Part III with Shirley Bloomfield: USF reform and cost of broadband deployment

FierceTelecom: Overall, how important is government intervention in helping independent telcos reach their goals?
Bloomfield: 
When you go to a meeting on Capitol Hill, everyone wants to talk about what we're ranked in terms of broadband penetration. You can intellectualize that it's one thing if it's Hong Kong and everyone is living in one multi unit dwelling and you're putting in the fiber and shooting it up the walls is very different than if you're doing it in Montana. I always think that debate becomes a bit of an apples and oranges debate.

I do think if you look at this administration and members of Congress, there's a huge emphasis that broadband is very important and is the next economic driver out there. Then, you look at what it will really take to get broadband out there you can't do it in a market-based economy. You simply cannot do it. In the areas that NTCA's members serve, you have too many challenges and a small customer base and density to actually do it as a return on investment type of proposition. That's where I think some of the traditional mechanisms that have been in place like USF and access have been really important to certainly our membership in terms of making these investments. I think government does have a big role.

If you do the analogy that the high cost USF supports annually is about a $4 billion fund right now. Every year the government appropriates $100 billion for the national federal highway systems. As you look at interstate commerce and our digital economy, what if you just doubled it to $8 billion and now you could reach those very hard to serve areas? That's just 10 percent of what we spend on our highway systems. You have the political will to do it, but at the same time we'd probably be very concerned to not mess with mechanisms that are working right now.

FierceTelecom: You mentioned USF and there's a lot of talk about USF reform. Can you talk a bit about NTCA's point of view on USF reform?
Bloomfield:
There are a lot of ideas. Is there one answer out there? I think there's a lot of opportunity for the entire industry to come together and talk to through a lot of these issues. I know the FCC put some provisions in the broadband plan and you have Congress starting to make noise about a rewrite, but they have quite gotten to USF.

First of all, you know what won't work. We look at what the FCC put out there in the national broadband plan. There are very grave concerns doing some of this reform that you're not thinking holistically about the mechanisms. If you do USF separate from access that throws everything off kilter because these companies look at their revenue streams holistically. I think there's a need to be looking at how to do this in a real world way? For example, trying to do things where you're putting models together instead of really looking at a company's individual situation. Rate returns carriers focus on their costs, and their costs really vary. It depends on where you are, your demographics, and what your construction time periods are. That's been pretty effective.

I think more importantly it's got to come out of an academic perspective and look at what are the real implications? On one hand you got this policy goal of 4 Mbps for rural America by 2020 and 100 Mbps for the rest of the country. How how does USF fit into trying to achieve those goals?  Again, it's one of those things where we need to roll up our sleeves and be part of the discussion, but I don't think it's an easy solution.

Part III with Shirley Bloomfield: USF reform and cost of broadband deployment
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