April 09, 2013, 3:48 PM — 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."