Kansas Independent Telcos Seek FCC Answers on USF Reforms

Kansas Independent Telcos Seek FCC Answers on USF Reforms
October 27, 2011

The Kansas Rural Independent Telecommunications Companies organization has asked the Federal Communications Commission for a clearer explanation of the proposed changes for the $5.8 billion Universal Service Fund the agency administers. Among the concerns expressed by the KRITC and other rural telecommunications organizations is that USF appropriations might subsidize telecommunications companies in areas where an unsubsidized competitor is already providing service.

In a September 21, 2011 letter to The Wichita Eagle, KRITC President Kendall S. Mikesell wrote, “Wichita State University calculated the measurable consequences of the FCC proposal. If anything, the analysis understates the harm to rural economies and tax revenues. Rural Kansas will see entire local service providers and telecommunication systems fail if this Washington administrative ‘solution’ is imposed.”

Mikesell’s letter continued: “Providing advanced telecommunication services requires local investment. Where advanced services are lacking, the required local investment has not been made. Regulatory efforts to restrict or penalize local investment would interfere with consumers’ quality of service and undermine rural economies.”

Micromanaging Broadband Industry
The USF traditionally has subsidized rural landline phone services in remote and underserved areas of the country paid for by fees on all consumers’ monthly telephone bills, but the FCC is seeking legislative approval to divert USF funds in the future to rural Internet broadband buildout. The Senate Committee on Commerce, Science, and Transportation convened a hearing in October to explore the issue.

“It’s sad that the FCC even has to be convinced by outside entities that restricting local investment is a result of its attempts to micromanage the broadband industry,” said Jim Lakely, co-director of the Center on the Digital Economy at The Heartland Institute, which also publishes InfoTech & Telecom News. “The more the FCC or any government agency meddles, the more often we see private firms leave for less-regulated pastures. That’s a pretty solid rule across the country,” he added.

“The government can’t deprive what it shouldn’t provide,” Lakely continued. “But what it can do is establish rules and regulations that depress free-market competition—which seems to be the case time and again. The only way the government can deprive rural areas from better tech services is by thinking it can make decisions better than companies and customers and getting in the way of the market,” he said.

‘Deadweight Loss’
“Rural communities in Kansas and other parts of the nation have become reliant on the Universal Service Fund to subsidize the cost of bringing telecommunications to sparsely populated areas,” said Paul V. Tyahla, executive director of the Common Sense Institute of New Jersey.

“Unfortunately, the USF has led to deadweight loss, and the FCC has a rare opportunity to minimize that loss with a well-designed system,” Tyahla continued. “Communities are responding to some of these efforts by insisting not only on USF funding, but at levels to build networks beyond what is needed for necessary functions such as public safety, public health, and education. The FCC needs to be more stringent on this and must develop an outcome-based measurement system. Otherwise, Washington will rely on self-confidence and faith that their actions actually resulted in desired outcomes,” he said.

Lakely agrees with Tyahala’s assessment.

“We need less government meddling, especially from the FCC, so the market can provide broadband for the people of rural Kansas,” Lakely said. “A recent study shows that Alaska—the least-densely populated state in the union, with enormous geographical challenges—has achieved 91 percent broadband penetration. Certainly the challenge is not nearly as daunting in Kansas.

“That Wichita State found that the FCC proposal would lead to the failure of entire local service providers indicates that government intervention in this case is doing more harm than good. The FCC should butt out and let localities and broadband providers itching for customers decide how to proceed,” Lakely added.

Krystle Russin (krystle@purepolitics.com) writes from Texas.

Internet Info

“FCC Reform No Solution,” Kendall S. Mikesell, The Wichita Eagle, September 21, 2011: http://www.kansas.com/2011/09/21/2026010/fcc-reform-no-solution.html#ixzz1YbNQRkRh

“Kansas Rural Local Exchange Carriers: Assessing the Impact of the National Broadband Plan,” Wichita State University W. Frank Barton School of Business Center for Economic Development and Business Research, Summer 2011: http://news.heartland.org/sites/default/files/KRLEC.pdf