Rural Carriers Complain About Broadband Obstacles

Reform of the FCC's telecom subsidy program creates uncertainty, some carriers tell lawmakers

Rural telecom and broadband providers in the U.S. face big challenges in connecting their most remote customers, as the U.S. Federal Communications Commission transitions away from old telephone subsidies, a group of providers told lawmakers.

The FCC's eligibility rules for carrier subsidies under the new Connect America Fund, a broadband-focused revamp of the agency's Universal Service Fund, seem to have arbitrary caps and target carriers serving the most rural areas, said John Strode, vice president of external affairs for Ritter Communications, an Arkansas voice and broadband provider. High-cost carriers have their subsidies capped under the new fund, he noted during a Senate hearing Tuesday.

The high-cost carriers are capped "with no examination" by the FCC of why their costs are higher than other carriers, he said. Some carriers have legitimate reasons for high costs, because "some service areas are very, very expensive to serve," Strode told the Senate Commerce, Science and Transportation Committee's communications subcommittee.

The new FCC rules, adopted in November 2011, make it difficult for rural carriers to plan ahead and to invest in new services, Strode said. Ritter has cut costs and laid off workers as a way to offset changes in telecom subsidies and declines in intercarrier compensation rates, he said.

The FCC's efforts to reform USF have "generated uncertainty and stalled investment, leaving customers and broadband advancement in a lurch," Strode said.

The first round of subsidies from the Connect America Fund -- about US$775 per home -- were not large enough for providers to expand into remote areas, added Steven Davis, executive vice president of CenturyLink. About 18 million U.S. residents still lack access to broadband service, he said, but more reforms of subsidies are needed to serve those people.

CenturyLink has not received significant funding from the FCC's Connect America Fund because of those funding limits, he said. Davis called on the FCC to focus the fund on areas where "market forces would not otherwise make broadband available."

The FCC has made some strides toward eliminating subsidies in areas that have broadband service, but the U.S. Rural Utilities Service continues to provide subsidies in areas that already have broadband, said Patricia Jo Boyers, president and CEO of Boycom Cablevision, based in southeastern Missouri.

"It's ... vital that the government not subsidize the build-out of broadband networks in areas where unsubsidized companies already provide that service," she said. "When we spend private capital to bring broadband to communities, there's no reason for the government to step in and aid others."

Boycom, financed through second mortgages on Boyers' house and farm, provides broadband service to "end-of-the-world-and-turn-left places," she said. "We've always said we've done so much for so long for so little, we are absolutely qualified to everything with nothing at all."

Boyers called on Congress to eliminate unnecessary regulations for broadband and telecom providers, but she also called on the Congress and FCC to set rules in upcoming wireless spectrum auctions that allow small carriers to win spectrum.

Representatives of the FCC and RUS didn't immediately return messages seeking comment on the hearing.

The hearing was an effort to educate senators about directions to take telecom reform, said Senator Mark Pryor, an Arkansas Democrat and subcommittee chairman.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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