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Lawmakers aim to shift $50 million phone subsidy toward broadband

February 25th, 2014

Filed under featured, Home Page, In The News

By Andy Vuong
The Denver Post

POSTED:   01/05/2014 12:01:00 AM MST4 COMMENTS| UPDATED:   ABOUT A MONTH AGO

 

Colorado lawmakers and industry officials are dialed in on plans to overhaul a program that reimburses carriers more than $50 million annually for providing land-line phone service in rural areas.

A revamp of the so-called High Cost Support Mechanism is expected to rank among the top business issues this coming session after efforts over the past three years failed. The federal government and other states have already restructured similarly outdated subsidies, shifting the money toward broadband expansion.

Though competing measures are floating around, the consensus is that Colorado will also aim to repurpose the funds for broadband rather than eliminate the subsidy, which is backed by a 2.6 percent surcharge on land-line and mobile phone bills.

The Colorado Public Utilities Commission has initiated a review to determine which areas of the state have sufficient competition and should no longer qualify for High Cost support. Industry leaders expect that process to free up several million dollars as early as this year.

Lawmakers such as Sen. Gail Schwartz, D-Snowmass Village, and Rep. Don Coram, R-Montrose, have held town hall and stakeholder meetings in recent weeks to seek input in shaping proposed legislation. Another town hall is scheduled for Tuesday in Limon.

“It’s a crime that three or four years have passed and we’ve done so little to advance rural infrastructure,” Schwartz said. “By funding land lines and copper-line phones, we’re funding buggy whips with a really important asset of $50 million to $60 million a year.”

The High Cost fund was established in the 1990s, before the proliferation of cellular coverage, to ensure that all Colorado residents have access to affordable phone service.

Previously, proposals to phase out or phase down the fund have been tied to sweeping and complicated updates of the state’s telecom rules and terminology. And broadband expansion hasn’t always been attached to efforts to overhaul the program.

“The bill that I had last year was wrapped into a larger concept, and that concept failed,” Schwartz said. “This year, I’m working on a stand-alone bill that will dedicate the High Cost fund at some level toward infrastructure development, especially in rural Colorado.”

Broadband expansion is a top priority for Gov. John Hickenlooper, whose staff members have participated in discussions related to the repurposing of the High Cost fund.

“The governor supports broadband expansion to rural and unserved communities,” Hickenlooper spokesman Eric Brown said, adding that “details are still being discussed with legislators and stakeholders.”

The details that could present the most conflict include:

• Whether the broadband funds would cover both unserved and underserved areas of the state, or just unserved areas.

• Whether grant recipients would be required to contribute matching funds.

• Which agency would administer the program.

• How much would remain for land-line service in areas that are still “high cost” to serve.

Telecom giant CenturyLink receives more than 90 percent of High Cost funds annually and has, in the past, resisted efforts to change the program. The carrier, which acquired Denver-based Qwest in 2011, appears relegated to the fact that the program will shift toward broadband.

“We’ve heard that if there are reductions in the voice support, then that should go to a broadband fund, which we support,” said Jim Campbell, a CenturyLink regional vice president. “We support it under the guideline that it goes to unserved areas and not underserved areas.”

He also said a matching-funds component should be included.

“If a company is going to apply for support for broadband funding, they ought to put some of their own investment in,” Campbell said. “Industry has to have some skin in the game.”

Fort Morgan-based Viaero Wireless, which provides cellular service in rural Colorado and draws from the High Cost fund, has drafted a measure that doesn’t include a matching requirement.

Jon Becker, vice president of business at Viaero, said the company likes the idea of matching funds but didn’t want such a requirement to prevent smaller providers from seeking support.

“We wrote it without and wanted to have a discussion of ‘Does it make sense to have it in there?’ ” Becker said. “Maybe it’s a quarter match.”

Viaero’s draft bill would limit the use of the High Cost funds for infrastructure build-out and not operating expenses. Becker said the carrier may draw from the broadband fund, but that wouldn’t be the only benefit.

“If there is high-speed broadband in rural areas, you therefore bring more customers and more need to the table for wireless services,” Becker said. “Whether we get the broadband portion or not, any economic growth in eastern Colorado is good for us.”

As for whether the money would go toward underserved areas, Becker said the money should be available to communities that don’t have access to Internet download speeds of at least 4 megabits per second and upload speeds of 1 Mbps.

Becker estimates that the PUC’s current review of High Cost areas could free up $3 million to $10 million in funds this year.

PUC spokesman Terry Bote pegged the figure at less than $10 million and noted that CenturyLink could still apply to keep the funds for voice service “even in competitive areas if they can make a persuasive case for it.”

Rural-broadband activist Ken Brenner, a trustee for Colorado Mountain College, has drafted a measure that would shift administration of the High Cost funds from the PUC to the Department of Local Affairs.

The measure also proposes to require grant applicants to form a local technology-planning team that includes at least one community organization, such as a county government, school district or hospital.

“It’s a local solution crafted by the people who use it every day,” Brenner said.

Lawmakers are also expected to introduce at least one separate measure to update Colorado’s telecom rules, such as stamping into law that Internet Protocol-enabled services are unregulated. The state’s existing laws don’t currently address services such as Voice over Internet Protocol.

“The state of Colorado hasn’t updated its (telecom) statutes since 1996,” said Angela Williams, D-Denver.

Last year, a bill co-sponsored by Williams to exempt IP-enabled services from regulation unanimously passed out of the House but stalled in the Senate.

Read more: Lawmakers aim to shift $50 million phone subsidy toward broadband – The Denver Post http://www.denverpost.com/business/ci_24843279/lawmakers-aim-shift-50-million-phone-subsidy-toward#ixzz2uPCtyb55
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