State funding urged for Nebraska telecom services

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Associated Press

Posted on October 30, 2013 at 12:08 AM

Updated Wednesday, Oct 30 at 9:00 AM

LINCOLN, Neb. (AP) — Rural Nebraska could lose high-quality broadband service unless the state provides funding to offset a loss in federal subsidies, a consultant told lawmakers on Tuesday.

The small carriers are at risk because of new regulations that will reduce the federal payments for cable, fiber optic and DSL connections in remote areas, said Michael Balhoff, a Maryland-based telecommunications consultant.

Rural areas are more expensive for carriers because the service has to cover greater distances to reach relatively few paying customers. Balhoff told the Legislature's Transportation and Telecommunications Committee that without the funding, some remote areas would turn into an "economic wasteland" with little or more expensive service.

"Small carriers are very significantly at risk, and that risk will grow through the year 2020," Balhoff said. "I think that high-cost (rural) areas are going to experience lesser and lesser support unless there's appropriate state funding put in place. ... Ultimately, without sufficient support, there's no question in my mind that you will have an economic wasteland in some of those areas."

The hearing was called to study the role of Nebraska's universal service fund. Money from the fund comes from a state fee tacked onto consumers' telephone bills.

Without the fund, consumers in rural areas would likely see a lower-quality or higher-cost service or possibly none at all, said Cheryl Parrino, a consultant who testified for Nebraska Rural Independent Companies, a trade group. Parrino said fiscal uncertainty and limited funding at the federal level will require Nebraska to play a larger role in keeping the system funded.

"In many very-high-cost areas, a business case cannot be made to deliver those services," Parrino said. "Revenues from customers are simply not enough to cover the cost of deploying, investing and maintaining those operating services."

Parrino said Nebraska's universal service fund provides funding only for the most high-cost remote areas, and still requires rural customers to pay higher rates for voice service than urban residents. It also caps the expenses that providers can incur for state aid.

Harold Furchtgott-Roth, a former Federal Communications Commissioner from 1997 to 2001, said the federal government's high-cost universal service fund is plagued with uncertainty and can't be counted on to provide funding.

The fund distributed $86 million to the state in 2012 but was on track to disperse less than $80 million this year. Nebraska ranks 25th among states in the funding it receives despite its large geographic area and rural population, Furchtgott-Roth said.

Eric Thompson, a University of Nebraska-Lincoln economist, told lawmakers that his research has shown a correlation between broadband service in small towns and business activity. Smaller towns with broadband services also tended to have more 18- to 34-year-olds and residents with college degrees, he said.

The broadband service was also crucial to providing medical services in rural areas, said Dr. Mandy Constantine, executive director of Telehealth at the Nebraska Medical Center in Omaha. Constantine said remote consultations have helped reduce health care costs in Nebraska and made it easier to monitor a patient's recovery in a remote area.

"This is the wave of the future," she said. "It's here now, and it's only going to extent further and further."

The hearing was part of a legislative study to ensure statewide access to broadband service.

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