FCC Blind to Rural Telco Plight?

KANSAS CITY -- IP Possibilities 2011 -- Rural telcos are in the fight of their financial lives, and thus far, finding few friends in Washington -- either in Congress or the Federal Communications Commission (FCC) .

That was the primary conclusion of a regulatory panel here Thursday morning that did point out one bright spot: The multiple associations that represent rural telecom have come together to speak with one voice in the nation's capital, something that hasn't always happened in the past.

There seems to be real doubt as to whether anyone is listening.

"When I wake up on good days, I think [FCC Chairman] Julius Genachowski doesn't understand rural America," says Glenn Brown, president of telecom consultancy Brown and McLean and panel moderator. "When I wake up on bad days, I wonder if he cares."

Rural companies were initially happy to see that the FCC planned a transition period in which it phased out the Universal Service Fund, reformed Intercarrier Compensation and created Connect America to fund broadband in underserved areas. But they now see the FCC taking away much more money than it plans to give back, with telcos in high-cost areas losing as much as 70 percent of their funding. (See NTCA Relieved USF Reform Includes Transition Time and Rural Telcos Go Toe-to-Toe With DC.)

Here are the primary pain points, according to the panel:

  • Plans to reform USF and Intercarrier compensation shift funding from smaller telcos to larger ones: Larger telecom operators haven't done as much as smaller companies to build out broadband in the rural areas they serve, so the FCC's plan to fund Connect America to bring broadband to underserved areas is pushing money away from the small companies into the pockets of bigger telcos, says Mark Gailey, president and GM, Totah Communications, a rural Missouri carrier. Rural telcos are basically being punished for their broadband efforts. (See FCC Proposes USF Reform.)

  • The FCC wants to eliminate rate-of-return regulation of rural carriers: This is due in part to alleged network gold-plating. The irony of that thinking, says Josh Seidemann, director of policy for the NTCA - The Rural Broadband Association , is that the FCC would replace rate-of-return with price cap regulations used by the larger carriers -– the ones who haven't built out rural broadband because it isn't cost-effective. "Why get rid of something that works and go to something that has proven not as effective?" he asks.

  • The FCC is hopelessly hung up on wireless as a rural solution: "There is a belief in the FCC, right or wrong, that wireless will take care of rural America -- that's not happening in the areas I serve," Gailey says. "If they put us out of business while they are trying to build a wireless network, who is going to haul it for them? We take orders for special circuits every day to provide backhaul for some wireless tower somewhere."

  • The National Broadband Plan's broadband standard of 4 Mbit/s downstream and 1 Mbit/s upstream will doom rural economies: If no federal funding is available for faster Internet speeds in rural areas, businesses and consumers that need speed will move to where they can get faster access, says Randy Tyree, VP-legislative policy, Organization for the Promotion and Advancement of Small Telecommunications Companies (Opastco) . And rural populations will dwindle even faster.

  • The FCC doesn't "get" rural America: The FCC's plan for areas that don't get rural wireless is to wire anchor institutions, Tyree says. "In rural America, that means getting into your truck and driving 20 miles or more" for broadband Internet. Before ethics laws prevented rural telcos from paying the expenses of visiting FCC or Congressional staff, it was possible to get people out of Washington to actually see what rural America looks like, Seidemann says, but that doesn't happen now. "They think rural is Poolesville, Maryland," an exurban community with multiple broadband providers.

  • Congress just doesn't seem interested in rural telco problems: "We are not seeing the emergence of leadership on these issues, which is why the FCC is moving ahead with its agenda -- the Hill seems to be sitting on their hands," Tyree says. One reason is that cutting USF is a popular move in the current fiscal environment.

  • Rural telcos face tough financial situations if the FCC proceeds as planned: Gailey says his telco would lose 70 percent of its funding under current plans, forcing major staff cuts and severely diminished customer service. As the largest company in the area, Totah is the source of financial support for community organizations, and that would vanish as well.

    Opastco, NTCA and a number of other groups are presenting a united front to the FCC and Congress, and encouraging their members to reach out, particularly to their U.S. senators, to make clear the impact of what the FCC has planned, Brown says.

    — Carol Wilson, Chief Editor, Events, Light Reading

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    DCITDave 12/5/2012 | 5:07:34 PM
    re: FCC Blind to Rural Telco Plight?

    Have there been any smaller telcos that have surveyed their communities to find out how fast a speed their customers need and what price they're willing to pay for it? I'd love to see the results of those sorts of surveys. Someone point me to them if they exist.

    paolo.franzoi 12/5/2012 | 5:07:33 PM
    re: FCC Blind to Rural Telco Plight?




    Might want to start here.... http://www.utopianet.org/



    DCITDave 12/5/2012 | 5:07:33 PM
    re: FCC Blind to Rural Telco Plight?

    The FCC enforces rules that are on the books. The rules on the books now are mostly a result of big telecom lobbying in the 70s and 80s. So I don't think it matters if the FCC "gets" rural America.

    But I do wonder to what extent city governments are willing to make providing broadband a viable business? If city or state governments make a sweet enough deal, broadband will show up regardless of what the government does. The city of Keller, Texas (Verizon's first FiOS market) might have a pointer or two.

    ravanelli 12/5/2012 | 5:07:32 PM
    re: FCC Blind to Rural Telco Plight?

    I've never fully understood why rural broadband has become a rallying cry for the government. To me having limited, or eve no, broadband options is just part of the remote lifestyle, just like having fewer choices for shopping malls and gas stations.

    It just seems that in this country providing universal broadband coverage has become a higher priority than, say, universal health care coverage. Am I off-base here?   

    DCITDave 12/5/2012 | 5:07:32 PM
    re: FCC Blind to Rural Telco Plight?

    Yeah, but a city doesn't need to build its own network just to provide incentives for telcos to rehab existing infrastructure, do they?

    Cities that want to get stadiums built and roads paved always seem to find ways to work things out. What makes broadband so different?

    paolo.franzoi 12/5/2012 | 5:07:32 PM
    re: FCC Blind to Rural Telco Plight?


    So, let's use the Utopia area as an example.  That was Qwest territory and Qwest was not planning to upgrade that area.  Even if they did, it would have been for a moderate rate DSL offering.  Remember, unless they are going to build a 1 off NOC and support structure they are not going to deploy a special solution over here.  They might make an exception for a trial area, but you are not trialing say FTTH in rural Utah.

    Now, lets say they decided as a town to fund a DSL rollout.  Think that is going to fly?  Really?  If I am Qwest I am asking for the whole thing, mid-mile upgrades, DSLAMs, any plant upgrades, and training costs for the new support crew.  Let's call that $500/home.  Now what happens when you do the next upgrade, pay for it again?


    Well, at one time phone service was not a right.  I would argue broadband has more value to rural folks than urban and suburban ones.  There is an discussion that gets had that broadband penetration will help the economy (usual infrastructure spending argument).  I argue here all the time we ought to make FTTH a universal service (which means its mandatory to be installed on all homes/apartments).



    unbearable 12/5/2012 | 5:07:31 PM
    re: FCC Blind to Rural Telco Plight?

    This seems like an appeal by rural telco to grab more tax money.


    Why are urban taxpayers supposed to subsidize rural broadband?

    Will rural taxpayers reciprocate and subsidize our urban rents?


    DCITDave 12/5/2012 | 5:07:30 PM
    re: FCC Blind to Rural Telco Plight?


    Wouldn't that be $500 a home amortized over 20 years or something like that? In other words, not all due all at once?

    re: "Let's call that $500/home.  Now what happens when you do the next upgrade, pay for it again?" Seems like a better problem to have than still fiddling with dial up in 2011.

    I guess my point, born out of ignorance and observation, is I don't know how they can do it, but I know they can. City governments can do some wildly forward-thinking and aggressive things when they really want to.

    DCITDave 12/5/2012 | 5:07:30 PM
    re: FCC Blind to Rural Telco Plight?


    That's why I want to see demand info from a real service provider. 

    I think most folks are comfortable with the tradeoffs they make moving to a rural location -- the restaurants, schools, shopping and services simply won't be as good as you can expect in a big city. If they're fine with all those things, seems a service provider would be right to be extra sure their customers really want broadband before building.

    paolo.franzoi 12/5/2012 | 5:07:30 PM
    re: FCC Blind to Rural Telco Plight?



    I think you are missing the point.  The carrier has already decided it will not make a lot of money on these rural upgrades.  The IOCs that are city owned/municipal owned are basically doing what you say.  They are owned by the town and deliver the services their neighbors want.  That is why they have good broadband penetration and lots of FTTH.

    I chose Utopia for the exact reason it overlays rural RBOC properties.  They have lots of ways of spending their capex and these places are the lowest on the chain.  You want them to spend then pay it all up front or they have better things to do.  So, as an alternative they form the equivalent of a CLEC and cherry pick the new services for themselves.  They leave the junk for the RBOC.  Its a better deal for the city and a worse deal for the RBOC, but that way the RBOC is now spending its money only where it sees best returns.

    The article is not about any of this but the death of USF.  What they are trying to say implicitly (and I will say explicitly) is that 80% of revenue for some IOCs comes out of USF funding and compensation.  Kill that and many rural telcos can't afford to deliver voice.

    Secondarily, it is about not understanding these areas.  It was not unusual for us to dispatch folks to towns that DID NOT HAVE A MOTEL.  They would stay 2 hours away and drive in for whatever service requirement or beta we were doing.  It is NOT that there is no Starbucks, it is that there is not a Starbucks for 200 miles.

    You know I live in Sonoma County, CA.  Ever look (actually look) at a map of CA?  They call San Francisco Northern California.  It really is Central California.  I make a joke which might actually be true.  There are more people in Santa Rosa than there are between there and Oregon along 101 (and thus Santa Rosa is the end of civilization).  Note this is like a 8 hour drive and includes the 40,000 person town of Eureka.  Now, the 101 Corridor is dense for spots in Northern CA.  Go up by Lassen or Shasta and some of the roads listed on Atlas maps and you find Logging Roads on the maps.  Some one building towns.  Now THAT is rural.



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