NTCA–The Rural Broadband Association urged the Federal Communications Commission (FCC) to waive scheduled cuts to Universal Service Fund (USF) support for rural operators, arguing a reduction in financial assistance could force them to raise rates for consumers or halt planned network investments.
The organization’s concern relates to the Connect America Fund Broadband Loop Support and High Cost Loop Support programs. Both are targeted at smaller operators and are designed to make the economics of deploying and providing broadband service in rural areas more sustainable. Unlike other USF programs, these provide reimbursement for costs already incurred rather than advances for future costs.
In 2016, the FCC passed an order which capped support from the funds and implemented a budget control mechanism to systematically reduce the monthly per-line amount distributed to operators over the course of several years. Though the FCC revisited the issue in 2018 to reset its budget in light of increased demand on the programs, the budget control mechanism and scheduled cuts were retained.
Last June, the Commission waived a scheduled 8.6% reduction in support that was due to take effect in July on the grounds that such a move could further strain rural operators pushing to meet increased demand for broadband services in the wake of the Covid-19 pandemic. NTCA wants the FCC to do the same for a cut set to take effect on July 1.
Michael Romano, NTCA’s SVP Industry Affairs and Business Development, told Fierce the cut slated for 2021 was upwards of $110 million across all the operators participating in the program. The reduction amount for this year is yet to be announced but is likely to be even higher, he said. According to Romano, the same conditions that were the basis for the waiver in 2021 are still present and a reduction in funding would fly in the face of broader government messaging around the importance of broadband connectivity.
NTCA currently has around 850 members, about half of which receive the aforementioned kind of support. The practical effects of a drop in support could include headcount reductions, a slowdown or suspension of new broadband investments or an increase in rates for consumers, Romano said.
“The problem it presents is the network’s already in the ground, you’re already delivering services so you’re going to have to look to recover those costs some other way,” he explained. “The kinds of things we typically hear from people are either I’m going to leave positions unfilled that I don’t have filled now, I may have to reduce headcount depending on how significant the cuts are, [or] I’m not going to choose to invest moving forward. I was going to do more investment but now I can’t because I can’t depend upon the revenues I thought were going to come in to help me do that.”
While NTCA is seeking a short-term solution to eliminate the effects of the expected 2022 cuts, Romano said he’s hoping the issue also sparks a conversation about longer-term solutions.
“Obviously having waivers required every year is not a really sustainable prospect. There’s probably a better way to manage and design the system,” he concluded. “Let’s have a holistic discussion about what should be the new service level commitments going forward given we have to talk about that next year anyway, and what is the budget that’s needed to achieve those service level commitments.”