Senators ask FCC to reform rural broadband investment rules

A group of 26 U.S. Senators, including both from Montana, have signed on to a letter to the chairman of the Federal Communications Commission asking him to reform the way that Universal Service Fund support is distributed.

The USF provides support to telecommunications companies to build broadband and other networks in hard-to-reach areas, such as rural America. This helps keep consumer rates affordable in areas where the network service would otherwise be very expensive.

However, reforms in 2011 to the way the USF distributes the money have made the amount of support telecoms can expect unpredictable. This, the senators say, has discouraged telecoms from taking out the necessary loans to make long-term capital investments on broadband networks for the rural parts of the country.

“We remain concerned the reform order is limiting the ability of small carriers to provide rural consumers with the broadband service they need to compete in today’s global economy,” the senators wrote in their letter to FCC Chairman Tom Wheeler.

The economics behind it all are over my head, but Cassandra Heyne of the Monitor, a communication industry blog, summarized the problem in a 2012 post.

The 2011 reforms changed the system so that the USF relies on a method called quantile regression analysis to determine which companies are eligible to receive USF support.

This established 11 caps that companies could trigger, which would limit their USF support. However, critics say the FCC is using the QR analysis incorrectly, relying on bad data, making assumptions about the quality of the data it is using, and keeping companies in the dark about which other companies they’re being compared with.

Also it seems some of these caps can be applied retroactively, meaning that investments a company has begun to take out loans for could have their USF support yanked later on if they hit any of the 11 caps when the math gets done.

In other words, if a company invests too much in an areas, and other companies have already spent in that area too, then a cap could be triggered – “and there is a high probability that today’s reasonable investments will suddenly become excessive,” Heyne wrote.

Companies “live in constant fear that they are spending too much on broadband infrastructure for rural Americans – an infrastructure that this very government has demanded and insisted is necessary to ‘win the future’ – and will be penalized for doing so,” Heyne wrote.

She goes on:

Basically, QR punishes (companies) financially by limiting incentives to make any investments; by making capital more difficult to obtain; and by pitting (companies) against other, unknown (companies) in a reverse-incentive ‘race to the middle.’
The senators’ bipartisan letter was signed by Sens. Jon Tester (D-Mont.), Max Baucus (D-Mont.), John Barrasso (R-Wyo.), Kelly Ayotte (R-N.H.), Mark Begich (D-Alaska), Michael Bennet (D-Colo.), John Boozman (R-Ark.), Bob Casey (D-Penn.), Saxby Chambliss (R-Ga.), Mike Crapo (R-Idaho), Michael Enzi (R-Wyo.), Deb Fischer (R-Neb.), Chuck Grassley (R-Iowa), Heidi Heitkamp (D-N.D.), John Hoeven (R-N.D.), Johnny Isakson (R-Ga.), James Inhofe (R-Okla.), Tim Johnson (D-S.D.), Jeff Merkley (D-Ore.), Jerry Moran (R-Kan.), Lisa Murkowski (R-Alaska), Mark Pryor (D-Ark.), James Risch (R-Idaho), Pat Roberts (R-Kan.), Jeanne Shaheen (D-N.H.), and Mark Udall (D-Colo.).