Rural Broadband Alliance: FCC Has “Systemic Disdain” for Rural Telcos

Some members of the Federal Communications Commission have a “systemic disdain” for small rural carriers, the Rural Broadband Alliance argued in a press release issued today. “Both the official record and meetings with the Commission evidence the creation of a superficial caricature of rural companies at the Commission,” the group said. “This caricature is forged on a baseless assumption that rural carriers make unwarranted investments in network.”

The RBA is a lobbying and public interest group that was originally created last year  by certain rural telcos that were unhappy about the direction the FCC was moving as a result of recommendations about Universal Service reform made in the National Broadband Plan.

Systemic Disdain
I can’t attest to a “systemic disdain” toward rural telcos within the FCC. But I have noted that NBP crafter Blair Levin takes every opportunity he can to call attention to rural telcos that have received unusually high levels of Universal Service support, despite the fact that those telcos are the exception to the rule.  Levin and other parties within the FCC like to portray their USF reform efforts as a means of curbing the excesses of the system—because when today’s program is portrayed in that light, it’s easier for the FCC reformers to justify their recommendation to cap broadband Universal Service funding at the same level as today’s high-cost voice fund.

In a filing with the FCC last week, the RBA opposed the proposed funding cap, arguing that a cap is inconsistent with the Telecommunications Act of 1996, which requires the FCC to determine “what constitutes universal service and reasonably compare rates prior to determining how much funding is needed.”

ABC Plan
Members of the RBA in late July attempted to prevent larger rural telco organizations from supporting the “ABC Plan” for USF reform submitted to the FCC by six of the nation’s largest telcos. Although the larger rural telco associations stopped short of recommending proposals in the ABC Plan for their rural telco members, they essentially said that proposal was fine for rural areas served by the larger price cap carriers.  The rural telco associations also agreed to several modifications to USF reforms originally proposed for their members, including a reduction in the rate of return for small rural telcos from 11.25% to 10%.

The RBA, however, continues to oppose the ABC Plan—and made its position clear in last week’s filing, arguing that the plan would “place investments by small rural telephone companies in rural communities at risk.”

The group’s filing echoes comments made by the Rural Utilities Service in a recent FCC filing. The RUS argued that rural telcos might not be able to repay infrastructure loans made by the RUS if the FCC were to cap Universal Service funding.

Brokered Solution
I have to disagree with the RBA on a few issues, however.

First, the group continues to talk about how important it will be to retain rate-of-return regulation. But that goal is not contrary to what the brokered solution proposed by the rural telco associations and the six large carriers are recommending. Indeed, the retention of the ROR system—albeit at a reduced rate– was a key win for the rural telco associations in the brokered solution.

The RBA also has been one of the champions of the notion that large telcos somehow don’t deserve to get broadband Universal Service funding or shouldn’t be allowed to do so—and today’s press release was no exception. “Many of the larger carriers that would reap the benefits of the new ABC plan have failed in the past to invest in building telecommunications networks in rural areas,” the release states.

But what this argument misses is that the majority of U.S. households that can’t get broadband at all today are in rural areas where the incumbent is one of the large price cap carriers. I don’t think rural carriers really want these people to go without broadband, but that’s the logical result of what they are advocating. I realize I will anger some people by saying this, but I think some small rural telcos might find themselves on the receiving end of a bit less “systemic disdain” if they would rethink their rhetoric on this particular issue.

It’s also important to recognize that while the RBA seems to view the brokered USF solution as a defeat for small telcos, some other stakeholders–including the Rural Cellular Association, the National Cable & Telecommunications Association and the American Cable Association—have argued quite correctly that the brokered solution actually favors incumbent telcos both large and small. And although that favoritism is skewed more toward the large telcos than the small ones, the FCC appears to be unwilling to budge on that recommendation, simply because about twice as many unserved households are in price cap territories than in small rural telco territories.

It’s also important to note that the rural telcos are looking better under the brokered solution, which seems to have a fair level of FCC support, than they would have under the original NBP proposal. As the larger rural telco associations have pointed out however, that will only be true if the FCC can resist tampering with the brokered solution.

I’m sure the rural telco associations—and many of the companies they represent—are keeping their fingers crossed on that one.