Senate Panel Probes Rural Broadband

Gets Input on Challenges of Government Broadband Subsidies

Senate Communications Subcommittee members probed rural communications issues, specifically the efficacy of government broadband subsidy policies, on Tuesday at its inaugural hearing of the new Congress.

New Subcommittee chair Mark Pryor (D-Ark.) pointed out it was the first of a series of hearings on the communications marketplace, signaling that he expects it to be an active subcommittee.

The witnesses, representing smaller and midsized cable and telecom companies -- wired and wireless -- all agreed that getting broadband to rural areas was an important government goal that requires subsidizing private companies where the cost model is not there, but they disagreed on how well government policies for handing out those subsidies were serving that goal.

They called on the Senators, who appeared to share many of those concerns, to flex their oversight muscle.

Patricia Jo Boyers, president of BOYCOM Cablevision and American Cable Association board member, said it was imperative that the government not subsidize her competition, a point seconded by Sen. Kelly Ayotte of New Hampshire.

Asked how the FCC might better monitor that, Boyers said she wasn't sure, but that one answer might be the way she has to justify broadband loans with invoices and other evidence at certain points throughout the process.

Boyers said that the keys to the FCC's dispensing of hundreds of millions in rural broadband subsidies from the Universal Service Fund's Connect America Fund (CAF), were not overbuilding, only subsidizing service that meets the 4 Mbps/1 Mbps benchmark for high-speed broadband, and making sure that cable operators were on equal footing when the FCC launces the reverse auction through which it will dispense the next round of CAF funds.

John Strode, vice president of broadband, cable and phone provider Ritter Communications, told the Senators he thought the FCC's USF broadband funding regime was working reasonably well, but took issue with the FCC's cap on spending at the 90 percentile of fund recipients. He said that cap should trigger further FCC investigation that would allow a company to justify why its cost to reach rural, high-cost areas exceeded that cap.

Strode also had some complaints about the NTIA/FCC national broadband map used to identify unserved and underserved areas. He said that some areas that show up unserved are because there are no people there to serve. Though he said the map fairly accurately represented his company, he was worried that it was overestimating service others were delivering.

Steven Davis, executive vice president of CenturyLink, continued to push the FCC to raise its $775 per sub subsidy, saying that underestimated the cost and helped lead to the result that only $115 million of the $300 million available in the first tranche of CAF funding was applied for.

CenturyLink applied for only a portion of the money for which it was eligible, and major incumbent telcos AT&T and Verizon did not take any.

Davis argued that changing the benchmark would allow the FCC to release more of that $300 million ASAP. "Timely FCC action could significantly narrow the rural digital divide, and faster broadband speeds and greater availability of broadband services will give rural consumers access to new educational opportunities, cloud computing services, healthcare applications, IP television and streaming video," he said.

U.S. Cellular chair Leroy Carlson Jr. talked a lot about the upcoming incentive auctions, as well as a previous auction of wireless spectrum.

Carlson said more spectrum is the raw material of the wireless business, and smaller companies like his must be able to compete for spectrum against the larger companies. He argued for dividing the auctioned spectrum into smaller geographic areas so that smaller companies would not be bidding against the larger, as would be the case if spectrum was tied to larger urban markets.

He said it was key for the FCC to establish interoperability as a condition of the upcoming 600 MHz incentive auction of broadcast spectrum. He pointed out that because the FCC did not set an interoperability condition on the 700 MHz broadcast spectrum it reclaimed and re-auctioned as part of the 2009 DTV transition, many of the more popular handsets did not work on his network.

He said the Senate needed to pay "urgent attention" to those issues so they could be addressed before the FCC comes out with its auction rules later this year.

Sen. Mark Begich (D-Alaska) was sympathetic. Saying he didn't want the committee to have to come back two years after the 600 MHz auction and be talking about the same interoperability problem, he advised the committee to "dog this issue."