GM 12-074

House and Senate Committees Hold Hearings on the effect of the FCC's Changes in the Universal Service Fund in Indian Country

On June 7, 2012, the Senate Committee on Indian Affairs held an oversight hearing on “Universal Service Fund Reform: Ensuring a Sustainable and Connected Future for Native Communities.” On June 8, the Subcommittee on Indian and Alaska Native Affairs of the House Natural Resources Committee held an oversight hearing on “Federal Communications Commission’s rule on Universal Service Fund and its Impact on American Indians and Alaska Natives.” Witnesses included representatives of the Federal Communications Commission (FCC), the Rural Utilities Service (RUS), telecommunications companies owned by tribes, and companies serving Alaska Native and Native Hawaiian communities. Each Committee has posted the witnesses’ written testimony on its website. The record for each hearing will remain open for two weeks from the date of the hearing.

The FCC was represented in the Senate hearing by Commissioner Mignon L. Clyburn and in the House hearing by Geoffrey C. Blackwell, Chief of the FCC Office of Native Affairs and Policy (ONAP). Both referred to written testimony of Mr. Blackwell before the Senate Committee on Indian Affairs at two hearings in 2011, testimony that included an overview of FCC proceedings in which the FCC is working to improve “connections to Tribal Nations and Native Communities.” According to the FCC, only 68 percent of residents of tribal lands have basic telephone service, compared to about 96 percent of all Americans; less than 10 percent of residents of tribal lands have access to broadband, compared to about 94 percent of all Americans. The creation of ONAP in August 2010 was a major step by the FCC to rectify these disparities.

In their written testimony, each of the FCC witnesses provided an overview of the FCC’s efforts to reform the Universal Service Fund (USF). The original intent of the USF was to help make telephone service available and affordable in rural areas where for-profit companies have little interest in providing service given the costs of doing so. Congress has made universal service a national policy. The statute provides that FCC policies to advance universal service are to be guided by certain principles, including: “services should be available at just, reasonable, and affordable rates;” and “all regions … should have access to telecommunications and information services … that are reasonably comparable to those services provided in urban areas and that are available at rates that are reasonably comparable to rates … in urban areas.”

The USF is, in effect, a source of funding for subsidies to cooperatives and other companies that are willing to serve high-cost areas. The USF is not funded through appropriations but, rather, is funded through an assessment imposed on the interstate and international revenues of telecommunications companies. The FCC has created a number of programs to achieve the goals of universal service, including the “High-Cost” program, which allows eligible telecommunications carriers that serve high-cost areas to recover a portion of their operating costs from the USF, and the “Lifeline” program, which allows for low-income households to subscribe to phone service at a discount.

The FCC now sees the reform of the USF as necessary because it is outdated, given its historic focus on voice telephone service, and has taken a number of steps to transform the USF so that it explicitly supports the deployment of broadband-capable networks, mobile as well as landline. In transforming the USF, the FCC has conducted a series of rulemakings, some of which are discussed in the testimony. One recent rulemaking adopts a methodology for setting limits on the recovery of costs for capital investments and operating expenses in high cost areas.

Administrator Jonathan Adelstein represented the USDA Rural Utilities Service in both hearings. He described a number of RUS grant and loan programs to support investments in telecommunications infrastructure and gave examples of RUS-supported projects carried out by tribally-owned telecommunications and by non-tribal carriers serving tribal communities. He also explained that such carriers rely on payments from the USF to repay the long-term loans that RUS has provided.

Witnesses representing the National Tribal Telecommunications Association and the National Telecommunications Cooperative Association, while expressing support for the intent to extend broadband to areas that lack service, raised concerns that the new limits on cost recovery will make it harder to maintain broadband services in tribal areas where such service is now available. Representatives of tribally-owned companies and companies serving Native communities said that existing loan obligations should be governed by the old rules, and that being subject to the new rules would force them to curtail expansion plans and focus on maintaining existing service, or perhaps go out of business. While the rules do allow for the FCC to grant a waiver from the new limits, witnesses whose companies had applied for waivers objected that the process is costly.

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