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Carriers resisting FCC slug on international cables

Great idea, let's tax the Internet!

Internet Security Threat Report 2014

Back in April, the Federal Communications Commission (FCC) proposed revising how contributions are made to America’s Universal Service Fund (USF), suggesting drawing international cable operators into the fund’s ambit.

The operators are now pushing back with a filing arguing that submarine cable operators should retain their exemption from the fund. The filing, prepared by law firm Wiltshire and Grannis, argues that the FCC’s proposal “would cause severe distortions in the market for international cable capacity”.

Under the proposed FCC rule, international operators would pay 15.7 per cent of their revenues to the USF.

The filing has been made on behalf of Global Crossing, GT Landing, Level 3 Communications, Pacific Carriage, PIPE, Southern Cross Cables, and Polynesia’s Office of Posts and Telecommunications.

The operators argue that non-US customers of submarine cables – for example, any Australian carrier or ISP that buys direct capacity rather than seeking a transit connection in Australia – are unlikely to tolerate price increases to subsidize America’s broadband policies.

Operators would also have to try to renegotiate “hundreds” of IRUs (indefeasible rights of use) – one of the principal instruments by which long-term high-capacity international services are contracted. The filing also notes the prospect that other countries could ape America’s folly, imposing their own penalties on international operators, and suggests that new operators would seek landings in other countries such as Canada.

The filing also notes that the FCC’s rulemaking appears to contravene Section 254(d) of the US’s Communications Act, which it says has been consistently interpreted as exempting international services from USF contributions. ®

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