WASHINGTON, April 6, 2016 - The Federal Communications Commission was extra busy last week expanding a broadband subsidy for low-income Americans and reforming universal service rules to help small carriers deploy and operate broadband in rural areas.

These policy changes were intended to expand access to broadband and make it more affordable in rural areas, but according to Shirley Bloomfield, the CEO of the NTCA – The Rural Broadband Association, FCC has more changes to make before rural residents get their due. 

The FCC last week unanimously approved an order to allow Internet service providers to use FCC universal service support funds – provided through the commission’s Universal Service Fund (USF) or Connect America Fund (CAF) – to deploy stand-alone broadband. Before, carriers had to offer bundled telephone and broadband service in order to get the universal service subsidy, which limited broadband expansion as well as rural consumer choice.

Rate-of-return broadband carriers – usually small, rural providers – will now receive a higher capital expenditure allowance from the USF when they deploy broadband in “high-cost” areas that don’t already have a broadband provider. High-cost areas refer to the locales where the terrain can be difficult to build infrastructure on, and customers are sparse and more often low-income. 

The order also allows these rate-of-return carriers to accept support from the CAF, which before the order, only subsidized price cap carriers – the big broadband companies that serve about 85 percent of broadband customers. Now, smaller carriers can use the CAF computer model to estimate how much funding will be needed (and allocated) to expand broadband access – a process that is theoretically more efficient and precise, and less paper-intensive than USF’s support mechanism. 

One aspect of the order has proved troublesome, however. 

When the FCC designated broadband as a utility last year, it decided not to require broadband carriers to contribute to the USF (like telephone companies do), and as a result, USF funds were kept tight. Those funds are now limited in another way, because the order set a budget cap for the fund at $2 billion annually.

“Generally speaking, (the order) was a good thing. It was time to get a standalone broadband mechanism” that meant broadband subsidy didn’t hinge on telephone service, said Bloomfield, whose organization represents about 900 small and midsized rural broadband carriers. “But programs can only work if they’re adequately funded.” 

That brings us to FCC’s second big move last week: It voted 3-2, with Democrats in the majority, to expand the Lifeline subsidy program that has been critical in helping low-income Americans purchase phone service for the last 30 years. The commission expects that by Dec. 1, the program will be providing a monthly subsidy of $9.25 to low-income people to buy high-speed Internet service. The FCC set the annual budget for the program at $2.25 billion.

“How do we reach our low-income rural consumers (with Lifeline) if (the FCC) hasn’t already made a commitment to building out these rural networks? The (program) that actually rides on these networks is getting more support than the actual underlying networks,” Bloomfield told Agri-Pulse. “That was a little frustrating, to be honest.” 

For context, Lifeline provided about $1.5 billion in subsidies for landline or cellular phone service in 2015 and caught flak in 2012 – remember “Obamaphone”? – when spending in the program peaked at $2.2 billion. It was the intent of the universal service provision “to ensure that rural residents had reasonably comparable broadband access and pricing (to urban areas),” Bloomfield said. “And that will not happen yet.”


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