ETC What is the right number and its impact on USF

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ETC - What is the right number and its impact on
USF?

• Curt Stamp
• President
• Independent Telephone and Telecommunications
  Alliance (ITTA)
• June 18, 2008
• Oklahoma City, OK

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Agenda

• ITTA Overview
• USF Reform to Date
• Solutions for Sustainable USF

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ITTA members are mid-size local exchange carriers
that provide a broad range of high-quality
wireline and wireless voice, data, Internet, and
video telecommunications services to 30 million
customers in 45 states
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A Mid Size Company Perspective

• 2nd Largest ILECs in Most States
• Mix of Rural, Urban and Small Urban Markets
• Leading Rural Broadband Providers
• Significant Competition
• Multi-faceted Business Operations
• Major Acquirers of Bell Access Lines
• Publicly Traded
• Access to Capital
• Engineering Expertise
• Good Consumer Track Records

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USF Reform where we are today

• CETC Cap implemented
• Joint Board Recommendation 11/07
• Comments and replies filed
• Parties meeting to work on industry plan

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Universal Service Reform

• Support Federal State Joint Board Recommendation
• Mobility Program
• COLR Program
• Broadband Program
• Concerns About Reverse Auctions and Investment
• Removal of Identical Support Rule
• Contribution Methodology
• Key Outcome Stability

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USF Contraction for Large RLECs
2004-2006 Growth In Large Rural Company
Federal USF Funding

• Largest rural carriers are reporting significant
  contraction in federal USF receipts
• Among explanations . . .
• Increased efficiencies at rural companies
• Unanticipated effects of Rural Growth Factor as
  investment continues but the number of access
  lines contract

Growth and Decline in Funding, December 20, 2007
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Number of CETCs by Study Area
Why the Identical Support Rule Should be
Eliminated
Numbers of CETCs funded and pending in ILEC areas

• 11 funded CETCs operate in the study area of
  Telephone USA of WI (one more pending)
• 45 study areas have 5 or more funded CETCs
• 205 study areas have 3 or more funded CETCs

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Why USF Reform is Needed

• Increased pressures on fund in current
  environment
• Increased calls for accountability while asking
  the fund to do more with less (e.g. broadband,
  mobility, etc.)

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Guiding Principles for USF Reform

• Reform needs to
• Ensure maintenance of wireline networks
• Establish clear guidelines for wireless
  recipients
• Promote broadband deployment
• Eliminate the identical support rule
• Take steps to address intercarrier compensation
  issues