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Sunday, June 22, 2014

The FCC Taketh Away

I recently called Chairman Wheeler to task for saying he'll increase the contribution factor to allow more E-Rate funding only "should this be warranted." (I think it's warranted already.)  Well, check this out.

Chairman Wheeler's hit list of services that he finds "outdated" saves the program about $600 million a year.  Almost all that savings  comes from voice, both landline ($377 million) and cell phone ($176 million).  By tossing voice out of the program (to make room for more broadband and Wi-Fi), we would save about $550 million per year, or $138 million per quarter.

Well, it's a quiet Sunday afternoon here at the Riordan household, so I thought I'd peruse the Proposed Third Quarter 2014 Universal Service Contribution Factor since I felt like taking a nap.  The contribution factor: 15.7%.  Last quarter, it was 16.6%.  Seems like a small drop, but how much is 0.9% in dollars?  It's $123.5 million.

So at the same time the FCC is cutting the size of the USF by $123.5 next quarter, they're talking about tossing voice out the program to save $138 million, because the fund is so strapped.

If you take a look at the contribution factor history, you can see that the peak was 17.9%, which we hit in Q1 of both 2010 and 2012.  I'm not advocating that the contribution factor should be that high, but if the FCC "rolled back" the contribution factor to 2010 levels and used the extra to pad the E-Rate, we'd have an extra $300 million next quarter.  Annualized, that's $1.2 billion.

And here's a little rant for dessert:
Hey, wait, wasn't Commissioner Pai just complaining the contribution factor was 16.6%?  Sure enough, on June 18th, he said it was 16.6%.  OK, we're still in Q2, so I guess it is still 16.6%, but since June 12th he's known it would be dropping to 15.7%.  So while he can at the moment claim "over an 80 percent increase" since 2009, he knew when he said it that in two weeks, it would be only a 65% increase since 2009.  It's lucky for him that the Commish chose 2009 and not 2010, since the contribution factor has actually decreased 12% since the beginning of 2010.  A decreasing contribution factor wouldn't have fit his narrative.

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