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New rules impact broadband users

The impact of new FCC rules may cause tremors in rural communities.

For some farmers and rural residents, it may mean finally gaining access to broadband. According to a U.S. Department of Commerce report released in 2011, only 60% of rural households accessed broadband Internet service in 2010.

For others, the benefits are less clear. Local telephone companies still are assessing the full impact of the new rules.

“The objective is to increase rural broadband. But it may have a reverse effect and lead to a decline in expansion of broadband network,” says Debra Lucht, general manager, Minburn Communications, Woodward, Iowa.

Under the National Broadband Plan, the FCC will shift up to $15.5 billion over the next decade from the Universal Service Fund to the new Connect America broadband initiative. The aim is to spur telecommunication providers to reach out to underserved rural areas.

Over the next nine years, the new FCC rules also phase out intercarrier compensation fees collected by phone companies from other carriers that use their networks to transport calls and data.

Wi-Fi requires Wires

Reading a market update on a smartphone, watching a video on a tablet, and making a Wi-Fi connection from home still require a wire line network. The wireless signal travels from these devices to a wireless tower or router, and then it is handed off to the wire line network to complete the voice or data connection.

In Iowa, mutual, independent, and cooperative phone companies have spent more than $235 million over the past five years investing in fiber-optic capabilities to serve businesses and consumers. Over the next five years, these companies plan to spend more than $240 million.

“The Universal Service Fund was set up to support the higher cost of serving rural areas,” Lucht says. “It provided a stable source of funds to make long-term investments in infrastructure.”

She says the immediate impact of FCC rules is likely to arrive in two forms.

1. Higher fees

To replace the lost revenue, beginning last July, Iowa consumers and businesses were billed monthly access recovery charges ($1 for businesses and 50¢ for consumers per access line) per month. “These are fees that previously were shared among providers, not consumers,” Lucht says.

2. Slower upgrades

Many five-, 15-, or 20-year projects are under way. Due to changes in revenues, upgrades may be stretched out.

“As an industry, we believe changes are needed in the way the Universal Service Fund is structured,” Lucht says. “We need to move from a voice-based to a data-based network. But a longer transition would allow for support of our current network as we move to tomorrow's network.”

“We're still in dialogue with FCC,” adds Joe Hrdicka, Iowa Telecommunications Association. “We'd like to see major changes delayed until we know more about the impact.”

It's even possible that technology may not completely close the rural gap. A 2011 Nebraska Rural Poll suggests other factors play a role.

“The digital divide may be more about demographics and socioeconomics than technology,” says Brad Lubben, University of Nebraska-Lincoln public policy specialist.

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