Congress Wants GAO to Investigate FCC USF Reforms

Concerned about the rural impact of the FCC USF reforms, more than sixty members of Congress asked the GAO to examine the effects of the 2011 USF/intercarrier compensation order and related rulemakings. In a letter sent Monday to U.S. Comptroller General Gene Dodaro, the bipartisan group of 63 members -- mostly from rural areas -- asked the GAO to focus on the effects of the commission’s changes to the high-cost component of the USF, and on the availability of broadband.

"As implementation of the USF reforms already adopted by the FCC moves forward, an independent report will promote a data-driven, transparent process for evaluation of those changes and the effectiveness of their implementation,” said the letter. Its lead author was Rep. Chris Gibson, R-N.Y. As the representative of a rural district in upstate New York, Gibson is “concerned about the lack of access to broadband technology in rural areas and the impact this has on our farmers’ and small business owners’ ability to compete and grow in the 21st century,” he told us. The information requested in the letter “will help ensure Congress has information necessary to properly oversee this process and expand access to broadband technology in rural areas,” Gibson said. “The FCC has repeatedly noted its commitment to a data-driven process."

Rep. Tom Cole, R-Okla., supported the letter “due to rising uncertainty” for rural carriers, he told us. “Having GAO check the implementation of USF reforms provides an independent look into what is taking place with broadband services. We can ensure that the modifications to USF are truly beneficial and cost-effective.” The FCC looks forward to working with the GAO “to review the Commission’s progress on this landmark modernization effort,” a spokesman said.

The letter asks the GAO to prepare a report with detailed measurements, statistics and metrics on the progress of implementation of the modifications adopted in the 2011 USF/intercarrier compensation order. The legislators are interested in the rules’ effect on retail end-user rates for voice and broadband services, and on average fixed and mobile broadband Internet speeds available to residential and business customers. They also want to know if there are any “disparities and/or trends” in rural and urban areas.

The letter also sought information on “the magnitude and pace of investments and broadband networks” since the USF reforms have taken place, including investments financed by the Rural Utilities Service. Agriculture Secretary Thomas Vilsack and RUS Acting Administrator John Padalino told Chairman Julius Genachowski in February that demand for RUS loan funds had dropped precipitously since the USF reforms went into place (CD Feb 20 p3).

NTCA fully supports congressional efforts to determine whether the commission’s reforms are delivering the promised benefits to all Americans, a spokeswoman said. “Given the importance of communications systems to our national and economic security -- and in light of serious concerns regarding changes thus far to the critical cost recovery mechanisms supporting these systems -- a formal review by the Government Accountability Office of the impacts of those changes on consumers, carriers, and state objectives will be essential in evaluating them and in guiding more thoughtful decision-making going forward."

NTCA also asked senators to cosponsor legislation introduced last month by Sens. Mark Begich, D-Alaska, and Deb Fischer, R-Neb., that would require a GAO report on USF reforms (http://bit.ly/10Ft5OW). The bill, referred to the Commerce Committee on April 22, would require an annual GAO report on the impact of the reforms for the next five years.

GAO reports can provide a “powerful arsenal for lawmakers desiring to affect policy in a particular fashion,” said Jeff Silva, analyst at Medley Global Advisors. The data collected, and conclusions and recommendations by GAO, are given “substantial weight in light of the entity’s non-partisan standing,” he said. “GAO reports tend not to be so compelling as to tip the balance in any given policy debate or formulation, but they can nonetheless prove quite influential in steering outcomes one direction or another. In this case, the prospective GAO report could be a meaningful factor in determining to what extent USF reform might be rebalanced down the road."

The letter also questioned the effect of the reforms on state universal service funds and carrier-of-last-resort requirements. NARUC members would welcome such a study, said General Counsel Brad Ramsay. “There’s a general concern” among the association’s members “about the viability of landline service and the substitutability of wireless service” in rural areas long term, Ramsay told us. NARUC members have also criticized the FCC over failing to conduct a “more careful vetting of the possible outcome” of the reforms before passage, and “the way the commission has proceeded has pushed some of the expense of universal service onto the state half of the equation,” he said. “The least bad thing that could happen would be a reduced level of investment in rural areas."

The letter “reflects the concerns that we've been hearing” from rural telcos and wireless carriers that are dependent on the USF for viability, said Public Knowledge Senior Vice President Harold Feld. The questions in the letter “seem to be aimed at addressing the arguments that the carriers have made in the past,” he said: The problem is that because carriers raise these kinds of concerns all the time, “it’s very hard to evaluate how real is the threat.” If the GAO confirms that carriers could very well go out of business due the USF reforms, that would force the FCC and Congress to pay attention, he said. “If any one of these rural providers goes under, everybody who’s been saying that the USF reforms were a big mistake is going to point to that and say ‘See? We told you. The Connect America Fund means the end of phone service in rural America!'” Regardless of what the merits of the argument are from FCC’s perspective, Feld said, that would be “a very difficult political issue if it comes up.”