FCC's Pai: USF rules hamper rural providers' broadband investments

FCC commissioner Ajit Pai remains concerned that there are too many rules in place that make it difficult for rural service providers to invest in their networks to deliver higher speed broadband services.

Speaking during the recent NTCA telecom policy summit, Pai said that one of the problems with the Universal Service Fund (USF) is that recipients have to agree to use the funds to also provide traditional voice services.

"Through of a quirk of regulatory history, our rules governing small, rural carriers continue to provide universal service support only to networks that supply telephone service, not stand-alone broadband service," Pai said. "That regulatory system has increasingly come under strain as consumers flee landlines in favor of wireless and Internet-based (or "over-the-top") alternatives."

This regulatory construct has forced rural service providers to make two choices: offer standalone broadband and lose USF support or just not provide the service option at all.

"On one hand, they can offer stand-alone broadband -- which urban consumers have and rural consumers want -- and lose universal service support," Pai said. "On the other, they can deny consumers the option of an Internet-only service, and risk them dropping service altogether (which they increasingly are). The net result is that rural carriers hold back investment because they are unsure if they can deploy the next-generation services that consumers are demanding."

In June, Pai proposed new revisions to the USF to give rural telcos a chance to take advantage of funds to deliver a broadband-only service.

Through this proposed plan, the FCC would include standalone broadband delivery costs when calculating high cost loop support and interstate common line support.

The new rules would also determine how much of that support should be attributed to standalone broadband, while directing that support be used to offset the cost of service.

Pai said that his plan would provide benefits to rural providers in that they can enhance broadband deployments within their existing budgets while consumers could get stand-alone broadband from their local provider.

"They would allow rural consumers to choose broadband as a stand-alone service, and they would give carriers more assurance that arbitrary loopholes won't prevent them from meeting consumer demand," Pai said. "This will increase broadband deployment. They would also meet the FCC's own goals of distributing support equitably and efficiently and ensuring no double recovery of costs. And they would do all of this within the existing budget."

In addition, Pai's plan creates a path so that rate-of-return carriers that want to participate in the second phase of the Connect America Fund (CAF-II) can do so before the end the year. The FCC made $9 billion available in CAF-II funding earlier this year.

"The FCC's staff have worked diligently to create an alternative cost model for rate-of-return areas (the A-CAM), refining many aspects of that model in recent months," Pai said. "The model might not be perfect—it wasn't initially designed for small, rural companies, for example. But that is no reason to prohibit participation on a strictly voluntary basis."

For more:
- see this speech (PDF)

Related articles:
Pai advocates USF rules enabling rural telcos to deliver broadband-only services
AT&T, CenturyLink and other ISPs imagined concerns won't hinder broadband, Wheeler says
Internet access neither 'necessity nor a human right,' FCC's O'Rielly says in live-streamed panel

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