Members of Congress Weigh in on National Broadband Plan

June 17, 2010

RTFC Capital Connections | Vol. 22, No. 6

U.S. House and Senate members recently contacted the Federal Communications Commission (FCC) to question some of the agency’s goals as laid out in the National Broadband Plan (NBP)—including proposed changes to the Universal Service Fund. A position statement released by RTFC echoes some of these same concerns.

In a June 10 letter to FCC Chairman Julius Genachowski, a group of 22 senators highlighted their unease with the agency’s approach to achieving nationwide broadband coverage. "Our concern is that some of the proposals in the NBP have the potential to set the United States on a course toward a greater digital divide between urban and rural areas. For example, while trumpeting the benefits of broadband at 100 megabits per second (Mbps) for 100 million homes, the NBP also moves to transition the Universal Service Fund to support broadband offerings at 4 Mbps. The practical impact is two very different goals for rural regions and more densely populated areas. Establishing such a low threshold for rural residents and businesses relegates them to second-class broadband capacity."

A separate letter, sent May 28 by a group of 40 House members, also challenged the proposed changes to the Universal Service Fund. "Over the last three decades, small independent communications carriers have invested in networks in rural areas based on a relatively predictable regulatory structure and support provided by the Universal Service Fund, both of which have led to success in the deployment of voice and broadband service throughout much of the rural areas they serve. As proposed, the NBP abandons this successful policy approach, endangering our national statutory goal of affordable and comparable communications service for all consumers, including those living in rural and insular areas."

The House members’ letter further notes that the NBP "puts at risk the regulatory structure and support that rural communications providers need to maintain and expand their networks. The plan as written will lead to job loss, less investment in rural areas, a further erosion of state and local economies, and the deterioration of communications services for our constituents."

Earlier this month, RTFC released a position statement on the NBP echoing many of these concerns. "The changes outlined in the FCC’s National Broadband Plan will seriously inhibit investments in infrastructure necessary for the delivery of broadband service to rural America," RTFC said. Without assured sources of revenue for rural telecom service providers, lenders such as RTFC will be unable to underwrite and fund loans for rural broadband deployment. And without debt capital available to rural telcos, investment in network upgrades will be limited and inadequate. Key elements of the NBP that RTFC opposes include:

• Replacing rate-of-return regulation with price cap regulation—which has been shown not to work in rural areas;
• Eliminating the critical revenue source of intercarrier compensation without providing for any mechanism to keep rural telcos whole; and
• Evolving from the existing—and successful—Universal Service Fund to an inadequate Connect America Fund.

"All of these provisions, if enacted, will necessitate significant rate increases for rural Americans and will severely impede much-needed investment in rural telecom infrastructure," RTFC said.

Log into RTFC's Member Center to read the entire June 2010 issue of Capital Connections and access the issue archive.