OK, so I don't think "USF Reform Week" is a real thing, but I thought it sounded nice and it is definitely appropriate. There will certainly be considerable buzz across the country all week as the FCC reveals a proposal for comprehensive reform of USF and ICC at tomorrow's Open Meeting. This morning, Chairman Genachowski spoke to a small group and the press at an event hosted by the Information Technology and Innovation Foundation (ITIF). He provided a preview of what is to come in the much anticipated USF reform proposal that will finally be unveiled tomorrow. This reform effort is particularly interesting because telecom sectors are extremely divided over how far the FCC should go to change the current USF and ICC systems. Much like the controversial Net Neutrality issue, some argue that the status quo is perfectly fine and that any upheaval of the status quo will have devastating effects, and others argue for a complete and swift overhaul of these allegedly antiquated and unsustainable systems. Where do I fall on this spectrum? Well, I definitely think that USF should be supporting broadband and other forward-looking 21st century services (mobile, text messaging, etc.), but I don't think voice service should be left behind in the dust either. I definitely do not think rate-of-return should be eliminated, and I think that the FCC is making rural phone companies look like greedy, wasteful, traffic-pumping enemies of government funding. This perception is completely unsubstantiated and very unfortunate for the rural phone companies who truly work hard to bring modern telecommunications services to even the most remote customer--the customer that would most likely be ignored by the big companies. It is a commonly known fact that small rural companies go to much greater extents to deliver high-speed broadband to all of their customers than the big companies, so why are they made to look like they are wasting precious USF money and accused of being more driven to lose customers than to serve customers with state-of-the-art service offerings?
Genachowski reiterated some of the commonly known facts about the troubling state of broadband deployment in the U.S.-- 24 million Americans don't have broadband access, 1/3 of the population doesn't use the Internet, and the U.S. ranks pathetically low in the international rankings. Apparently, the US ranks 40th out of 40 countries on improvement of innovation competitiveness according to an ITIF study. According to Genachowski, "moving forward slowly is moving backwards." I completely agree with him on this point, and I think it is extremely troubling that the US continues to slip lower and lower on international broadband rankings (see my post below on broadband speeds for more on this topic). In order to recover from the economic crisis, the US must improve broadband deployment and adoption, and rural areas are the primary target for this improvement effort. There is so much wonderful potential hidden in rural areas for economic recovery, investment, growth and job opportunity; but an extensive broadband infrastructure is absolutely required if the rural potential is to be tapped.
USF--the High Cost Fund in particular--has been thrust in the spotlight as being plagued with inefficiency, "broken," unsustainable, lacking clear oversight, promoting "perverse incentives," and in dire need of clear goals. I personally believe that all of these negative descriptions are better suited for, say, E-Rate, but apparently Genachowski is happy with E-Rate right now. So the focus is on the High Cost Fund, and particularly on rural carriers, because the impending "Rural-Rural Divide" is a national problem. Apparently it rewards companies for losing customers, but this seems like a business strategy for sure failure for any company no matter how much government money is involved. The current ICC system was also described with a gloomy cloud of words like unstable, unpredictable, constant litigation, and discouraging investment in IP infrastructure. Basically, Genachowski argued that the current USF and ICC mechanisms are designed "for a world that no longer exists."
So what is the FCC proposing? Genachowski was scant on actual details--we will have to wait for tomorrow to learn more--but the good news is that USF will probably not be abruptly yanked away in the middle of the night with no notice. However, change is definitely coming whether we like it or not. The FCC is hoping to modernize the systems to support broadband deployment and adoption, increase fiscal responsibility and accountability, and implement more market-driven and incentive-based mechanisms for distributing support (the dreaded reverse auctions). The NPRM will include short and long term goals for reducing waste and disputes with ICC, addressing VoIP issues, establishing a path for transitioning to the Connect America Fund, and keeping USF costs in check. There will most likely be strong pushes to eliminate support for the antiquated traditional voice telephone network, as well as per-minute based ICC payments.
I will wait until tomorrow when I hear from the other Commissioners to dig deeper into how these reforms will impact rural providers, but for now I will say that changes are coming and the rural providers best be prepared. Hopefully tomorrow's decision will reduce some of the ongoing uncertainty that has hindered rural telecom investment over the last year--sometimes it is better to have bad news than no news at all for long periods of time. Genachowski did call for all stakeholders to work with the FCC on proposals and solutions, and I cannot stress how important it is for rural telecom providers to speak up through their attorneys and state/regional/national advocacy groups about how the FCC's USF and ICC proposals will affect them in the short and long term. I am eagerly hoping to hear more tomorrow about two issues-- the future (or lack thereof) of Rate-of-Return and that awful 4/1 Mbps broadband speed target.
If you want to read a transcript of Genachowski's presentation, it is available here.
Cassandra Heyne
ruraltelecommentary@gmail.com
The same mechanism that "pays companies for loosing customers" is the same one that compensates companies in areas that are loosing population, as is the case in many rural areas, so the remaining people will continue to have communications services. As the population goes down the costs to serve those who remain goes up
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