Rural Telecoms: USF Reforms Are Pushing Us Toward Fiscal Cliff

Take complaint about FCC action to president in letter asking to be included in budget-fixing legislation

By John Eggerton -- Broadcasting & Cable, 11/28/2012 9:00:28 AM

Rural telecom providers have taken their complaints about the FCC's Universal Service Fund (USF) reforms to the White House, tying the issue to the "fiscal cliff" negotiations.

The USF funds telecom build-outs in high-cost areas where there is not a business case absent the government subsidy. The FCC is moving that support for phone service in high-cost, particularly rural, areas to broadband deployment, the new must-have telecom service, and to reform subsidies to reflect the move of voice to IP delivery. The goal is also to provide a "glide path" for that migration given that the switch-over will take time, though rural carriers suggest it is more like a crash landing for their particular economies.

In a letter to the president, the Rural Broadband Alliance asked to include language in fiscal cliff legislation suspending some of the reforms and require the FCC to submit them to the Federal State-Joint Board for their recommendations.

The carriers say the "well-intentioned but misguided" changes -- part of the FCC's migration of support from traditional telecom to broadband -- has led to job cutbacks and consumer rate increases.

USF 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).

"The rural small businesses will not receive the needed and anticipated revenues from the universal service mechanisms that they had understood to be 'sustainable' and 'predictable' when they were encouraged by the government policy and programs to make the investments to bring universal service to their rural communities," they wrote.

"We recognize and appreciate that the goal of the outcome of the broader fiscal cliff debate is to bring more certainty to our markets and accelerate our economic recovery, create new jobs, and improve the economic outlook for all Americans," the RBA said in its letter. "This broader discussion lends itself to the inclusion of provisions that address the need for a careful review of well intentioned, but misguided FCC policies that are proving an obstacle to new investment by small businesses in rural America and creating rippling effects throughout the economy."

The FCC has argued that there is a waiver process in place for companies having a hard time with the reforms, a point made by Commissioner Mignon Clyburn in a June Senate hearing on the issue that featured some criticism of the program by senators concerned about the impact on rural carriers of phasing out legacy support.

"The Connect America Fund is already working to expand broadband access to the 19 million rural Americans who lack it, while at the same time increasing fiscal responsibility in order to be fair to the consumers and small businesses nationwide who pay into the fund through universal service fees," the FCC sasid in a statement. "The accompanying reforms of the outmoded Intercarrier Compensation system will unleash over $1.5 billion in annual benefits to consumers by eliminating hidden callings costs while removing major barriers to deployment of advanced broadband networks.  The FCC continues to work closely with all stakeholders as we make this once-in-a-generation transition to bring broadband and voice service to all of rural America."