Abstract
The primary reason that current government policy is failing to achieve universal rural broadband is rooted in its own past statutory and regulatory policy. The two biggest roadblocks are the rural waiver provided for in The Telecommunications Act of 1996 (hereafter cited as the 96 Act or Act) and the disastrous policy for (mis)allocating radio spectrum. Unless and until substantial reform or repeal of these policies occurs, the achievement of universal (affordable) rural broadband will be elusive.
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Notes
- 1.
For an update on broadband regulatory initiatives, see Federal Communications Commission (FCC) (2011a).
- 2.
- 3.
Dickes et al. put it succinctly: "Unfortunately, the status quo system of broadband providers is unlikely to offer service to the most rural communities or enhance existing service in already underserved rural areas. Current suppliers operate under a complex array of government regulations, subsidies, and market protection, which provide little incentive for these firms to alter the status quo structure."
- 4.
For some history of the transition of subsidies from usage-based charges to fixed monthly charges, see Congressional Research Service (2002).
- 5.
For example, one small telco reports that about 20 % of traffic is unidentifiable. Private communication from Ron McCue, President/C.O.O., Silver Star Communications.
- 6.
The Universal Service Administrative Company (USAC) administers the FCC's USF Program. For a basic tutorial on USF programs, see USAC and the USF: An Overview, March 2011, http://www.usac.org/_res/documents/hc/pdf/training-2011/USAC-and-High-Cost-Overview-March-2011.pdf.
- 7.
FCC 11–161, Report And Order And Further Notice Of Proposed Rulemaking Adopted: October 27, 2011 Released: November 18, 2011. Full text is available at: http://www.fcc.gov/document/fcc-releases-connect-america-fund-order-reforms-usficc-broadband.
- 8.
ibid. In particular, the FCC declined to review or make any changes in state-by-state carrier of last resort (COLR) rules, and the amount of subsidy from the old USF fund to small rate-of-return telcos will remain the same at $2B per year, through 2017. Also, see p. 42 "Waiver. As a safeguard to protect consumers, we provide for an explicit waiver mechanism under which a carrier can seek relief from some or all of our reforms if the carrier can demonstrate that the reduction in existing high-cost support would put consumers at risk of losing voice service, with no alternative terrestrial providers available to provide voice telephony."
- 9.
The petition urges the FCC to reconsider key aspects of the CAF Order: sufficiency of budget for high-cost universal service, capping mechanisms, and waiver standards. See Petition For Reconsideration and Clarification of The National Exchange Carrier Association, Inc.; Organization for The Promotion and Advancement of Small Telecommunications Companies; and Western Telecommunications Alliance. December 29, 2011.
- 10.
To drive the point home for those who do not work on this full time, the following passage from the Executive Summary of the CAF plan document (p. 12 of 751!) should suffice.
27. Alongside these broadband service rules, we adopt reforms to: (1) establish a framework to limit reimbursements for excessive capital and operating expenses, which will be implemented no later than July 1, 2012, after an additional opportunity for public comment; (2) encourage efficiencies by extending existing corporate operations expense limits to the existing high-cost loop support and interstate common line support mechanisms, effective January 1, 2012; (3) ensure fairness by reducing high-cost loop support for carriers that maintain artificially low end-user voice rates, with a three-step phase-in beginning July 1, 2012; (4) phase out the safety net additive component of high-cost loop support over time; (5) address Local Switching Support as part of comprehensive ICC reform; (6) phase out over three years support in study areas that overlap completely with an unsubsidized facilities-based terrestrial competitor that provides voice and fixed broadband service, beginning July 1, 2012; and (7) cap per-line support at $250 per month, with a gradual phasedown to that cap over a three-year period commencing July 1, 2012. In the FNPRM, we seek comment on establishing a long-term broadband-focused CAF mechanism for rate-of-return carriers, and relatedly seek comment on reducing the interstate rate-of-return from its current level of 11.25 %. We expect rate-of-return carriers will receive approximately $2 billion per year in total high-cost universal service support under our budget through 2017.
- 11.
For details, see http://www2.ntia.doc.gov/.
- 12.
For details, see http://www.rurdev.usda.gov/utp_bip.html.
- 13.
Kruger (2011), p. 9.
- 14.
See the latest quarterly report: “Broadband Technology Opportunities Program (BTOP) Quarterly Program Status Report,” submitted to the Committee on Appropriations United States Senate, the Committee on Appropriations United States House of Representatives, the Committee on Commerce, Science and Transportation United States Senate, and the Committee on Energy and Commerce United States House of Representatives, December 2011, National Telecommunications and Information Administration, US Department of Commerce.
- 15.
See the last report available on the RUS/BIP Web site: “Broadband Initiatives Program Quarterly Program Status Report,” submitted to The Committee on Appropriations United States Senate and The Committee on Appropriations US House of Representatives December 27, 2010, US Department of Agriculture Rural Development Rural Utilities Service. See http://www.rurdev.usda.gov/supportdocuments/BIPQuarterlyReport_12-10.pdf.
- 16.
For example, one recent study claims that “The evidence indicates that RUS’ history of funding duplicative service has continued under BIP, and that the current program is not a cost-effective means of achieving universal broadband availability.” See “Evaluating the Cost-Effectiveness of RUS Broadband Subsidies: Three Case Studies,” Jeffrey A. Eisenach, George Mason University School of Law, Kevin W. Caves, Navigant Economics, April 13, 2011. It should be noted that the cable industry lobby (NCTA) supported this study.
- 17.
The Broadband Technology Opportunities Program: Expanding Broadband Access and Adoption in Communities Across America, Overview of Grant Awards, p. 19, NTIA/BTOP, December 14, 2010. Advancing Broadband: A Foundation for Strong Rural Communities, p. 3–4, USDA/BIP, January 2011.
- 18.
For example, Katz provides references to academic studies including a summary of studies relating broadband investment to employment and economic growth, p. 2, Fig. 1, Studies of the Employment Impact of Broadband, in: “Estimating Broadband Demand And Its Economic Impact In Latin America,” Prof. Raul L. Katz, Columbia Business School, Proceedings of the 3rd ACORN-REDECOM Conference Mexico City, May 22–23rd 2009.
- 19.
Tables reproduced from CRS Report (2011).
- 20.
For example, the CRS Report states “Until 2011, the USDA Office of Inspector General (OIG) had not reviewed the BIP program, instead leaving that review to the Government Accountability Office (GAO). OIG has previously reviewed (in 2005 and 2009) the existing RUS Rural Broadband Access Loan and Loan Guarantee Program and made a number of criticisms, primarily that too many loans were made in areas with preexisting broadband service and in areas that were not sufficiently rural.”
- 21.
Author was a member of the governor's Wyoming Telecommunications Council (2003–2007); the Council objective was to implement a statewide universal broadband access policy. Past research includes “Toward a Sound Public Policy for Public High-Speed Information Networks,” Columbia Institute for Tele-Information, Research Working Paper #282, Columbia Business School, September 1988; “Bringing Advanced Telecommunications to Rural America: The Cost of Technology Adoption,” Columbia Institute for Tele-Information, Research Working Paper #393, Columbia Business School, October, 1990 and Telecommunications Policy, February, 1992; “The Case for Residential Broadband Communication Networks,” draft, Columbia Institute for Tele-Information, Research Working Paper #456, Columbia Business School, January 1991; “Improving Rural Telecommunications Infrastructure,” The Center For Rural Studies, Nashville, TN (1995) and TVA Rural Studies, University of Kentucky.
- 22.
Wyoming has 67.3 % of rural population without broadband access versus 28.2 % for the US, See FCC report (2011a), Appendix B, p. 25.
- 23.
There is some state government activity to direct federal subsidy funds for rural health care, libraries, and education, but these are administered on a case-by-case basis by responsible agencies. The chief information officer (CIO) has responsibility for operations and procurement of state government telecom systems, but has no statutory authority for broadband policy development. The CIO also has responsibility for meeting data production requirements of the National Broadband Plan and has hired an outside consultant to do so.
- 24.
Except for electricity, gas, and water.
- 25.
Further Inquiry into Certain Issues In the Universal Service-Intercarrier Compensation Transformation Proceeding, Reply Comments of The Wyoming Public Service Commission, September 6, 2011, p. 4. The full document is available at: https://prodnet.www.neca.org/publicationsdocs/wwpdf/9711wypsc.pdf.
- 26.
For example, see the numerous references to past studies in Elleg. Jerry, “Intercarrier Compensation and Consumer Welfare,” Journal of Law Technology and Policy, Vol. 2005, No. 1. Welfare losses due to Universal Service subsidies derived from usage-based charges are discussed in pp. 118–123.
- 27.
This is nothing new; such policy practices have been in place for years in many jurisdictions.
- 28.
Indeed, during my tenure as a government advisor during the legislative budget session, it became immediately obvious that a reallocation of a small amount of road improvement funds in a single year could go a long way toward funding a long-lived rural broadband infrastructure.
- 29.
For a summary of legislation, see the 2010 Annual Telecommunications Report, Wyoming PSCat: http://psc.state.wy.us/htdocs/telco/telco10/2010%20Annual%20Telecom%20Report.pdf.
- 30.
ibid. Table 7, p. 14, provides a summary of tariff increases from 1995 to 2009.
- 31.
ibid.
- 32.
ibid. Table 7, p. 14.
- 33.
Source notice of inquiry regarding issues raised by the February 23, United States Court of Appeals for the Circuit Qwest II Decision, Comments of the Wyoming Public Service Commission, May 8, 2009, Table 12.1, p. 11.
- 34.
47 U.S.C. §254 calls for a federal USF that is sufficient to provide rate comparability between rural and urban areas. For details on the federal court proceedings, ref. ftn. 25, p. 8, Federal Universal Service Issues.
- 35.
The Wyoming PSC requires all telecom providers to pay 1.2 % of annual retail revenue into the state USF. See Order Establishing The Wyoming Universal Service Fund Assessment Level, May 13, 2011, http://psc.state.wy.us/htdocs/wyusf/wusf-assessment2011.pdf.
- 36.
For example, Skype phone service allows for free domestic phone calls for a small ($50) annual fee and nearly free international calls. Also, Facebook is ubiquitous and free and allows calling anyone that is online, including video calls using Skype.
- 37.
Small rural telcos do offer subscribers that wish to keep their phone number a choice of PSC-approved companies to designate as their primary long-distance provider, but they must pay for the privilege via relatively high interconnection charges.
- 38.
Technically, small rural telcos are supposed to comply with federal regulations mandating number portability, but, as a practical matter, some do not.
- 39.
Like Qwest's basic service tariff in Table 12.3, Silver Star's nominal tariff rate for local service in Alpine Wyoming is only $26.45/mo., but is nearly double that after all the add-ons from regulatory fees and taxes. The $0.105/min. price is the stand-alone tariff rate, and the rate drops down to $0.055/min. with a "bundled" service package. Silver Star also offers its own broadband service for between $40 and $100/mo. (depending on speed).
- 40.
“Costs and Benefits of Universal Broadband Access in Wyoming,” October 24, 2006, Costquest Associates. Study documentation is available at:http://www.costquest.com/uploads/pdf/CostsAndBenefitsofUniversalBroadbandAccessInWyoming.pdf. A follow-on case study on the cost of wireless broadband: "Targeting Wireless Internet Services at Areas with Lower Investment Thresholds" is available at: http://www.wyoming.gov/loc/04222011_1/Documents/Statewide_IT/Broadband%20Information/Wireless_BB.pdf, Costquest, 2006
- 41.
ibid. p. 26. Even though the cost model included satellite as an alternative wireless technology, it is not included here because it is not capable of providing high-quality VoIP.
- 42.
“NECA Rural Broadband Cost Study: Summary of Results,” June, 2000. Available at http://www.ics.uci.edu/~sjordan/courses/ics11/case_studies/NECA%20rural%20bb.pdf.
- 43.
See Alleman et al. (2010) and the reference cited therein.
- 44.
A list of BIP awards by state is in the report to Congress at: http://www.rurdev.usda.gov/supportdocuments/BIPQuarterlyReport_12-10.pdf.
- 45.
For detailed information of the NTIA/BTOP grant, see “Wyoming Broadband Data and Development Grant Program, LinkAMERICA/Puget Sound Center for Teaching, Learning and Technology Designated entity on behalf of the State of Wyoming,” See http://www.ntia.doc.gov/legacy/broadbandgrants/BroadbandMapping_Wyoming_091130.pdf. BTOP funds were also used to develop a Web site that tracks project activity. See http://www.linkwyoming.org/lwy/Default.aspx.
- 46.
“Report of Findings: Wyoming Broadband Interviews,” LinkWyoming, July 2010, p. 20 concludes “Strong leadership is needed to build awareness about the benefits of broadband in Wyoming. An advocacy effort is needed to improve fixed and mobile broadband access in Wyoming.” The full report is available at: http://www.linkwyoming.org/lwy/docs/WYReport8July2010.pdf.
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Egan, B. (2014). Universal Rural Broadband: Economics and Policy. In: Alleman, J., Ní-Shúilleabháin, Á., Rappoport, P. (eds) Demand for Communications Services – Insights and Perspectives. The Economics of Information, Communication, and Entertainment. Springer, Boston, MA. https://doi.org/10.1007/978-1-4614-7993-2_12
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