A More Holistic Approach to Achieving Universal Broadband in Rural America November 15, 2017
GUEST BLOG BY CAROL MATTEY
I recently attended a symposium hosted by the Schools Health & Libraries Broadband Coalition (SHLB) about the Federal Communications Commission’s programs to achieve universal service: the Connect America Fund to expand and maintain voice and broadband service in rural, high-cost areas, the E-rate program to bring internet connectivity to schools and libraries, the Rural Health Care program to provide critical communication services to healthcare providers, and the Lifeline program to make service more affordable for low-income households.
All four programs support broadband. Each program is administered in a silo, with little effort to tackle the challenges of universal service on a more holistic basis.
There are practical difficulties to coordinating the various programs. The E-rate and Rural Health Care programs provide funding to specific end users (schools, libraries and healthcare providers) through an annual application process. The applicants select their desired service provider, for the most part through a competitive bidding process, with the funding effectively providing a discount on the cost of service and related infrastructure.
The Connect America Fund, in contrast, provides subsidies directly to eligible telecommunications carriers to defray the cost of building and operating communications networks. Service providers that are eligible for such support either receive funding for a period of years, or even indefinitely, subject to annual reporting.
More than three-quarters of the support in the Connect America Fund today goes to telecommunications carriers that historically have been viewed as “carriers of last resort,” legally obligated to serve their entire service territory. That will change in the coming years, however, as the FCC is working to hold several auctions to award funding on a technology neutral basis to any entity that can meet the performance requirements for the requisite level of broadband service in unserved geographic areas.
On more than one occasion, attendees at the SHLB conference asked if it were possible to better coordinate these separate programs to achieve the overall goal of universal service. I’ll leave it to others to think about how one might design a new program if working on a clean white board. Instead, I’ll offer a few modest proposals on what the FCC could do to promote efficient deployment in rural America.
It’s a good thing when service providers build integrated networks that serve not just the community anchor institutions but also the surrounding community. Let’s create incentives for them to do that in the rural areas of the country that are hardest to serve. And let’s eliminate regulatory red tape impacting communities that are least equipped to deal with complicated regulations.
First, don’t micromanage cost allocations for eligible services in the E-rate and Rural Health Care programs when the service provider also is receiving Connect America support. I heard an earful of animated discussion at the SHLB conference about the implementation of the FCC’s rules for self-provisioning fiber in the E-rate program, and broader concerns about whether this foreshadowed a move to more scrutiny of cost allocations between eligible and ineligible services in general. In rural, high-cost areas, we should encourage service providers to design and build broadband networks that serve the entire community, and not have to worry about someone second guessing how they’ve allocated those costs among different customers.
Second, give applicants in the E-rate and Rural Health Care programs greater freedom to design projects that can leverage Connect America Fund support. According a recent study, rural school districts represent 60 percent of the districts that receive only one or no bids for broadband service. While the lack of competition is unfortunate, it is not surprising in less dense, rural areas where it’s harder to make a positive business case for significant network investment.
For those areas, it’s worth asking if there are steps the FCC could take to maximize the impact of scarce universal service dollars: should the FCC provide greater flexibility to rural schools, libraries, and healthcare providers to work with Connect America Fund recipients without fear of running afoul of competitive bidding requirements? Is there a way to allow E-rate and Rural Health Care applicants to contract with Connect America recipients outside of the timetable dictated by those programs? How can the application review process be streamlined for schools, libraries, and healthcare providers seeking support for special construction that will occur in conjunction with a Connect America Fund deployment? Should the FCC implement such proposals in areas where Connect America support is awarded through competitive bidding, or more broadly in any area lacking the FCC’s definition of baseline broadband for residential households, 25/3 Mbps service?
E-rate and Rural Health Care applicants should be free to continue to seek competitive bids for services, and not obligated to contract with whomever is awarded Connect America support. But in many instances, the service provider receiving Connect America Fund support may be the only viable choice, because the market is too small to attract competitive interest from multiple providers. While important details need to be worked out, measures that provide a greater assurance of a multi-year revenue stream to justify network investment should be encouraged.
The goal should be to make it easier for service providers to leverage funding from three different universal service programs to build one network in rural, high-cost areas. That is how we’ll get a 21st century network that meets the needs of the entire community.
About the author: Carol Mattey is the former Deputy Bureau Chief of the FCC’s Wireline Competition Bureau (2010–2017) and Senior Advisor on the National Broadband Plan (2009–2010), where she led teams working on the landmark Connect America Fund and other initiatives to modernize the FCC’s universal service programs. She currently is the principal of Mattey Consulting LLC, which provides strategic and public policy advisory services to broadband providers, governmental agencies, non-profit organizations, and other entities active in the telecommunications arena.