WASHINGTON-A proposal from Western Wireless Corp. to receive universal-service support payments for providing telephone service to rural areas seems to have gotten a lukewarm response from the Federal Communications Commission.
A basic piece of the Western Wireless proposal-to have the FCC re-evaluate support for rural independent wireline telephone companies before 2001-seems to have fallen on deaf ears. “We’re not going to do anything [on the rural telco issue] before 2001,” said Tom Power, a legal adviser to FCC Chairman William Kennard.
This view was echoed by James Casserly, senior legal adviser to FCC Commissioner Susan Ness, who noted there has been considerable pressure from Capitol Hill to make sure rural telcos get to live under the old rules for at least several more years.
The 2001 date is important to Western Wireless because the company would like to begin offering service in some of the most remote sections of the lower 48 states but feels it can’t compete against the independent rural telcos that receive universal-service support subsidies for offering wireline service.
These subsidies can be generous, Casserly said, noting the subsidies are based on the embedded costs of the rural telephone companies. “The difficulty for [Western Wireless] is that we don’t get a subsidy,” said John Stanton, CEO of Western Wireless.
Wireless companies could qualify for these generous subsidies if states would designate them as “eligible telecommunications carriers” or ETCs. Getting this designation may be harder than it looks because as Stanton said, “We have concerns that the independent phone companies are too politically powerful,” and could block competition.
The Telecommunications Act of 1996 allows states to decide whether they will designate more than one company an ETC in rural areas.
Western Wireless is going on the offensive to get ETC status, signaling last week it would ask the FCC to pre-empt a Kansas law it says discriminates against wireless carriers.
Once competition is in place, the amount of the subsidy becomes the question. The FCC is devising a cost proxy model for universal-service support payments for companies that serve non-rural areas. This process is slated to be completed by the end of the year. The cost proxy models are supposed to determine how much it would cost to build a telephone system from scratch.
The FCC has been refereeing a debate between U S West Inc., Sprint Corp. and BellSouth Corp. on one side and AT&T Corp. and MCI Communications Corp. on the other. Each side has presented a proposed model. FCC staff also has proposed a model. It is expected the FCC will devise a synthesis of the models, said Glenn Brown, executive director for public policy for U S West. All models assume that it would cost at least $10,000 for wireless carriers to offer service in rural areas. However, a model for wireless deployment shows this number is too high.
Western Wireless and the Cellular Telecommunications Industry Association plan to present to the FCC a model that shows that wireless service may actually be cheaper than wireline.
A preliminary test using the model to determine the costs of providing wireless service in Montana and North Dakota shows the cost savings are significant compared with the cost of providing wireline service, said Gene DeJordy, executive director of regulatory affairs for Western Wireless. For example, the Western Wireless model predicts it would cost $92.90 to provide service in rural Montana while it would cost $188.84 using the model supported by AT&T and MCI.
However, the study found wireline telephony still was cheaper in the urban areas of Montana at a cost of $22.22 for wireline vs. $56.31 for wireless service.
The use of Montana and North Dakota is significant because senators in those states have been vocal about rural issues. Sen. Conrad Burns (R-Mont.) chairs the Senate communications subcommittee, and Sen. Byron Dorgan (D-N.D.) was a leader in the so-called Farm Team that devised the universal-service system in the ’96 telecom act.
It is unclear whether any of the wireless models would be included in the final cost proxy model.
Brown said he has concerns about the wireless model, noting topography is an issue that may not be thoroughly addressed. “If the world [was] flat, it would be real easy to provide service,” he said. He conceded, however, he has not seen the study.
