June 8, 2012

Indian Affairs Oversight Hearing Examines Concerns with the Universal Service Fund Reform

Washington D.C. –
U.S. Senator Daniel K. Akaka (D-Hawaii), Chairman of the Senate Committee on Indian Affairs, chaired an oversight hearing on Universal Service Fund Reform: Ensuring a Sustainable and Connected Future for Native Communities, yesterday.
The Committee heard testimony from federal, tribal, and stakeholder witnesses including Mignon Clyburn, Commissioner, Federal Communications Commission; Jonathan Adelstein, Rural Utilities Service Administrator at the USDA; and Shirley Bloomfield, Chief Executive Officer of the National Telecommunications Cooperative Association.
“Native communities suffer from the poorest access to telecommunications services in the country. More than 90 percent of tribal residents lack access to broadband, and one-out-of-three tribal residents still lack even basic telephone service,” said Chairman Akaka. “Not only are Native communities severely underserved, they are owed a special duty as part of the Federal government’s trust relationship which must be honored and respected.”
“In this new era, access to Internet services is now a basic need. The funds provided through universal service make a difference in how our elders receive critical healthcare services. They pave the way for accessible and affordable education opportunities for our young people at home in their communities. And, they give our business owners, large and small, real economic opportunities to participate in the global economy.”
The FCC’s Universal Service Fund (USF), a telecommunications subsidy program, was created in 1997 to promote both the availability and affordability of services in high-cost rural areas. Without the fund, small rural carriers would be unable to recover the costs of their networks. High-cost rural telecommunications companies are further financed by the RUS through loans and grants made specifically for rural electric, telecommunications, and water and wastewater infrastructure.
“The Universal Service Fund enables both network operations and consumer adoption in high-cost rural areas, including tribal lands,” said Ms. Bloomfield. “Without these mechanisms, small rural carriers – which have few, if any, ‘profitable’ large markets to help support operations –would be unable to recover their costs over the useable life of the networks they build.”
Recently, the FCC issued a number of major reforms to the Fund, capping the subsidies that rural service providers are eligible to receive. As a result, tribally owned and operated telecommunications companies may see as much as a 33 percent revenue reduction.
Witnesses testified that the reform will cause further difficulties in securing new loans, a process that has already been recently complicated by the Supreme Court’s Carcieri v. Salazar decision, which created uncertainty regarding the eligibility for tribes to receive trust lands.
“Land tenure across Indian country can make it difficult for any lender to find adequate security, whether they are lending on fee, allotted, or tribal land,” said Administrator Adelstein. “Fixing Carcieri remains one of the Administration’s top priorities.”
Witnesses also voiced concern that their companies already operate on slim margins and that the reform could mean the end to their business and a major step back for Native access to broadband.
“The reform will result in a massive reduction in the Universal Service Fund annual support,” said Alfred LaPaz, Councilman of the Mescalero Apache Tribe. “Under this scheme, our company would not have been able to meet its RUS loan repayment and other obligations.”
“The reality is that there are unintended negative consequences for Alaska Natives because of the broad brush approach taken by the FCC in the reform, consequences that will raise costs to consumers, diminish or eliminate existing services, and will force the loss of jobs,” said Steve Merriam, Chief Executive Officer and General Manager of the Arctic Slope Telephone Association Cooperative, Inc.
“In general, the uncertainty created by the Order has compelled our company to shift its planning priorities from expansion of services through continued reinvestment to a system of sustaining current operations with reduced funding. The reform will potentially result in a degradation of service quality on its current network,” said Councilman LaPaz. “This scenario will severely limit the Tribe’s plans for economic growth, lead to less capital, likely lead to substantial loss of employment opportunities, and possibly shutter business operations altogether.”
“The rule changes have effectively created an environment where small companies, like ours, cannot participate in the Universal Service Fund and, therefore, will quickly face bankruptcy,” said Albert Hee, President of Sandwich Isles Communications. “And while facing the potential for bankruptcy is daunting as a businessman, what I fear most, is the possibility that I may be forced to tell the more than 6,400 Native Hawaiians who have come to rely on my company for life-saving telephone service and life-changing broadband connectivity, that we can help them no more.”
“We had to make these cuts to get this fund on a sustainable path—that requires change. But I assure you, if in any way we are deficient I assure you – tomorrow we will correct that and do better,” said Commissioner Clyburn.
“We must work together to insure that the proposed USF reforms address the special needs of Native communities. Federal agencies must also work to insure equal access to high-quality, high-speed, and reliable broadband services—not a second-class system,” closed Akaka. “More importantly, Congress needs assurance that Native communities won’t be left with companies shutting their doors due to these reforms—leaving them with no service at all.”
More information and an archived webcast is available on the committee’s website: Link
Contact: Emily Deimel
Contact Phone: 202-224-3667
Contact E-mail: emily_deimel@indian.senate.gov