Whenever the FCC proposes to spend Universal Service money, it is important to remember that the subsidies come out of consumers' pockets. In 2015 alone, USF spending totaled $8.35 billion dollars. The Commission has an obligation to consumers to ensure that USF money is spent wisely. Dollars collected from consumers should not be wasted or risked on untried bureaucratic pet projects.
FSF President Randolph May and I have previously raised concerns about the way the FCC's
"rural broadband experiments" are run – including funding rural
electric co-ops' and other entities' entry into the broadband business to the
tune of $40 million dollars. It's not the FCC's job to artificially create and
prop up new business competitors through subsidies. And capitalizing entities
with no established operations or experience in the competitive broadband
market risks wasting USF dollars collected from consumers.
At the very least,
"Strong Safeguards of Scarce
Funds Should Govern FCC Broadband Experiments." In a prior blog post, I urged the FCC to
maintain its bank-issued letters of credit (LOC) requirements before
distributing rural broadband experiment money. Requiring recipients to obtain
LOCs from banks helps ensure that disbursed dollars will be returned if
recipients fail to meet build-out and service obligations.
According to reports in Telecompetitor, some
entities remain unable to obtain LOCs and therefore have not received rural
broadband experiment money. This inability comes despite the fact that orders
issued by the Commission this spring have loosened LOC requirements.
In other words, it
looks like some proposed rural broadband experiments are delayed or won't
happen because those would-be recipients of USF money still can't get banks to
give them LOCs. But this shows the sensibility of requiring LOCs, not of
relaxing the standards. If financial institutions in the business of lending
money won't risk giving LOCs to entities participating in rural broadband
experiments, why should we want money collected from consumers to be thrown
at such risky ventures?
In and of themselves,
these rural broadband experiments are problematic on FCC institutional and
financial responsibility grounds. But the Commission may not be able to undo
what's already been done.
Going forward, however,
the Commission ought to retain its Letter of Credit protections. To loosen them
further will risk dissipating funds collected from consumers to fund an already
excessive USF tax.