Insufficient Universal Service Budget Hurting Rural America

  • NTCA – The Rural Broadband Association
ARLINGTON, VA — NTCA–The Rural Broadband Association, which represents nearly 850 independent, community-based telecommunications companies in rural and small-town America, released data from a recent survey of its members about the impacts of a budget control on the federal support systems that enable small rural network operators to deploy infrastructure and provide robust and affordable broadband services to consumers and businesses in rural America.

The survey comes in the wake of a recent announcement that the average reduction in federal Universal Service Fund (USF) support for small, community-based broadband providers due to this budget control has grown from a 4.5 percent reduction to 9.1 percent to 12.3 percent over just the past nine months. Overall, this budget control is expected to reduce USF support for small rural network operators and the millions of rural consumers they serve by approximately $173 million over the next 12 months starting July 1, 2017. This USF support would have gone to recover costs that these small businesses incur in deploying networks and delivering services in rural areas.

Nearly 200 NTCA member companies responded to the survey, and nearly 50 of those companies were able to estimate impacts of the recently increased budget control on their investments and operations. According to the survey results, the budget control mechanism will have the following adverse impacts on broadband providers and the rural American consumers and businesses they serve:

  • Nearly two-thirds of responding NTCA members indicate that they intend to scale back network investments over the next 12 months in the face of a budget control that has increased several times and will now reduce their USF support by $536,000, on average, over the next year.

  • While many continue to evaluate specific impacts of the recently increased 12.3 percent budget control factor, those respondents that provided financial impact estimates indicated they would reduce their broadband investments over the next 12 months by $943,000, on average, due to the budget control.

  • The total estimated investment impact for respondents equals over $44 million in delayed or cancelled broadband investments over the next 12 months. Extrapolated across NTCA members subject to the budget control, this could equate to as much as $300 million in delayed or cancelled broadband investments.

  • Respondents estimate that the delayed and declined investments will result in 34 percent fewer of their customers receiving broadband at speeds of 10 to 25 Mbps than would otherwise have been the case had the network builds proceeded.

  • Respondents that could provide buildout impact estimates indicated that approximately 42,000 customer locations (or 850 customer locations per company, on average) would remain locked in at slower speeds due to the budget control. Extrapolated across NTCA members subject to the budget control, this could equate to as many as 275,000 adversely affected rural customer locations.

  • Even in the wake of USF reforms intended to achieve reasonably comparable standalone broadband service rates for rural and urban consumers, the average respondent that is not currently offering standalone broadband estimates it would need to charge a customer $126 per month for such service due to the budget control—a rate that is more than twice the urban average.

“By law, Congress has called for a universal service mechanism that is sufficient and predictable. In letters sent to the FCC, Congress has called for updates to universal service policies that will enable better, more affordable broadband for rural Americans,” said NTCA Chief Executive Officer Shirley Bloomfield. “But recent reforms have laid bare that an insufficient USF budget and an unpredictable budget control are chilling broadband investment and preventing rural consumers from obtaining access to reasonably priced services. The diagnosis of the problem is now unmistakable, and NTCA is eager to work with the FCC and Congress on a cure for the benefit of the millions of rural Americans who can’t afford broadband at these rates—and can’t afford for this system to fail.”

The survey report is available online.


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