The average rate paid for local voice service in urban areas is $20.46, according to a survey conducted by the Federal Communications Commission. And according to rules established a few years ago, rural carriers that charge less than that amount are required to raise rates to that level on July 1 or lose some Universal Service support, explained Mike Romano, senior vice president of policy for NTCA – The Rural Broadband Association. That’s a 40% increase from the current local service rate floor, which is around $14, according to the NTCA.
The FCC is considering implementing a phase-in approach to the increase in local phone service rates, Romano said. But while that is a step in the right direction, he said that “doesn’t address the issue of what is reasonably comparable.”
Romano questions the requirement for rural carriers to charge no less than the urban average when rural local calling areas include fewer people – and therefore have potentially lower value – than urban local calling areas. Additionally poverty levels are higher in rural areas – a reality the FCC noted in a workshop about rural broadband just two days ago, Romano said.
When the subscriber line charge is added to the $20.46 urban average rate, the total cost of local phone service rises to between $26 and $27 – a level that could drive some rural customers to cancel local service and rely instead on a cellphone or on VOIP over broadband, Romano said. And as Romano explained, that would cause broadband prices to spike so that rural carriers can recover their network costs.
“It’s a real Catch 22,” said Romano, who added that the NTCA flagged this issue for the FCC after the policy was imposed but the FCC has not responded.