Some of the rural telcos that will be key to furthering the FCC’s National Broadband Plan fear the agency’s plans for the Universal Service Fund (USF) will destroy their business models and derail ubiquitous high-speed Internet deployment.
The plan, as proposed, would freeze rural providers’ USF support and move them from Rate-of-Return (RoR) regulation to price-capping, said Delbert Wilson, general manager of Hill Country Telephone Cooperative in Ingram, Texas. That would “effectively stop a rural carrier from further deployment of infrastructure because we could no longer recover our cost, which is very contrary to the objectives and goals of the plan,” Wilson told VON/xchange.
That’s partly because, even though RoR and price-cap rules prevent operators from charging more than market value for products and services, the RoR method lets companies collect government subsidies for multiple services.
On Thursday, Wilson testified before the Senate Commerce Committee, one of the Congressional bodies that oversees telecom policy, for the National Telecommunications Cooperative Association (NTCA), the Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO) and the Western Telecommunications Alliance (WTA), about the proposed shifts to the USF within the FCC’s National Broadband Plan. Hill Country has migrated to an IP network, Wilson said, but if the National Broadband Plan takes effect as written, there’s no guarantee such momentum will continue.
"We had great hopes for the broadband plan and what it could mean for all Americans,” Wilson told lawmakers. “Yet here we are again scrambling to fix an emerging federal policy that fails to comprehend the rural circumstance.”
Senators want to know how best to overhaul the USF as they implement the National Broadband Plan. The USF, a more than $7 billion-subsidy established by the 1996 Telecom Act, is fueled by surcharges on consumers’ and businesses’ landlines, and by VoIP calls that connect to the public-switched telephone network. So, one aspect of the problem is that fewer Americans use “plain old telephone service” now than they did 14 years ago. With less money trickling in, providers are shouldering ever-increasing contribution rates – 2010’s second quarter marked the highest factor ever, at 15.3 percent of a telecom company’s interstate and end-user revenue. The proposed third-quarter rate fell to 13.6 percent.
