Study by Former FCC Economist Finds USF Changes Undercutting Rural Broadband Investment

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WASHINGTON (July 24, 2013) – The approach developed by the Federal Communications Commission to implement caps on Universal Service Fund (USF) support for small telecommunications providers has the effect of chilling investment in broadband infrastructure in some of the country’s most remote communities, according to a study issued today by former FCC Chief Economist Simon Wilkie.

The study was commissioned by NTCA–The Rural Broadband Association (NTCA), United States Telecom Association (USTelecom) and Western Telecommunications Alliance (WTA) to review the approach being used to limit the support that certain rural telecommunications providers receive under the USF’s high-cost program. Wilkie, a professor of economics at the University of Southern California who served as FCC chief economist from 2002 to 2003, analyzed seven years of cost data to identify the effects of the model on predictability of USF support and incentives for responsible and efficient broadband deployment.

Among the study’s key findings are:

• Uncertainty—specifically in the fear that network deployment efforts will result in tripping the limits on support—has dampened rural carriers’ investment in the broadband infrastructure needed to connect unserved rural Americans and enhance existing service.

• A prolonged period of uncertainty and efforts to “game the system” by delaying or deferring much-needed investments merely to attempt to stay below the limits could very well induce a “race to the bottom” as the benchmarks continue to decline over time precisely due to such gaming.

• The FCC’s “one-size-fits-all” approach for limiting small carriers’ support will lead to even more infrastructure delays as the most efficient companies sit on the sidelines out of fear of having support reduced in the future.

Read the report.

Read the full press release.