New FCC Rules On USF Will Trigger Economic Crisis In Rural America Putting Small Businesses And Jobs At Risk

Rural Broadband Alliance Press Release October 19, 2011:

As President Barack Obama travels key battleground states with heavy concentrations of rural voters to bolster his chances for reelection in 2012, prospects for the economic recovery in rural America are set to go into a quick reverse if rumors of a Federal Communications Commission (FCC) ruling come to pass that would radically alter the nation’s universal service rules. Based on briefings of selected industry associations and parties conducted last week by staff for FCC Chairman Julius Genachowski, rumors are circulating that the agency will put in place new telecommunications policies that are inconsistent with current law and threaten the viability of small rural telecommunications businesses that have brought advanced services to the rural communities they serve.

The briefings provided by Genachowski’s office reportedly outlined the changes in the Universal Service Fund (USF) and intercarrier compensation policies that the FCC is expected to adopt at its October 27 meeting. The briefings have fed the concerns of small rural telecommunications businesses that the FCC’s new rules will make their operations more unstable and uncertain.

According to reports from the FCC Chairman’s briefings, the new rules will not only apply to future operations and investments, but also will apply retroactively and threaten carriers’ abilities to recover the investments they have made in reliance on the FCC’s existing rules and policies. Several rural associations that participated in the briefings have reported that the FCC plans to adopt rules that “fail to adhere to the statutory mandate for consumers to have access to reasonably comparable rates and services.”

In anticipation of the FCC action, small, rural and independent telecommunications companies (45 at last count) – many of which provide services in key battleground states across the country – have written directly to Genachowski to “reserve all legal rights and remedies, including, but not limited to, the right to recover our established operational costs and historic capital investments.” The concerns of the rural small telecommunications businesses were included in a formal series of ex parte filings made for the companies to the Commission recently by the Rural Broadband Alliance (RBA), a coalition of small, rural and independent telecommunications carriers formed to preserve universal telecommunications service for rural consumers.

These small businesses provide telecommunications services in rural areas in such key states as Illinois, Wisconsin, Virginia, Pennsylvania, Iowa, Michigan, and Maine – all states that political strategists say Obama must carry to win reelection next year. According to the rural carriers, these rules will discourage rural broadband deployment where it is most needed in these states; stifle new economic investments; and lead to more job losses in rural areas throughout the country.

“As President Obama often has said, broadband is the new engine of the American economy,” said Steve Kraskin, RBA counsel, who filed the ex partes on behalf of the group’s members. “If the rumors that emerged from the briefings by the FCC Chairman’s office are correct, the new FCC rules will turn back the clock on a commitment to rural Americans that they are entitled to receive a range of telecommunications services, including broadband, comparable to those available in urban areas. The impact of this policy change will be felt for years to come, but its immediate effect will be to freeze new investment and cut existing jobs.”

“President Obama is now travelling the country with a message that the federal government must do all it can to encourage job growth and bring about an economic recovery. But, there is a major disconnect between the President’s message and what our rural representatives have heard from the FCC Chairman’s office. Instead of stimulating the economy, these new rules will further frustrate the economic recovery in rural America and lead to even more job losses and missed economic opportunities.”

Kraskin added that members of the RBA have responded to the President’s call to deploy broadband infrastructure to stimulate rural and economic development and bring the technology of the 21st century to rural consumers and communities, but will now pay a heavy price for making that commitment.

“These small rural telecommunications businesses participated in good faith in the administration’s excellent Rural Utilities Service (RUS) finance programs and the broadband stimulus program included in the American Recovery and Reinvestment Act (ARRA),” he said. “They developed business plans in reliance on these programs and in conjunction with the FCC’s universal service program.”

“If the reports from those that were briefed by the Chairman’s office are correct, the new rules will not stifle new rural infrastructure investment and job creation, they will destabilize existing small businesses that have successfully met a commitment to carry out the nation’s universal service policy.”

“The idea that an appointee of this President – even an appointee to an Independent agency - would propose the retroactive application of new rules to deprive small businesses of an opportunity to recover investments made in reliance on existing government programs is remarkable and should be unthinkable,” Kraskin continued. “The result would not only be contrary to everything the President has said he stands for with regard to rural economic development and stability for rural small businesses, but it would be unfair and inequitable – a blatant example of what Americans are saying is wrong with government.

“I am hopeful that the rumors and reports that are being circulated about the briefings are inaccurate. But, the small rural businesses that are members of the RBA cannot run their businesses on hope. That’s why we recommended that our members individually write to Chairman Genachowski and contact their congressional delegations to share their concerns.”

The RBA members are concerned that the new USF rules that Genachowski plans to adopt will slow broadband deployment in rural areas; result in dramatic price increases for rural consumers; and further depress rural economies. The rural carriers also have asserted that the new rules must not sanction a slower broadband threshold speed for rural America. They believe that the failure to provide reasonably comparable services in rural areas as those available in urban areas of the nation will discourage economic development and job growth in already economically depressed parts of rural America.

“We believe that the establishment of any differential between urban and rural service standards is simply contrary to law,” the carriers state in their ex parte letters, “and deprives rural communities of the infrastructure most necessary for economic stability and advancement.”

The carriers warned that the FCC’s approach to formulating the new rules has “marginalized the operational impact on individual companies and, worse, ignored the consequences to consumers, businesses, and the economy in rural America.”

In their individual ex parte letters to Genachowski, the rural carriers also noted that they have built their companies and deployed services consistent with current laws and regulations. Changing those regulations will impact their ability to continue to deliver services to rural consumers at affordable prices.

“My company’s historic investment and operational structure has been based upon a specific statutory and regulatory framework,” the ex parte letters state. “Simply put, after-the-fact modifications to regulations cannot interfere with our company’s expectation and right to recover historic costs, or the public expectation and right to continued service at reasonable costs.

“Our resort to this formal reservation of rights is required because, in a rush to implement an industry-sponsored solution, the very purpose of Section 254 – the preservation and advancement of universal service – has been undermined, and we must preserve our legal rights as result.”