Entries in Rural Telecommunications Group (2)

Sunday
Aug282011

$300m Mobility Fund is Arbitrary and Inadequate, Claims RTG

Rural Wireless Carriers Call RLEC-ILEC Consensus Framework for USF “Highly Flawed”

Comments on the FCC’s Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding were due on August 24, and the rural wireless industry did not hold back any criticism of the wireline ILEC’s ABC Plan or the Consensus Framework negotiated by the Rural Associations and the ABC Plan participants. I have been looking forward to hearing the wireless response to the ABC Plan’s proposed $300m Advanced Mobility/Satellite Fund (AMF), and the Rural Telecommunications Group (RTG) comments did not disappoint. RTG slams the $300m amount for mobility funding as arbitrary, insufficient, inadequate, meager and measly; and they argue that the Consensus Framework “shows that the landline authors of the RLEC and ABC Plans are oblivious to the rapid changes taking place in the marketplace or have chosen to ignore them.”

Wireless carriers had no part in the industry negotiations that led to the Consensus Framework, which I think seems rather irresponsible given the significant role that wireless plays in the broadband market. Wireless broadband critics may argue that mobile broadband is not equal to wired broadband in terms of speed, service quality and capacity; but the market speaks clearly that wireless broadband is both a compliment and a substitute for wired broadband, depending on an individual consumer’s needs. Wireless service critiques aside, I can’t help but agree with RTG’s assertion that “it is a given that mobile wireless will play the most important role in the country’s broadband future and any order resulting from this proceeding should ensure the continued growth of wireless broadband.” The question then comes down to this: how much USF support should be dedicated specifically to wireless broadband, especially when the FCC is intent on keeping the size of the fund at or near the current level?

RTG unfortunately does not offer a specific amount of ideal funding, rather they argue that the funding should be based on actual costs, and “the size of the mobility fund would have to be substantially larger than $300 million and should reflect specific, ongoing support in order to spur investment and ensure the availability of existing wireless services and the expansion of mobile broadband networks.” I wonder, what constitutes a “substantially larger” mobility fund: $600m? $1b? More? There are a lot of costs involved in building and maintaining a wireless network (especially when spectrum acquisition is factored in), and I think we have all learned a thing or two about this from watching the recent drama with the AT&T/T-Mobile merger unfold. AT&T allegedly could build out 4G wireless to nearly the entire country for an additional $3.9b—equal to 13 x’s the proposed annual budget for the AMF.  I certainly do not expect the AMF to cover all costs to deploy wireless broadband in rural areas, but when put in perspective, $300m indeed seems like a pittance.

In addition to the size of the AMF, RTG is concerned about the disproportionate amount of money that wireless carriers pay into the USF while proposals on the table call for shifting support away from competitive ETCs. According to RTG, “Competitive ETCs would lose approximately 75% of their current support. In contrast, incumbent wireline carriers would lose only one third of their current support.” RTG is worried about the outcome of this proposal on rural wireless carriers, and “the consequence of applying such a large reduction of support to competitive ETCs will be a shrinking or elimination of many rural wireless networks.” RTG further argues for a transitional phase-out of CETC support of at least 10 years and a sufficient recovery mechanism to offset the lost funding.

RTG also raises concerns about including satellite support in the $300m AMF. They believe that funding for satellite broadband should come from the ILEC’s slice of the USF pie, because “satellite carriers provide a fixed Internet access service, and should not receive support from a fund proposed for ensuring that consumers enjoy the benefits of mobility.” RTG points out that the ABC Plan participants wish to partner with satellite providers and “rely on satellite in order to avoid having to serve the highest-cost areas.”

I have been highly critical of this particular large-carrier proposal in the past, and I agree with RTG that if wireline ILECs want to hand off the responsibility for serving especially remote areas to satellite providers, then the funding should come from the ILEC portion of USF. I think it is also important to look at the difference in market demand for mobile broadband and satellite broadband as an indicator that perhaps grouping these two services in the AMF is not reflective of actual consumer trends. I rarely hear of anyone clamoring for satellite broadband service, but there are stories every day about the dire need for improving mobile broadband. Expanding wireless broadband to 98% of America is a key component of the Obama Administration’s goals for universal broadband, and it is interestingly also a major point of debate in the AT&T/T-Mobile merger controversy.

RTG definitely covered some of the most contentious issues in this proceeding, and it will be interesting to see if, or how, the FCC responds to the wireless industry’s demands for a larger Mobility Fund. I imagine that RLECs would be concerned that a larger Mobility Fund could mean a smaller RLEC fund, but what do rural telecom providers who have a stake in both wireless and wireline think?

Read RTG’s comments here.

Thursday
Aug182011

Obama Pledges Rural Jobs and Economic Growth

Broadband, RLECs Play a Crucial Role in Achieving a Vibrant Rural Economy

On Tuesday, August 16, President Obama visited the small town of Peosta, Iowa as part of a 3 day Midwest road trip, where he was engaged in Town Hall meetings in Iowa, Minnesota and Illinois communities. The Peosta stop was more than just a presidential Town Hall Meeting, as it was also the site for the White House Rural Economic Forum. The Forum brought together government leaders and rural small business owners, farmers, energy sector employees and individuals from community organizations to discuss both challenges and goals for rural America to overcome to achieve a vibrant rural economy. In addition to the Forum, the newly formed White House Rural Council also released a report, “Jobs and Economic Security for Rural America,” earlier this month.

I felt that Obama’s remarks at the Rural Economic Forum and the Council’s report were optimistic about the future of rural America and realistic about the economic and demographic challenges that rural businesses face. I believe that rural broadband plays a critical role in every single goal for rural economic revitalization, and I see important positions for RLECs as major employers themselves, and as catalysts for the growth and innovation of other small businesses in rural areas. RLECs also provide the necessary infrastructure for health care, education, energy and agriculture—which are all areas identified by the White House Rural Council and President Obama as critical sectors for the future of rural American prosperity and vitality.

In his opening remarks at the Rural Economic Forum in Peosta, Obama commented that although times are tough for Americans right now, tough times are nothing new for rural Americans specifically. He described how rural Americans look out for one another during difficult times and hold shared values of honor, self-discipline and integrity. Obama believes that it is time to “push through economic hardships and get to a better place,” and the White House Rural Council is seriously looking for ways to promote jobs and opportunities in rural America. Deploying broadband to an additional 7 million Americans is one of the primary goals of the Council, which will help enable distance learning, job training and international trade for people in rural areas.

Obama’s message in the White House Rural Council report states that he established the Council “to accelerate the ongoing work of promoting economic growth in rural America,” and the Council “will focus on spurring agricultural innovation, expanding infrastructure, increasing access to capital in rural areas for small businesses, and creating economic opportunities through conservation and outdoor recreation.” The report states that small businesses “are the engine of job growth and an important source of innovation in the country.”

 I believe that rural telecom providers have the potential to be models of economic growth in rural areas, as they are small businesses themselves and they provide the infrastructure and communications capabilities for other rural small businesses to succeed. The report notes that rural areas face significant challenges, and “many rural communities have lower incomes, higher poverty rates, worse health outcomes, and lower educational attainment than urban and suburban areas.” Without adequate broadband infrastructure, I do not see how any of these challenges can be overcome effectively, causing rural America to fall short of meeting its growth potential.

The report also notes that rural entrepreneurs face greater challenges in accessing capital, and “often face a greater two-way information gap—there is less information about rural entrepreneurs for potential funders, and there is less information in rural communities about sources of funding.” An even more serious challenge is that “over the last century, the percentage of Americans living in rural communities has declined by nearly 50%.” The trend of young people leaving rural areas for greener pastures in urban areas has troubled rural telecom businesses for some time, and there definitely needs to be opportunities for jobs and education for rural youth in order to keep these communities viable in the long term. Iowa Telecommunications Association president Dave Duncan attended the Forum, and in a Radio Iowa article about the event he described that there were rural youth in attendance from the Future Farmers of America. When he asked if they would stay in rural areas with no broadband, “none of them raised their hand.”

Among President Obama’s commitments to rural America are creating jobs and economic growth and promoting innovation and investment. The second commitment includes “expanding broadband access and promoting global connectivity in rural America,” and expanding wireless broadband to 98% of Americans. I definitely believe that RLECs have a role in these commitments, but what about other industry players—like wireless companies and large telecom providers? The Rural Telecommunications Group (RTG) issued a statement this week in response to the Council’s goal of wireless broadband for 98% of Americans. RTG believes that “market-based competition for rural broadband access—especially mobile broadband access—can create jobs, encourage education, strengthen small businesses, improve medicine and promote economic growth.” RTG does not however believe that the potential merger between AT&T and T-Mobile will help achieve the Council’s goals for rural wireless broadband. RTG argues that AT&T “has a long history of treating rural America as an afterthought at best,” and “the fastest way to create telecommunications jobs and broadband coverage in rural America is robust competition, not a monopoly.”

What are the plans moving forward? The Rural Council “will continue to coordinate programs across government to create jobs and promote economic development in rural communities;” “will also be responsible for creating new policy recommendations and proposals;” and most importantly, “the Administration and the Council will take immediate steps to create jobs and improve the economy in rural communities.” I am not sure what involvement the Council has with the FCC as far as USF reform is concerned, but I definitely hope the Council is aware of the challenges that rural broadband providers will face if certain detrimental decisions are made this fall at the FCC. Meanwhile, I see the Rural Council as a positive addition to the Obama Administration and a great ally for RLECs.

The White House Rural Council’s August 2011 report is available here.