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Hank Hultquist of AT&T just smiled as senior state regulator Jim Cawley warned the Big Telco "ABC" plan was based on "Fiction worthy of James Bond. No responsible regulator would use this data until they release the actual model." Hultquist responded with a $5M, 12 person lobbying team pressuring Steve Rosenberg of the FCC to make sure no one who didn't sign a license could obtain the actual data for the model. (ex parte details below.) 

    Hank's commissioned model implied that AT&T and Verizon were losing $50/month on each of a million existing DSL lines and would abandon them without $billions in subsidies. This is wildly implausible, given unchallenged Wall Street estimates that their average DSL line cost $8/month to service. The big carriers have modest backhaul costs because they have fiber in place to nearly all rural exchanges. The copper and DSLAMs are already in place with only modest maintenance costs. The folks running the big telcos would have been very stupid if they had invested so much in DSL lines where they were losing fortunes even after the investment. Randall and Ivan are extraordinarily capable executives who aren't stupid.

    I've discovered since that the need for subsidies for the (extremely modest) number of LTE lines to be added was highly exaggerated as well. AT&T in a T-Mobile merger filing said there was a good financial case for 97% LTE buildout, which would include most if not all of the deployment promised. I chose to believe that filing, which is another nail in the coffin of the model. 

     If they make the main assumptions of the model public, any informed scholar or reporter can rip it to shreds. There's far too much data, from AT&T and Verizon among others, that big carriers with fiber in place simply aren't losing $billions on their existing DSL deployments. So I bet they never make the actual assumptions public. No honest public servant would approve the subsidies.

    Jim Stegmann of CostQuest developed the model and thereby proved he is one of the most skilled analysts in this field. He gave his clients what they wanted: numbers that justified paying them $billions. He hid the truth effectively enough that senior FCC officials didn't retch when they saw the conclusions. I knew Stegmann is good and said as much when asked about his qualifications to do the work on the broadband plan. I'm sure others did as well, so I don't claim credit for him getting the job. I also excoriated Texas officials for rigging the contract for the state broadband map to exclude his firm. 

     Because he did the modeling for the broadband plan, I was surprised to see him part of the lobbying team a few months ago when Banks and the big telcos presented this to the FCC. I checked with the FCC and heard back that Stegmann had broken no rules on lobbying. An old boss believed "Jim's only a technician so who cares." He's a very good one, with inside information from the plan and close relations with the team deciding on USF, so I care.

    After the public criticism of Meredith Baker resigning as commissioner to lobby for Comcast, I thought they'd clamp down on the revolving door. So far, I've seen no evidence that the FCC is honoring Obama's pledges on the subject.

About that $5M estimate: Corporate lobbyists don't have to disclose how much they are paid, so I am working from an assumption the people involved are paid comparably to their peers. Senior lobbying partners at D.C. law firms pull at least $1M, and some $3-5M. Verizon's top lobbyist, Griffin Bell, collected $7M one year that went on record. Kathleen Abernathy of Frontier is paid over $M. Cicconi of AT&T publicly filed for $Millions. At least three of the team are at or near that level and would be underpaid if they didn't pull $M/year. 

    Abernathy as an FCC Commissioner was passionate about how companies were collecting far too much money for USF. Now working for Frontier, she's a loud voice demanding more money. 

     Lobbyists are like that. 

Ms. Marlene Dortch Secretary Federal Communications Commission 445 12th Street, S.W. Washington, D.C. 20554

August 10, 2011

Re: Developing a Unified Intercarrier Compensation Regime, CC Docket No. 01-92; High-Cost Universal Service Support, WC Docket No. 05-337; Establishing Just and Reasonable Rates for Local Exchange Carriers, WC Docket No. 07-135; Connect America Fund, WC Docket No. 10-90; A National Broadband Plan for Our Future, GN Docket No. 09-51; Federal-State Joint Board on Universal Service, CC Docket No. 96-45; Lifeline and Link-Up, WC Docket No. 03-109

Dear Ms. Dortch:

On Monday, August 8, 2011, Maggie McCready (Verizon), Hank Hultquist and Mike Lieberman (AT&T), Eric Einhorn and Frank Schueneman (Windstream), Jeff Lanning, Christy Londerholm, Richard Rousselot and Peter Copeland (CenturyLink), Jim Stegeman and Mark Guttman (CostQuest) and the undersigned met via conference call with Steven Rosenberg (Office of Strategic Planning and Policy Analysis) and Michael Steffen (Office of the General Counsel).

Our discussion centered on the model for allocating support to broadband networks in high-cost areas described in the recent ABC Plan filing. (Letter from Robert W. Quinn, Jr., AT&T, Steve Davis, CenturyLink, Michael T. Skrivan, FairPoint, Kathleen Q. Abernathy, Frontier, Kathleen Grillo, Verizon, and Michael D. Rhoda, Windstream, to Marlene H. Dortch, FCC, WC Docket No. 10-90 et al. (filed July 29, 2011) (ABC Plan)). The model was developed by CostQuest Associates, Inc., and is known as the “CostQuest Broadband Analysis Tool” (CQBAT). We discussed approaches to providing additional public information concerning the CQBAT as well as to providing access to the model and model reports for the FCC and for third parties. Access to the model could be provided through a licensing agreement or agreements depending on the level of access and reporting desired. More detailed access to certain inputs could require an additional licensing agreement with the data source. Access to model source code would likely require an additional nondisclosure agreement and could potentially occur on- site at CostQuest’s facilities.

607 14th Street NW, Suite 400 • Washington, DC 20005-2164 • 202.326.7300 T • 202.326.7333 F • www.ustelecom.orgMs. Marlene Dortch August 10, 2011 Page 2 of 2

Pursuant to Commission rules, please include a copy of this filing in each of the above-referenced dockets.