FCC Rules May Be Disaster For Rural Phones

There is a battle now being fought for fairness in pricing mechanisms. Battle lines have been drawn between the Davids and Goliaths - between smaller, hometown telephone companies and the corporate giants who shun sparsely-populated backwoods for higher population regions where operating costs are lower and profit potential is greater.

Unfortunately, the outcome of the battle lies with a bureaucratic dinosaur known as the Federal Communications Commission (FCC) which has a legal mandate to act as the referee, and to ensure "reasonable costs and without discrimination, rapid, efficient...communication services."

On November 4, unknown to most Americans who went to the polls, the FCC was also set to vote on sweeping Intercarrier Compensation (ICC) and Universal Service Fund (USF) reforms - reforms rivaling the changes brought about by the 1984 'Ma Bell' breakup and the 1996 Telecom Act. The prospect of ICC/USF reform, brewing since 2001, was about to come to a head.

During the week of Oct. 13, 2008, FCC Chairman Kevin J. Martin circulated a proposed order to fellow commissioners but did not put the entire proposal out for public study and comment. Only the five FCC members knew the details. Apparently those secretive details include what amounts to a tectonic shift in interconnection pricing regulation which objective observers feel would have monumental repercussions.

Then, on November 3, due to a tremendous volume of broad-based opposition to what appeared to be an 'under-the-radar' attack on the viability of rural communications, the FCC retreated from any action until its December 18, 2008, meeting.

Dan Mitchell, vice president of the National Telecommunications Cooperative Association's (NTCA) legal and industry affairs division, recently stated, "The seriousness of the situation concerning the future of rural LECs is real...You're considering a whole new pricing methodology, considering a proposed reform plan that you have not shared with the industry. We don't think there's a court in this land that would agree with that." NTCA is an association of small telecom providers, dedicated to improving the quality of life in rural communities.

Mitchell added, "The leadership at this commission seems to believe that in order to get something done in this world you have to get the blessing of AT&T and Verizon." Almost everyone in the telecom business acknowledges the pricing issues are complex and many believe formulas need to be revised, but there also seems to be a widespread belief whatever rules come from the FCC, the ICC/USF reforms will face serious litigation risk.

Rural providers fear FCC actions would dramatically increase telephone and broadband rates for rural telephone users across the country. Basic local phone service could increase $10-12 per line per month. Companies would be forced to cut back on investment in new lines and services, and job losses would mount during the present economic recession.

The Coalition for Affordable Communications' "Stop the Vote" website provides a summary of what the FCC is considering, "which, if adopted, would result in higher costs to consumers and would impede rural telecommunications and broadband investment in your state."

In a November 3rd telephone conversation with Craig Smith, CEO of MGW Telephone Company in Williamsville, Virginia, Smith said the proposed action could be "disastrous" for rural customers and the small companies on which they depend. He is president of the Eastern Rural Telecom Association and president of the Virginia Telecommunication Industry Association.

Many rural phone companies, such as Bay Springs Telephone Company of central Mississippi, started out as 'mom and pop' operations in the days of the crank telephone. They still operate as 'independents' and cooperatives - neighbors serving neighbors in remote parts of the country where the customer per square mile ratio is too low to interest the 'big guys.'

In rural America, there is a much higher cost to serve each customer, and the debts incurred for investments in modern infrastructure can take years for LECs to repay. For example, it is now costing one company about $55,000 per mile to run new cable to serve remote customers.

On October 29th, the Communications Workers of America (CWA) sent a letter to the FCC stating their concerns regarding the FCC's proposed order: "CWA has long urged the Commission to reform the universal service subsidy to support broadband build-out and to establish a level playing field for intercarrier compensation. However, as currently structured, the draft proposal would have the unintended consequence of reduced investment in rural broadband. Therefore, CWA strongly urges the Commission to revise the current draft...This is the time in which we need more, not less, support for job creation and investment in high-speed broadband in high-cost rural areas."

How the FCC finally rules will affect the rights, property and well-being of every person and business served by America's independent and cooperative telephone companies. The long-term viability of those utilities is critical to all of us who live and work in the 'sticks.' We urge readers to become informed about the FCC's proposals and to contact local, state and federal officials as well as FCC commissioners.

L. M. Schwartz, Chairman
The Virginia Land Rights Coalition
POB 85
McDowell, Virginia FOC 24458
540-396-6217
"Working to Protect the Rights of Virginia's Property Owners"

Visit our website at http://www.vlrc.org/

Good Neighbor Committee
P.O. Box 155 - La Salle, CO  80645
info@goodneighborlaw.com

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