Small Telcos’ Disconnect with the Connect America Fund

Carl Weinschenk

The NTCA survey is not an outlier. It seems that the dynamic now is that the rural telcos must make a move, but are unsure of what direction in which to go. Cassandra Heyne, a senior analyst at John Staurulakis Inc., a consulting firm for independent telcos, said that despite legal action aimed to derail the CAF, telcos are assuming it will happen. “There is no turning back,” she said. “Rules have been in place since November of 2011.”

The very name of one of the main tools being used to determine how much help a rural carrier gets – quantile regression analysis – is suggestive of the difficulty of these issues. Heyne described at a high level the massive amounts of money involved.

One goal is to help small telcos reach the modest download speed of 4 Megabits per second. Even that is proving difficult: Heyne said that only $115 million of a possible $300 million in Phase I awards were disbursed last year. This was money earmarked for larger telcos, but was largely bypassed because they didn’t like the amount allocated per household and some of the fine print.  There will be a second part of Phase I this year, Heyne said, aimed at giving out the remaining $185 million.

Phase I is a one-shot deal. Phase II, conversely, is an annual disbursement of $1.8 billion. The fate of that effort, she said, is unclear. All the while, the clock is ticking. “Rural carriers are caught up in a regulatory limbo while other providers that don’t have such stringent regulations can come in and pick away at their customers,” Heyne said.

Heyne lauds the overall goal of the initiative of modernizing a creaky system. To her, however, the means to that end are another issue. “The way that they have decided to do it definitely is questionable,” she said. “It depends on the perspective of the industry participant. Every company – from AT&T to the little mom and pop wireless companies – are having issues adjusting to the rules.”

Settles seems to agree. He is aware of the law of unintended consequences in a set of laws and regulations that rearrange the system in such a detailed and fundamental way. “Connect America is a 700-page document in which they are changing of whole program,” he said. “The fallout and pushback and all the rest of it is coming from the changes they have already implemented. The problem is that it is not clear exactly how it is going to roll out – probably because it is 700 pages.”

Add Comment      Leave a comment on this blog post
Jun 4, 2013 12:12 PM DavidFlynn DavidFlynn  says:
Your right Carl that rural telecos can be more cutting edge since they have to solve real world distance problems (i.e. the last mile). Also their small size allows for greater flexibility and innovation. But beware when the government gets involved. There are serious consequences since it’s some industry lobbyist who’s “whispering in their ear”. I wonder who’s truly behind these actions and what is the motivation? Reply

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