Comments were due August 24, 2011 for the Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding (AKA USF Reform), where the industry was asked to respond to a variety of questions about several proposed alternative frameworks for USF and ICC, namely The Rural Associations’ RLEC Plan and the price cap carriers’ ABC Plan (which together forge the Consensus Framework), and the Federal-State Joint Board’s plan. In an effort to cover a broad range of stakeholders in a really short period of time, today I want to bring your attention to a rather depressing selection of comments by Gila River Telecommunications Inc. (GRTI). Tribal carriers face some absolutely daunting challenges in deploying broadband on tribal lands, and the proposed USF/ICC reforms have the potential to further devastate broadband progress in these economically, geographically and demographically challenged areas.
GRTI does not support the Joint Board plan, ABC Plan or RLEC Plan (referred to as “The Three Reform Plans”), but they do not offer much by way of evidence or arguments against these plans aside from claiming that tribal carriers would likely lose millions of dollars if any of these plans are adopted. According to GRTI, “The loss of revenues would cripple GRTI financially and would likely have a detrimental effect on telecommunications services and on broadband service in the Gila River Indian Community” (pg. iii). Furthermore, “any decrease in revenue would likely halt any progress” in increasing Tribal community broadband adoption rates or decreasing end-user prices.
On the Unique Tribal Challenges: GRTI explains that only about 70% of households on tribal lands have basic telephone service, and the broadband adoption rate is absolutely dismal (like 10% dismal). GRTI actually has a fairly high adoption rate of around 20%. In addition to the adoption challenge, GRTI faces very high costs to deploy infrastructure, and the GRTI community has a high rate of unemployment and poverty. According to GRTI, “Costs of deploying fiber-to-the-home have been as high as $12,000 for a single residence. These costs leave little, if any, margin for profit. As a result, GRTI has been forced to deploy fiber-to-the-home in small increments” (pg. 5) Furthermore, GRTI cannot charge less than $52.90 per month for 1.5 Mbps DSL, over $20 more than the national average, and “few residents are able to afford this service” (pg. 5).
On Recognizing and Promoting Tribal Sovereignty: GRTI encourages the FCC to adopt USF/ICC reforms that uphold tribal sovereignty. GRTI’s recommendations include rules that reflect the following: “(1) any carrier seeking to provide communications services on tribal lands must receive approval from the appropriate tribal entity; (2) tribal governments should have the option to establish, monitor and enforce public interest obligations and deployment requirements; and (3) actions by states to reform state universal service systems and Intercarrier compensation mechanisms should have no bearing on the disbursement of federal funds to provide service on tribal lands” (pg. 11). Upholding such principles of tribal sovereignty in USF reform will allow Tribes to choose which carrier best serves their communities and allow them to have more control over service quality, costs and deployment schedules.
On Adopting a Tribal Carve-Out: GRTI encourages the FCC to adopt a “Tribal Carve-Out” similar to General Communications Inc.’s proposal. The Tribal Carve-Out “should include the following characteristics: (1) a floor on the minimum amount of USF support; (2) cost recovery for middle mile costs; and (3) an exclusion for tribal lands from any cap on high-cost support” (pg. 14). GRTI thinks that a carve-out will “ensure that ILECs serving tribal lands would have a reliable flow of revenue to further broadband deployment and sustain local service…prevent net losses in revenue due to decreased ICC revenues…[and] ensure that GRTI realizes fair and expected returns on its investments” (pg. 15-16). In addition to the carve-out, GRTI thinks tribal carriers should be excluded from any caps on CAF support, “for the same reason a cap would not be appropriate in the context of high-cost USF support to tribal lands” (pg. 18).
My Thoughts: While I am deeply sympathetic to the trials and tribulations of Tribal carriers, I feel a need to be harshly critical on some of their proposals. First, I think there needs to be a demonstrated increase in adoption rates before the FCC “carves out” special treatment for these carriers. I don’t think a 20% adoption rate necessitates investments of $12,000 per household. I would rather see special funding programs going towards increasing adoption rates and digital literacy than going towards infrastructure investments that will never be recovered. I calculated that it would cost $1.2m to deploy FTTH to 100 households, based on GRTI’s $12k figure. If only 20 of these household subscribe, GRTI is only recovering about $12,500 per year at the $53 monthly rate, barely enough to cover the cost of deployment to one household. When you include regular operating expenses, there is literally no business case for deploying FTTH to these households—and I do not say that very often, as I am an avid FTTH supporter. Last week I wrote about the fundamental rural broadband conundrum: do you provide the service first and then reap the rewards from increased economic activity in the community, or do you wait for new businesses and education opportunities and improved health care to come to the community and then increase broadband capability? In the case of these tribal communities, I’m not sure if deploying FTTH first is the right answer, when 50% of the population is unemployed and 50% are below the poverty line.
However… broadband has the opportunity to facilitate jobs, education and health care for tribal communities, so it probably isn’t a good idea to hold off on deployment either. So, I would propose that Tribal communities take a hard look at wireless broadband, either fixed or mobile, preferably utilizing unlicensed spectrum. It would cost considerably less, and the benefits would be just as powerful as if the community had FTTH. It probably would not take 20 customers an entire year to cover the costs of deploying wireless to one customer. Wireless broadband would be a much more affordable solution for the members of the community, especially compared to the astronomical $53/month for 1.5 Mbps DSL. If the cost of broadband decreased to $20-30, more people could subscribe, and more people might be willing to try it out for a couple of months and boost their digital literacy skills in the process. Once the tribal carrier increased adoption and helped the community realize the benefits of broadband, it might be able to make a better business case for investing in FTTH.
I hate that there are areas in this country where broadband only reaches 10-20% of the homes, but in these areas, I’m not sure if it is specifically the responsibility of the Universal Service Fund to fix what appears to largely be a demographic problem. I do however think that tribal carriers could benefit from a short-term separate fund, but a significant portion of the funding should go towards programs that increase adoption and digital literacy. Aside from this, I don’t especially think that tribal carriers should follow different USF rules than regular RLECs—there are also RLECs who provide service in tribal communities but are not specifically “tribal carriers,” so their interests need to be recognized as well, and there should be incentives for more companies—RLECs, ILECs, wireless, etc. to invest in tribal areas, which could be prevented by restricting special treatment only to tribal carriers.
What other funding opportunities are available to tribal carriers through small business loans, special tribal business financing programs, and schools, libraries and health care broadband funding opportunities? I hope that there are ample funding opportunities outside of USF for these carriers, because there is clearly a need for extra, extra support in these communities. I definitely don’t think the tribal carriers should receive less USF support than they do currently, but I’m not sure if USF is the solution to the vast challenges these carriers face.
If anyone has any good information on Tribal broadband adoption, deployment and investment challenges, please feel free to share it with me, as I would like to learn more about this issue.
Only 2 more days until reply comments are due! Where did the time go?