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Regulations Impact Rural Telephone Companies |
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Written On: September/October 2004 |
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Written By: By Carly West |
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Telecommunications as an industry has grown accustomed to dealing with regulatory hurdles and changes. While these regulations are designed to help the industry and keep things fair, they sometimes create more challenges to work around. Overseen by the Federal Communications Commission (FCC), but still greatly affected by local and state governmental bodies, rural telecommunications companies are typically more affected by the layers of regulations.
In 1915, the Washington Independent Telephone Association (WITA) formed in order to bring the rural telephone companies together so they could work as one to solve common problems and be heard as a larger whole in legislative arenas. In 2004, working together has become even more important as regulations are increasing and are coming from different angles. Gail Long, vice president of WITA, said, “The industry is changing at a tremendous speed, which often means regulations start at a state level and go to the federal level and come back full circle to the state level.”
This waiting game of sorts makes it difficult to plan for the future. One issue facing the industry right now is how to figure out the dollar amounts needed to subsidize what are defined as high-cost areas (generally rural areas) to make services to these customers affordable. Right now these subsidies come in large part from the Universal Service Fund, which is administered by the Universal Service Administrative Company (USAC). The USAC administers funds to Eligible Telecommunication Carriers via the high-cost support mechanism, which “ensures that consumers in all regions of the nation have access to and pay rates for telecommunications services that are reasonably comparable to those services provided and rates paid in urban areas,” (www.universalservice.org). The debate is whether or not to switch to a cost-based model and move away from the actual-cost forecasting that is used now. The Universal Service Fund provides a base for much needed subsidies and by switching to a model (versus using actual costs) there is the possibility of losing part of this base. Currently, those in the industry, including those at WITA, are waiting for the FCC to rule on which system will be put in place. “This leaves a lot of uncertainty. It is difficult to make investment decisions because the base we use might be going away,” said Rick Finnigan, legal counsel for WITA.
In addition to the waiting game centered on regulations, there is, as Terry Stapleton of the WITA said, “the intrusion of government entities in telecommunication,” over the past couple of years. Specifically, there is the issue of Public Utilities Districts setting up networks of their own and wholesaling their services to retail providers who then pass it on to the customer. Regulations require that the PUDs do not provide a retail service thus requiring them to use another company, but it is difficult to sell this service to companies because the profit margins experienced by the PUDs are so low. The PUDs often find it easier to build their networks because they use funds from other utilities, such as electricity and water, to build their fiber optic networks. The main issue here is the government/public sector entering the private sector, where they can often out-bid the private sector, while not necessarily doing a better job.
Finally, while there is an endless list of other issues facing the telecommunication industry right now, two top the list: the use of voice-over Internet technology, and the advancing broadband technology. With voice-over technology, it is now possible to bypass the telephone companies to make toll calls and thus bypass the fees associated with toll calls. The issue at stake for the telephone companies is that people are still using their networks to make voice-over connections but not paying for it. As for broadband, the technology has been advancing for years now, but those in the industry anticipate that broadband will be available over electric wires, thus making another route, another price and even more regulations to wade through.
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