Senate Appropriators Question How FCC Policies Influence RUS, Broadband Investment

Sen. Jerry Moran, R-Kan., fears the effects of the FCC’s direction on USF and what it has done to rural telecom companies’ ability to invest. Moran. a member of the Commerce Committee, also chairs the Appropriations Agriculture Subcommittee, where he held a hearing on rural development Wednesday and aired many concerns about how FCC policies may affect investment.

Sen. Jon Tester, D-Mont., agreed about the broader challenges and pressed witnesses on how the Rural Utilities Service (RUS) -- a part of the Agriculture Department -- coordinates with other government entities like the FCC. “Our broadband is not where it needs to be,” Tester said of Montana. He called FCC Chairman Tom Wheeler “a great guy,” saying Wheeler visited Montana last week.

RUS Administrator Brandon McBride emphasized the recent recommendations from the administration’s Broadband Opportunities Council (see 1509210053). “What that Council encouraged us to do more than anything else was to communicate more among agencies, what other folks were working on in terms of expanding broadband access and how we can do that,” McBride told Tester. “And that has helped us in terms of RUS in having weekly meetings with other agencies, including the FCC, and talking about what we can do to expand broadband access.”

“I’ve been worried a long time going back to the original [2011 USF] order of the FCC,” Moran said, saying decision-making “affects the ability to repay loans” given to telecom companies. “I’ve tried to get rural development and the FCC chairman in the same room to have these conversations and it seemed to me there was an unwillingness to have that occur.” Moran pressed McBride and other USDA witnesses on whether they were making concerns known to the FCC. Moran sees a possible "damaging aspect" where telecom companies may not ask for loans or draw from them. No officials from the FCC testified as part of the subcommittee’s two panels of witnesses, and FCC spokespeople didn't comment.

Lisa Mensah, undersecretary for rural development, assured Moran there’s dialogue with federal partners. She lauded in written testimony the “extremely successful” broadband loans from the government through the Recovery Act: “As companies build out these services, 260,000 rural households, 17,500 businesses and 1,900 schools, libraries and health care facilities have new service with potential for exponential growth in the future.” McBride referred to communication “regularly” with the FCC and said RUS provides “some feedback” on the agency’s different proposals. “Have you seen any evidence that they’re doing anything different as a result of you raising these issues?” Moran asked. McBride emphasized the communication at a “high level” and said FCC officials are “aware” of RUS concerns about modeling.

Demand for RUS loans seems to have dropped in recent years, Moran said. “I think we would see that demand correlate to the 2011 FCC order on the universal service fund,” Brian Boisvert, CEO of Wilson Communications testifying on behalf of NTCA, told Moran. Boisvert said the FCC has made some improvements since the 2011 order and praised the “good step forward” in removing the quantile regression analysis formula from its calculations. “The work is not done,” Boisvert argued, saying the model still creates uncertainty. He cited the ongoing work the FCC, NTCA and others are doing to figure out how to best support stand-alone broadband, which Wheeler has committed to accomplishing by year’s end. “That is rapidly approaching,” Boisvert said. “It’s really important we get it right. This is a long-term solution that we’re seeking, not trying to hit a deadline.”

“The pool of assessable telecommunications service revenues is shrinking even as overall communications-related revenues grow,” Boisvert said in his written testimony. “As a result, the USF program effectively has an artificial funding ceiling that lowers a bit each day due to the failure to broaden the contribution base. This de facto cap on the USF program will handicap severely our nation’s ability to fulfill the statutory core principles unless changes are made.” Lawmakers “should consider an express directive to the FCC to ensure that all who use our nation’s networks -- by whatever service or technology -- are responsible to contribute to the universal well-being and availability of those networks on an equitable basis,” he said.

Other senators questioned witnesses about how federal money is spent on unserved versus underserved areas and worried about duplication. Sen. Steve Daines, R-Mont., said many Montanans “don’t even have one provider, let alone two” and was skeptical of the Broadband Opportunity Council’s recommendations on giving to areas already served by a provider. He asked about RUS avoiding “duplicative investment” and how to make sure the funds go where they're needed. Sen. Roy Blunt, R-Mo., also touched on the distinction and described himself as “much more interested” in assisting unserved areas than in assisting a second competitor.

Mensah and McBride stressed efforts to avoid what Mensah called any “duplicative situation” in granting of loans. McBride outlined the various different funding mechanisms for broadband that RUS administers and acknowledged to Blunt the broad availability for both unserved and underserved.

Moran said RUS has been “moving in the direction of not making loans” to companies seeking them when there’s already an RUS loan recipient operating in that area. But the Broadband Opportunity Council report “seems to go the other direction when it seems to say that broadband loan eligibility should be expanded to different providers ‘even though an incumbent exists,’” Moran said, asking how RUS manages to “square” the possible difference.

“Of course we will have to follow what’s in statute,” McBride replied of how RUS operates. “That will be our lead focus.” But he lauded the guidance from the administration through the council.