Rural Telcos Wary About Revived USDA Broadband Loans

The Department of Agriculture recently redrew the program’s rules, and officials said they've solved problems cited by the department’s inspector general last month. “We think it really targets rural areas,” RUS Administrator Jonathan Adelstein told us. The rules require only combined download and upload speeds of 5 Mbps, Adelstein said, which is close to standards set by the National Broadband Plan but still flexible for rural carriers. RUS receive $28 billion worth of applications for its broadband stimulus grants and loans but could give out only about $3.5 billion, “so there’s huge pent-up demand for this,” Adelstein said. Unlike the stimulus loans and grants, which were awarded competitively, the broadband loans are “first come, first serve” and RUS can work with applicants to help get the process moving along, he said.

Applicants who lost out on broadband stimulus may be in a good position for the newly revived loans, because they've at least outlined their proposals, Adelstein said. “We're much more flexible when we're not in a competitive grant program,” he said. There have been no applications yet, but “we've had a lot of interest,” Adelstein added.

Many rural telcos are “apprehensive” about the proposed universal service and intercarrier compensation reforms at the commission, said Vice President Tom Wacker of the National Telecommunications Cooperative Association. “They're playing it very, very safe because they … just don’t know what the future holds,” Wacker said. The apprehension works at many levels, but rural telcos that rely on universal service for cost recovery are especially anxious, Wacker said. “There are those that sort of had things in the queue ready to go, but they're really questioning about how to proceed with taking a big loan if they're relying on USF to proceed,” he said. At the same time, rural telcos know that they're not going to get much of a Hill audience when they say that rural subsidies have to be increased.

American Indians are in an even tighter bind, said Native Public Media lawyer John Crigler. Many tribal leaders are glad to see the Agriculture Department concentrate on the least-served areas, but are still concerned about the FCC’s seeming shift from telephone subsidy to broadband. “The worst of both worlds would be to lose telephone subsidy and to see the money swung over to broadband when nobody can afford a computer,” he said. The FCC under Chairman Julius Genachowski has been “generous” to Indians, but there are just too many practical problems in their unique history and circumstances for a “one size fits all” package to make much difference to those on the reservations, Crigler said. “The constant effort of the tribes is to take these programs … and translate them into terms that will benefit the tribes and the reservations,” he said.

National Broadband Plan architect Blair Levin said rural carriers are crying out before they have been struck. “There has been universal service fund uncertainty for years,” he said. “It’s not the uncertainty, it’s the irrationality of the current system.” Levin, now with the Aspen Institute, has clashed repeatedly with rural carriers and leaders over the plan’s USF recommendations. He said the Obama administration has an obligation to do a strict cost-benefit analysis of its broadband deployment goals. If rural carriers want certainty, “we could easily give them $1 billion each,” Levin said. “But that would be a bad idea.”

Last year, during the broadband stimulus program, a handful of rural telcos walked away from grants and loans because of uncertainty about USF (CD Sept 27 p4). An FCC spokesman said the commission “is committed to reforming universal service within a few months, with the aim of adopting rules that will provide clarity on the transition of universal service support to broadband.”

To its credit, the FCC has been very open to talking with rural carriers about revamping USF, NTCA’s Wacker said. “I think a lot of them, for sure, looked at the very first cut of … the National Broadband Plan and they were all extremely worried. They thought there was no doubt that would do them in. Now this NPRM … leaves the door open for us to come back to them and come up with some suggestions.” The problem, though, is the FCC has made clear that it doesn’t want to add any more money to the fund, Wacker said. “That’s a major dilemma” for rural carriers, he said.

RCA’s Berry said he will be very surprised if the RUS gets many rural wireless applicants for its revived program. “The Wireline Competition Bureau is still endangering USF reform. They certainly don’t want to bring competitive forces in the marketplace every day.” As for the RUS program, Berry said, “We were waiting and hoping to see some kind of change but it never came. I'd rather we think about new technologies and … new timelines and get the consumer what they want."

Meanwhile, the House Communications Subcommittee plans a hearing April 1 on a stimulus oversight bill by Chairman Greg Walden, R-Ore., said a subcommittee spokeswoman. The bill would hasten the return of unused and misused money provided under the American Recovery and Reinvestment Act. The hearing is 3:30 p.m. in Room 2322, Rayburn House Office Building. At a hearing last month on a draft version, committee Democrats asked why the legislation is necessary (CD Feb 11 p5).