jurisdictional separations process while these rules are necessary to properly reform the separations process and the Federal-State Joint Board is still considering reforms to the separations process. 9 Commissioner Larry S. Landis, IURC, consistently argued that none of the Part 32 accounts and accounting rules should be eliminated until after final separations reform is accomplished. 10 b. Keeping in place the Part 32 USOA regulations is essential for the correct development and operation of the FCC s contemplated cost model that will be at the core of the Connect America Fund Phase II (CAF II) support to price cap ILECs. NASUCA has succinctly observed that to assess the reasonableness of proposed broadband cost models, the FCC needs to require all companies to submit data using the same guidelines, and the only consistent standards that can accomplish this function are the Part 32 rules. 11 Further, a number of States still rely on accounting data and information that are filed as part of the remaining FCC Automated Reporting Management and Information System (ARMIS) reports for intrastate proceedings that involve Parts 32, 64, 65, 36 and 69 of the FCC s USOA Rules, including useful cost accounting data that will become even more necessary as the Commission and the States are working to implement the 7 Compare USTA ex parte submission at WC Docket No. 12-61 of March 8, 2013 (March 5, 2013 USTA and FCC Staff tel. conference call). 8 See generally Comments of the California Public Utilities Commission (CA PUC), April 9, 2012; Comments of NASUCA, April 9, 2012; Comments of Commissioner Larry S. Landis, Indiana Utility Regulatory Commission (Commissioner Landis, IURC), April 9, 2012; Reply Comments of the Public Service Commission of the District of Columbia (DC PSC), April 24, 2012; Reply Comments of the Michigan Public Service Commission (MI PSC), April 24, 2012; Reply Comments of the Pennsylvania Public Utility Commission (PA PUC), April 24, 2012. 9 CA PUC, April 9, 2012, at 7. 10 Commissioner Landis, IURC, April 9, 2012, at 3. 11 NASUCA, April 9, 2012, at 26.
Page 4 of 5 FCC Reform Order and its ongoing rulemakings. 12 It is obvious that the continuous USTA advocacy for FCC forbearance from its own USOA accounting and reporting rules will not be of assistance to the Commission and States when it comes to the implementation of the ICC/USF Transformation Order and the joint FCC-State oversight on a going-forward basis. In contrast, if the USTA suggestions were to be adopted, it is totally unclear how the Commission and States will be able to monitor and verify the type of capital investments relevant to broadband deployment that are put in place, e.g., fiber optic facilities, Internet Protocol (IP) based soft switches, etc., and the associated expenses accrued in the absence of a totally new and national reporting system. c. States that still mandate the submission of financial accounting reports by the telecommunications carriers that they regulate largely rely on the FCC s USOA rules. If these were to be essentially eliminated per USTA s proposals, individual states will have to undertake their own individual and expensive efforts for either maintaining such rules in place at the intrastate level or devising their own financial accounting and reporting rules. The Michigan Public Service Commision (MI PSC) points out that Petitioners [USTA] neglect to mention that they have had great success in the individual States, and other jurisdictions, in reducing their reporting and regulatory requirements by arguing that the USOA accounting information is all reported at the federal level and the State commissions can obtain information from the federal entity. The MI PSC argues that if the FCC were to grant forbearance to eliminate these reporting requirements at the federal level, this would leave little to no oversight in place and the States would be unable to obtain this information. 13 d. The USTA Petition also seeks relief from the Commission s accounting and reporting rules regarding continuing property records. 47 C.F.R. 32.2000(e) and (f). The property records forbearance request is directly related to Category 4 rules that US Telecom is requesting forbearance from, and the Category 4 rules are correlated to the cost allocations which separate out the interstate and intrastate portions of the company s assets, and revenues and expenses, all of which are used to develop a company s total element long run incremental cost (TELRIC). 14 In short, continuing property records cannot somehow be treated as irrelevant for price cap ILECs when both the FCC and the States utilize the relevant accounting parameters for the development of cost-based TELRIC wholesale access rates for unbundled network elements (UNEs). In other words, the continuous implementation of the federal Telecommunications Act of 1996 (TA-96) by the Commission and the States cannot simply be wished away because of USTA s forbearance requests. 12 PA PUC, April 24, 2012, at 11, citing In re Connect America Fund et al., WC Docket No. 10-90 et al., (FCC, Rel. Nov. 18, 2011), Report and Order and Further Notice of Proposed Rulemaking, slip op. FCC 11-161, 921-923, at 333, 26 FCC Rcd 17663, 17996 (2011), and subsequent Reconsideration and Clarification rulings (collectively USF/ICC Transformation Order), appeals pending. See also NASUCA, April 9, 2012, at 23-26. 13 MI PSC, April 24, 2012, at 10-11. 14 MI PSC, April 24, 2012, at 11.
Page 5 of 5 6. The State Members reiterate their serious concerns that the repetitive ex parte in-person meetings with the Commissioners Offices and the Staff of the FCC while the Commission is considering an internally circulating draft Order do not afford adequate due process to the participating parties in this proceeding and undermine the value of the formally submitted initial and reply comments. If the Commission and its Staff are in need of additional and specific input on particular issues, the FCC should publish an appropriate notice and solicit supplemental comments within an abbreviated comment cycle that would still permit the FCC to timely rule on USTA s Petition. If you have any questions about this correspondence, do not hesitate to contact any of the undersigned or Labros E. Pilalis at (717) 783-5243, Advisor to USF Joint Board State Chair Cawley, George Young, Advisor to Separations Joint Board State Chair Burke at (802) 828-2358 or J. Bradford Ramsay at (202) 898-2207. Sincerely, State Members of the Federal State Joint Board on Universal Service Commissioner James H. Cawley Pennsylvania Public Utility Commission State Chair Commissioner Anne C. Boyle Nebraska Public Service Commission Commissioner Stephen Michael Bloom Oregon Public Utility Commission Consumer Counsel William Levis Colorado Office of Consumer Counsel State Members of the Federal State Joint Board on Separations Commissioner John Burke Vermont Public Service Board State Chair Commissioner Orjiakor Isiogu Michigan Public Service Commission Commissioner Larry Landis Indiana Utility Regulatory Commission Commissioner Betsy Wergin Minnesota Public Utilities Commission cc: Office of Chairman Genachowski Office of Commissioner McDowell Office of Commissioner Clyburn Office of Commissioner Rosenworcel Office of Commissioner Pai