Fitch U.S. Telecom Regulatory Review: CETC High Cost Support Cap Will Impact Wireless Operators
Fitch U.S. Telecom Regulatory Review: CETC High Cost Support Cap Will Impact Wireless Operators
For more on on wireless solutions for business, see our Wireless Buyer’s Guide
Universal Service Fund (USF) reform has been slow in developing, and while nearly all industry participants believe that massive reform is required, it has been very difficult to develop any sort of consensus on an ultimate solution. However, on May 1, the Federal Communications Commission (FCC) officially approved an interim cap on the total annual high cost support to competitive eligible telecommunications companies (CETCs), which are nearly universally represented by wireless operators. The cap will freeze the total annual high cost support for CETCs at their March 2008 levels with a few exceptions. The projected support for CETCs for first-quarter 2008 was approximately $361 million by the Universal Service Administrative Company (USAC), which compares to an actual disbursement of $275 million in the year earlier period, representing a 31% increase. The cap will likely lead to some erosion of the USF high cost support subsidy levels for wireless operators and owing to its high margin nature will negatively impact future cash flow. There is also broad support from the industry to eliminate the identical support rule that allows wireless operators to receive subsidy levels based on incumbent local exchange carrier (ILEC) wireline costs. However, the forthcoming fall 2008 elections could slow or stop any additional changes at this time.
The report, ‘Fitch Ratings’ Biannual Telecommunications Regulatory Register’, addresses the USF topic in greater detail and others including the 700 MHz auction summary and D-block developments, the Sprint Nextel rebanding plan deadline and video franchise activity. The report aims to give the reader an ability to evaluate the potential effects of regulatory developments on industry participants.
Fitch Ratings’ ‘Biannual Telecommunications Regulatory Register’, provides a review of important regulatory developments in the U.S. telecommunications industry over the past six months. The full report can be found at http://www.fitchratings.com. The report can be quickly located by clicking on Corporates under the Corporate Finance header and then clicking on special reports once in the Corporates Home Page.
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For more on on wireless solutions for business, see our Wireless Buyer’s Guide