Pai advocates USF rules enabling rural telcos to deliver broadband-only services

FCC commissioner Ajit Pai has proposed new revisions to the Universal Service Fund (USF) to give rural telcos a chance to take advantage of funds to deliver a broadband-only service.

Ajit Pai, FCC


Up until now, rural providers that have sought USF funds have had to use them provide traditional telephone service, a requirement that's at odds with the reality that consumers are increasingly dropping their POTS (plain old telephone service) and are using either wireless for voice or their broadband lines to access over-the-top VoIP players like Vonage.

"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 in a statement. "That regulatory system has increasingly come under strain as consumers flee landlines in favor of wireless and Internet-based (or "over-the-top") alternatives."

Pai added that while service providers can offer standalone broadband service, they would lose USF support if they don't also offer traditional voice services.

"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."

The commissioner's changes echoes a similar sentiment advocated by Sen. John Thune (R-S.D.) and others that have called for further USF reforms.

Led by Thune, who is chairman of the Senate Committee on Commerce, Science and Transportation, and fellow committee member Sen. Amy Klobuchar (D-Minn.), a group of 61 senators wrote a letter in May to FCC Chairman Tom Wheeler asking him to realign the USF rules, particularly for smaller rural carriers.

"No new models or sweeping changes are needed to adopt and implement a targeted update to fix the issue highlighted in this and last year's letters--instead a simple plan that isolates and solves this specific issue is all that is needed right now," wrote the senators.

Pai is advocating a similar approach to enact changes to the USF fund. Under the commissioner's proposed plan, the FCC would include standalone broadband delivery costs when calculating high cost loop support and interstate common line support.

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

"The rule changes needed to redirect funding to support stand-alone broadband facilities can fit on a single page, which I have attached as an appendix to this statement," Pai said. "They would include stand-alone broadband costs when calculating high cost loop support and interstate common line support. They would determine how much of that support should be attributed to stand-alone broadband. And they would direct that support be used to offset the cost of service."

Pai said such changes would have a number of benefits, including giving rural customers more choices for broadband from one or various providers, while enabling rural providers the opportunity to increase broadband penetration without having to increase their budgets.

"They would give rural consumers the real option of choosing whether they want to purchase broadband and telephone service from the same company, 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."

While the alternative cost model for rate-of-return areas (the A-CAM) was not initially designed to accommodate smaller rural providers, these operators should be able to participate on a voluntary basis.

"The path to permitting voluntary participation by the end of this year shouldn't be hard," Pai said. "In fact, there already appears to be a consensus on key points: Participation should be voluntary. The model should last for 10 years. Support should target unserved locations that will meet the Connect America Fund's 10/1 broadband benchmark. And FCC Form 477 data can form the basis of a streamlined challenge process."

For more:
- see Pai's full statement (.pdf)
- see Thune's letter (.pdf)

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