Rural Companies Say Broadband Slowed by USF/ICC Uncertainty, ‘Cumbersome’ Grants and Loans Process

Rural telecom companies protested the FCC’s Universal Service Fund and intercarrier compensation revamp efforts, in testimony at a hearing Wednesday of the House Small Business Subcommittee on Healthcare. Witnesses also complained about high administrative costs to apply for federal grants and loans. Subcommittee leaders urged accelerated broadband buildout, particularly in rural areas. Chairman Renee Ellmers, R-N.C., urged passage of her bill (HR-2128) to stop the federal government from imposing penalties on health care providers who can’t make electronic prescriptions.

"There is still a severe shortage of network infrastructure that limits many small businesses from utilizing broadband services,” Ellmers said. “In particular, rural areas of states are most likely to lack the necessary capabilities, as they can be difficult and expensive to develop.” When considering federal broadband policies, “we must first ensure that the regulatory changes do not diminish the incentive for private sector investment in broadband infrastructure,” she said. “Moreover, we must strengthen our oversight of various programs to confirm that federal dollars are being spent efficiently, and will benefit small businesses in rural areas.”

Broadband increases efficiency and reduces costs for small businesses, said Ranking Member Cedric Richmond, D-La. It contributes to tourism, agriculture and rural healthcare, he said. But broadband service is lacking in rural and low-income areas, he said. “The adoption gap may further widen without adequate support for broadband deployment."

Uncertainty surrounding changes to USF “is very scary for us,” said Mitzie Branon, general manager of Yadkin Valley Telephone Membership Corp. She spoke on behalf of OPASTCO, the NTCA and the Western Telecommunications Alliance. The FCC’s “narrow focus” on the “completely unserved” means many rural areas that need high-cost support for broadband won’t get help, Branon said. The USF order “failed to adopt provisions promoting broadband service in rural carriers’ service areas, cuts existing cost recovery mechanisms for rural carriers retroactively, and proposed a further notice of rulemaking with the potential for more cuts,” she said. “Dangerous cuts to USF, especially if applied retroactively, could put billions of RUS loans at risk of default,” Branon said. “In addition, regulatory uncertainty has led to private lenders becoming less willing to provide financing for rural broadband projects -- making RUS communications programs more vital than ever before.”

Rural wireless carrier NorthwestCell “stands to lose all, or a substantial portion of” its high-cost support due to the USF order, said General Manager Roger Bundridge. It’s a member of the Rural Cellular Association, on whose behalf he was speaking. “Unless the FCC takes steps to ensure adequate support for mobile broadband in universal service mechanisms, and makes that support available to competitive carriers, the continued deployment of mobile broadband services in rural areas is uncertain,” said Bundridge. In the healthcare sector, there’s “a lot of uncertainty” about the overhaul of USF and intercarrier compensation, Indiana Telehealth Network Director Rebecca Sanders said.

Applying for broadband grants and loans is a complex and expensive process, witnesses said. Branon’s company won a loan and grant from the Rural Utilities Service Broadband Initiatives Program (BIP), but she said the process was “very cumbersome.” The company had to hire outside help for all the paperwork and ended up spending between $100,000 and $150,000 to complete its application, she said. Sanders said her healthcare group couldn’t apply for BIP because it didn’t have enough money.

The U.S. lacks “a coherent strategy for broadband innovation,” said Darrell West, a director at the Brookings Institution. “Unlike other nations, we make policy in a piecemeal fashion and focus on short rather than long-term objectives. This limits the efficiency and effectiveness of our efforts.” He urged Congress to permanently extend the R&D tax credits. West also recommended digital literacy programs and setting aside spectrum from voluntary incentive auctions for unlicensed use.

Spectrum legislation should be passed as part of the payroll tax cut extension, Bundridge said. The bill should not restrict the FCC’s ability to make auction rules, as proposed by the House, he said. “The removal of competitive safeguards could make it very difficult for a smaller wireless carrier to establish a strategy for future auctions and more challenging to attract investment, and may have the unintended consequence of discouraging many smaller wireless carriers from competing in an auction.”