Blog Posts by Wireline Competition Bureau

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Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

The USF/ICC Transformation Order requires price cap carriers that accept the state-level commitment for universal service support under Connect America Phase II to offer broadband at speeds of 4 Mbps/1 Mbps to all supported locations and at least speeds of 6 Mbps/1.5 Mbps to a number of supported locations by the end of the fifth year. The Commission directed the Wireline Competition Bureau to design the forward-looking cost model so that it ensures that the “most locations possible” receive broadband at speed of 6 Mbps/1.5 Mbps or greater at the end of the five year term.

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop for inclusion in the record. Comments are moderated for conformity to the workshop’s guidelines.

Background

The second version of the Connect America Cost Model (CACM v2.0) assumes an average federal corporate income tax rate of 34 percent and an average state corporate income tax rate of 5.3 percent. Parties who have signed the Third Supplemental Protective Order may view how these income tax values are used in CACM v2.0 by accessing the model, selecting the “Posted Data Sets” option, and visiting the “Capital Cost Inputs” tab of the “CQCapCostForCACM” capital cost model.

For property taxes, CACM v2.0 uses a set of state-specific factors that are applied to general and administrative (G&A) costs, which are calculated as an operating expense. G&A costs include property tax. The factors are designed to reflect the difference in property tax rates across the states, based on information obtained from Duff & Phelps, LLC, a large national company that handles property tax assessments for telecommunications carriers. The state-specific factors are applied against the G&A costs, which are calculated as an operating expense. Parties who have signed the Third Supplemental Protective Order may view the state-specific factors by accessing the model, selecting the “Posted Data Sets” option, and visiting the “Ptax V3” table in the “Inputs Collection.” To see how CACM applies the state-specific property tax factors, these parties may select the “Posted Data Sets” option and visit the “Telco Opex” tab of the “OpexV4” table in the “Inputs Collection.”

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop for inclusion in the record. Comments are moderated for conformity to the workshop's guidelines.

Background

On December 11, 2012, WCB announced the availability of version one of the Connect America Cost Model. Version one of the model provides the ability to calculate costs using a variety of different inputs and assumptions, allowing the Bureau to choose among different network deployments to serve funded locations (e.g., fiber to the premises or fiber-fed digital subscriber line), different assumptions about the amount of existing facilities assumed to exist (e.g., green-field or brown-field deployments, the mix of aerial, buried or underground plant), as well as different assumptions about unit costs for capital and operating expenses.

While version one of the Connect America Cost Model is similar to the CQBAT model submitted into the record by the ABC Coalition, it contains a number of key differences, including an estimate of the cost of providing not only broadband services, but also voice services, and an updated calculation of brown-field costs to include replacement capital expenditures. The Bureau anticipates that a second version of the Connect America Cost Model will be available in the coming weeks and will include an update to 2010 census geographies and updated SBI data. The Bureau expects to adopt the final version of the Connect America Cost Model, with specific inputs, in 2013, which it will use to set Phase II support amounts to be offered to price cap carriers.

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop for inclusion in the record. Comments are moderated for conformity to the workshop's guidelines.

Background

The Commission required that the HCPM calculate the average cost of serving lines to at least the wire center level. The USF/ICC Transformation Order requires that the Connect America Phase II cost model be capable of calculating cost "on a census block or smaller basis"—a much more granular level.

Connect America Cost Model: To allocate costs within a census block, the first version of the CACM (CACM v.1) uses a "cost causation" allocation method where the fraction of shared costs is allocated according to the number of customers attached to each line.

In the Model Design Public Notice, the Bureau proposed to model the costs associated with the entire network, and then assign shared costs between eligible and ineligible areas. The Bureau sought comment on the appropriate methodology for allocating costs between these areas. The Bureau noted in the Model Design Public Notice that cost allocations can be problematic, and the "subtractive" method—determining the costs of supported areas by taking the cost of both supported and unsupported areas and then subtracting the cost of the unsupported areas—could be too complicated to calculate. Although some commenters urged the Bureau to adopt the subtractive approach, none have proposed a computationally tractable method for actually implementing such an approach.