Terrific Digital Opportunities Ahead…But Some Tweaks Are Needed To Prevent Storm Clouds In The Future

Terrific Digital Opportunities Ahead…But Some Tweaks Are Needed To Prevent Storm Clouds In The Future

wrote recently about how NTCA members are excited to participate in the upcoming Rural Digital Opportunity Fund (RDOF) auctions, and how pleased we are that FCC Chairman Pai responded to the call of Congress by circulating an order for those auctions that will help strike a terrific balance by looking to reach as many rural Americans as possible while ensuring that the FCC is “buying the best possible networks” for the available budget.  I am energized by the role that NTCA members can play in being a key part of the solution in bridging the rural/rural digital divide.

As we have studied this order further and as we have started talking with FCC commissioners’ offices and other stakeholders, that view still holds.  We think this order on the whole holds great promise, helping to promote amazing digital opportunities for rural America.  But there are just a few pieces that we think are worthy of further consideration and some modification before the order becomes final.  These are pieces that won’t “upset the apple cart” by delaying or materially changing the auction, but they’re important to ensure that the auction ultimately attracts as many bidders as possible from all tiers – and, even more importantly, that the statutory goal of promoting reasonably comparable services at reasonably comparable rates is achieved on a sustainable basis.

One of the issues we’re flagging is the proposal to inject a 50/5 Mbps speed tier into the auction.  (The FCC originally proposed just 3 tiers – 25/3, 100/20, and Gigabit.)  While we understand and support the goal of giving as many Americans as possible at least some level of service, we believe adding another speed tier that is below the average speeds enjoyed by urban Americans does not advance the cause of “reasonable comparability” as required by law.  However, the “clearing round” proposal that the Chairman’s draft order includes (which I highlighted in my last blog on this topic) should at least help to mitigate the impacts of including another lower-speed tier in the RDOF, so it’s critical at the very least that this “clearing round” provision remain as is as part of the auction structure.  Otherwise, I fear we are putting valuable resources to build networks that will become obsolete sooner rather than later.

Another issue we’ve raised with the FCC is how letters of credit are established to assure performance by winning bidders in the RDOF.  We understand the need for accountability in the use of USF funds, and we support reasonable efforts by the FCC to make sure that parties won’t bid speculatively and then not perform – everyone loses when that happens.  But we also believe the FCC should tailor the letter of credit requirements to the risk presented, tracking how much must be kept tied up by those letters to the level of performance of each party and the amount of USF funding the FCC has at risk at any given time.

Finally, and most importantly, we have highlighted to the FCC potential “storm clouds on the horizon.”  In particular, the RDOF item contemplates that any area where a USF recipient has already built high-speed broadband won’t be eligible for the auction.  In a world where the only goal is to build networks, that makes sense.  But in a world where the law is focused not just on network availability, but ultimately on the availability of reasonably comparable services at reasonably comparable rates, this view misses the mark.  In fact, it creates some really odd results and bad incentives – basically encouraging carriers to do the bare minimum in terms of building a network in order to help it qualify for another auction in the future.  By contrast, if a carrier is too efficient and builds an even better network for the same amount of funding, its “reward” is that the entire area becomes ineligible for USF support.  In turn, customers may end up with a great network, but the carrier may be unable to sustain it without charging customers unaffordable rates that are far higher than anything an urban customer pays.  That’s a result that makes no sense as a matter of policy, and it runs directly counter to what the law requires.

So, to make sure those storm clouds on the horizon don’t come thundering down on rural communities, we’ve called upon the FCC to examine this further.  Our request for the FCC to seek comment on this issue doesn’t slow down or change the RDOF auction at all.  All it would do is have the FCC, even as the RDOF auction is proceeding to promote deployment in areas that are unserved, take a look at what support might be needed to sustain reasonably comparable service at reasonably comparable rates in those areas that are already served only because the networks there were built leveraging USF support.  The FCC has previously recognized that there are rural areas that need support for operating expenses and loan repayments even after networks are built, and all we are asking is that the FCC not forget that or foreclose a conversation about how to address those concerns.  And this policy would have very real effects on the ground – this isn’t theoretical, as we explained to the FCC last week when Premier Communications came to DC to talk about how such a ruling would negatively affect their ability to sustain universal service over a cutting-edge network in rural Iowa and South Dakota where they have far outperformed a low 10/1 buildout obligation.

In short, NTCA believes the FCC should simply ask something along the lines of the following questions even as it moves forward with the RDOF:

  • Are there areas served by higher-speed broadband today due to prior USF support where ongoing support is needed to maintain networks, repay loans, and keep consumer rates reasonably comparable to urban areas?
  • If so, how do we identify those areas, and what level of support is appropriate to achieve the goal of reasonable comparability as mandated by the law?  
  • How should we distribute that support? If we provide such ongoing support, should we expect the provider to make higher speeds available to consumers in those areas?

NTCA and its members are excited about the RDOF, and we’re looking forward to this being a home run for rural America.  And with just a couple of tweaks and some further thought on the very important question of what universal service really means in the long run, this can be just that.

Leave a Reply