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Wireless technology advances in rural America, unless FCC USF reform kills it

Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.
The news from the heartland of America is that rural wireless carriers are as technologically savvy as their urban cousins, and in many ways more agile.

That said, why is Federal Communications Commission Chairman Kevin Martin so intent on cutting off the lifeblood that has enabled rural wireless carriers to build and maintain this technological prowess? Specifically, why is the chairman pretending there is a financial crisis in the universal service fund (USF), and attempting to correct this imagined problem by proposing a reform strategy that will irreparably harm to the rural wireless industry and its millions of customers?

Thanks to the 1996 Telecommunications Act and the USF it authorized, tier-two and tier-three wireless carriers have succeeded in bringing a vast array of wireless technology to huge portions of rural America. Just among carrier members of the Rural Cellular Association (RCA) nearly 80% of the continental United States now benefits from and enjoys wireless service that is as good as, and in some cases better than the wireless service provided in urban America. Many RCA members are offering EV-DO Rev. A and others are approaching 3G technology. As a group, rural wireless carriers are eagerly anticipating the arrival of LTE and to providing ubiquitous wireless broadband service for their customers in just a few short years.

But that won’t happen if current proposals for USF reform are adopted. Instead, many rural wireless consumers may experience a serious degradation of their current service.

Here are the facts. There is no evidence that the USF is in crisis, and it certainly is not in crisis because of rural wireless carriers. For example, a wireless customer with an average monthly bill of $50 pays approximately $2.11 per month into the USF. In return that customer’s wireless carrier receives about 35 cents with which the carrier builds out and maintains a wireless network that (theoretically at least) connects rural wireless customers to the world. One does not need to be a mathematical wizard to see that wireless carriers are not draining the USF.

Wireless carriers use the USF support they receive to build out their networks, to ensure as fully as possible that every customer in their service areas is served. Without USF support, rural wireless carriers would be required to scale back or stop any additional build out they may have planned for their service areas. Alternatively, these carriers would be required to increase their rates by such a huge amount that present and future wireless customers could not afford their service.

Advocates of USF reform argue that the “Equal Support Rule” is the culprit that is causing the fund’s crisis. But the “Equal Support Rule” exists because since the creation of USF no one has identified a more equitable means for distributing the fund to wireless carriers. Eliminating the “Equal Support Rule” without having some other formula for distribution would be an arbitrary and capricious means of controlling the size of the fund.

Whatever problems exist in the USF are not the result of growth in the number of eligible wireless carriers, or growth in the numbers of their customers. Taking a cleaver to the fund by slashing support to rural wireless carriers, as the FCC is proposing, will not serve the public interest and it certainly will not serve rural consumers.

If in fact there is need for reform, the commission can do so by targeting universal service support more accurately. One way to do that would be by making support fully portable for all carriers. Some experts argue that full portability of support would create the incentives for all eligible carriers to be as efficient and competitive as possible, enabling them to continue offering the latest wireless technology to consumers in rural America.
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