New rules from the Federal Communications Commission regarding its National Broadband Plan could have an undesirable effect on Iowa's rural telephone companies.
Sheila Navis, Rural Iowa Independent Telephone Association executive director, claims these changes will affect revenue for Iowa's independent service providers.
"While the goal was to deploy broadband, what they did was actually make some adjustments," she said. "They're moving to a Connect America plan relating to broadband, but in the process they've adjusted the rules as it relates to universal service funding and intercarrier compensation."
Telephone companies have three revenue sources, customer rates, universal service funding and intercarrier compensation, Navis said. Because of the universal service policy, phone companies are required to provide coverage to everyone.
"Basically, the country has had a long-standing policy on universal service," she said. "No matter where you lived across the country, you can get comparable service at comparable rates."
Following advancements in technology, the FCC began switching from the "plain old telephone system" to broadband. The new rules mandating broadband but restricting universal service funding place a burden on rural telephone service providers, Navis said.
"Really, what they're doing is putting more of a burden on the end user, the customers of rural Iowa, in this situation," she said.
Daryl Carlson, Webster-Calhoun Cooperative Telephone Association executive vice president, said the changes in funding are affecting his company's revenue, which affects the customer.
"The universal service funding is what a lot of companies like us utilize to keep our rates reasonable and make a network throughout the rural areas," he said. "And that is being jeopardized greatly with the FCC's new rules. They're requiring end users to pay more for their services. That's what we're really concerned about."
The end result, Carlson said, is that customers will see their bills go up.
"In Webster-Calhoun, for example, our rates are going to go up two or three dollars in just the next few months because we're trying to abide by their benchmarking rates and things the FCC is requiring," he said.
The loss of universal service funding and intercarrier compensation makes it difficult for telephone associations to maintain networks or even invest in upgrades. And without these networks, wireless service would not be possible, Navis said.
"The critical piece of this, the landline network these companies have built over the years provide service to the cell towers, to the cell sites. They provide the mechanism by which your cell phone can work," she said.
These networks are expensive, Navis said.
"The reality is, these networks require ongoing maintenance. It's like roads and bridges. You've got to continually upgrade them," she said.
With data consumption growing, these networks also have to become more robust, Navis said.
"That requires more investment and capital, and at the current time the way the FCC has structured the rules there's such great uncertainty and unpredictability in terms of how companies are going to recover the cost," she said. "Companies are finding it more difficult to access capital and they're not sure they want to make that investment right now, not sure how they're going to pay back the loans. It's really put a damper on future investment across the state of Iowa."
Demand for wireless, broadband-based service is just as large in rural Iowa as it is in any large city, Carlson said.
"We've got farmers, manufacturing, ethanol plants. They located in these small communities that Webster-Calhoun serves and they depend on that," he said. "It's kind of difficult for us with some of the FCC policy right now as to predict what our future is going to be."
Navis is advocating patience and restraint on the FCC's part.
"What we're suggesting is perhaps they need to hold tight, sit tight, and not implement any more rules until they know exactly what the impact is on the current rules that they just recently adopted," she said.
Carlson agree, saying that otherwise their decisions could have a negative impact on rural areas.
"They've got to be careful with what they're doing because right now it's actually impeding the process of broadband deployment in rural areas instead of increasing it, which was what their desire was," he said. "It doesn't seem to be working at this point."