Several rural telco groups have banded together to challenge the findings of a white paper from The Technology Policy Institute, which found that 59 cents of every dollar awarded to telcos from the Universal Service high-cost fund went toward general and administrative expenses.

“Faulty assumptions and erroneous calculations led the paper to overstate dramatically the portion of USF that supports such expenses,” wrote the National Exchange Carriers Association (NECA), the National Telecommunications Cooperative Association (NTCA), the Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO), the Rural Alliance and the Western Telecommunications Alliance (WTA) in a press release issued yesterday.

The telco groups noted that the Federal Communications Commission’s recently released notice of proposed rulemaking observes that corporate expenses account for only 13% of high-cost loop support—not 59% as the white paper states.

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According to the telco groups, the white paper author apparently assumed all of a small telco’s general and administrative expenses were covered through the high-cost fund. “The fatal flaw of the paper is its incorrect assumption that all expenses incurred by USF recipients are actually supported by USF,” the release states.

According to the rural telco industry, the Technology Policy Institute went looking for an outrageous statistic it could seize upon to illustrate its belief that the rate of return system eliminates the incentive for firms to operate efficiently. But it apparently did so without a full understanding of how the system works, which certainly calls into question any assertions and recommendations made in the paper about the high-cost program, argues this rural telecom coalition.

As the release from the telco groups notes, “The paper ignores that USF recipients are in fact required to run their businesses efficiently precisely because they do not receive full recovery of all expenses through USF.”

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2 thoughts on “Rural Telco Industry Challenges USF Reform Findings

  1. I wonder if anyone's pondered the question, are rural telcos being demonized by subtle wireless industry tactics? AT&T and Verizon, who reap the lion's share of USF money, have been vigorously selling (through multi-million dollar lobbying) a narrative that they walk on water and their sweat doesn't stink. Is it possible this report could have little to do with objective research, but something quietly encouraged by one of the big dogs to start an anti-rural telco narrative conveniently just at the time the FCC is deciding who continues to get USF money? If any of this is indeed the case, rural telcos need to think about collectively doing some all-out PR/lobbying to make their case for a bigger seat at the USF table.

  2. Craig – Right on the money.

    The FCC (and many legislators) have been drinking the kool-aid from the wireless industry (including the big wireline companies) that wireless is the only solution to all broadband capabilities. These big companies collect the lion's share of USF as compared to the aggregated high cost companies. Take a high cost company with 2,000 local lines receiving $55 per month per line as compared to a large company with 800,000 rural local lines receiving $13 per month per line. It takes a whole sweat load of those little high cost companies to equal just one of the big dogs.

    Anyone ever consider the big companies with a wireless play getting in on both sides of the USF game? They get rural land-line support and their wireless arm gets rural wireless support.

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