FCC Grilled Over USF Reform Impact On Telecom In Native Lands

Senators concerned about phasing out legacy support, question efficacy of waiver process

By John Eggerton -- Broadcasting & Cable, 6/7/2012 5:37:02 PM

The FCC came under some fire Thursday in a Senate committee for the impact of Universal Service Fund reforms on carriers serving Native lands, which are being implemented beginning July 1.

Those reforms include phasing out some legacy phone support as the FCC migrates to wired and wireless broadband, legacy support smaller carriers have been using to secure long-term loans made by another government agency, the Agricultural Department's Rural Utilities service (RUS).

Senate Indian Affairs Committee Chair Daniel Kahikina Akaka (D-Hawaii) said Thursday that the FCC's Universal Service reforms have "disproportionate and potentially dangerous" impacts on Native communities.

That came in a hearing Thursday on Universal Service Fund Reform: Ensuring a Sustainable and Connected Future for Native Communities.

Various legislators weighed in with their concerns that the reforms would cut off $600,000 in annual support to some companies supplying communications services in high-cost Native areas as the FCC migrates support from phone to broadband. He suggested that could actually be a setback for Native American Broadband Connectivity.

That point was seconded by Sen. Lisa Murkowski (R-Alaska), who said she recognized, as did most legislators, that the USF fund needed reforming. But she also said that the need to address waste and fraud should not have the unintended consequence of hurting the people reforms were meant to help.

FCC Commissioner Mignon Clyburn came to the FCC's defense. She told the committee that the reforms "will make a significant dent in the digital divide." She also pointed out that there was a waiver process in place "for those carriers who cannot adjust to the reforms." She also pointed to the FCC's Office of Native Affairs, which is helping with the transition.

Among Akaka's concerns was that the FCC's reduction in USF funding could cause some telecom companies to default on Rural Utilities Service loans, which depend on USF funds for repayments.

RUS Administrator and former FCC Commissioner Jonathan Adelstein said the vast majority of RUS loans depended on USF funding. He used the analogy of building a big, expensive house by taking out a mortgage rather than building it with additions paycheck to paycheck.

Sen. John Barrasso (R-Wyo.) said he had sent letter to chairman about taking into account the impact of reform on telecom providers before implementing them, making the point that he was still waiting for an answer.

Barrasso asked whether some of the FCC regression analysis data underlying the USF changes was flawed, as prepared testimony in a second hearing panel alleged. Clyburn said that if there is erroneous data, the FCC would make the "necessary modifications."

Sen. Tom Udall (D-N.M.) pushed the point, asking for any comment on those allegations. Clyburn said the FCC's process had been one of the most open and engaged, and that it was triaged. "Ultimately, she said, the goal was that everyone would be served.

Sen. Udall also said some of the witnesses on the second panel alleged there had not been enough outreach from the FCC to Native tribes.

Clyburn said that more resources would always be welcome. She said the FCC's Office of Native Affairs and Policy had had more than 250 meetings. "There has been engagement." Not everyone is going to be happy with the pace of change, she said, but that USF had to be put on a "sustainable path." Clyburn said she was not going to support a flash cut, and that the FCC did not have a flash cut.

Sen. Murkowski said there were concerns that that waiver process is costly and difficult. She also said "It seems clear that there are data errors that need to be followed up with." She thanked Clyburn for the open door policy, but said that is not giving smaller telecoms much comfort.

She asked how much Alaska telcos would lose due to reform, and asked how the companies were expected to sustain their business. Clyburn said that only two Alaska carriers' high-cost support was capped by the reforms.

Clyburn said she would look into suggestions that the Navajo Nation could be excluded from FCC mobility funding because it was considered to already have 3G service. Sen. Udall brought up the issue and said he would be surprised since some areas of the nation don't even have cell phone service.

The cost of the waivers was an issue at the hearing. In response to question from Akaka, Clyburn said Clyburn said the application cost is $8,000, though she was not ruling out other costs. She called it a streamlined process and the fee "not inconsistent" with other filing fees.

Sen. Murkowski said that she had heard from companies that the actual cost could be as much as $180,000. Clyburn said there was no requirement to hire outside consultants.

Clyburn's bottom line was that the transition would not be easy, or comfortable for everyone, but would ultimately be an effective and efficient process for getting broadband to unserved areas, including tribal lands.