Companies Walk Away from BIP Loans on Uncertainty Over USF, Paperwork
A handful of companies have turned down loan awards from the Broadband Initiatives Program, and officials in the U.S. Agriculture Department’s Rural Utilities Service are in negotiations to get the companies to stay with the program, a RUS spokesman said. “Fewer than 10” of about 300 grant winners have turned down awards, he said.
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Additional companies may end up turning down loans and grants, Western Telecom Alliance spokesman Derek Owens said. “We have many others who are still looking at them very closely,” he said. “I think once a lot of these companies get into that final stage” of the grant process, “they're really cautious about that.” The program requires mountains of paperwork and structural adjustments -- including weekly timesheets for contractors -- and some companies find them too burdensome, he said.
Another problem is uncertainty over Universal Service Fund overhaul, said Martha Silver, spokeswoman for Organization for the Promotion and Advancement of Small Telecommunications Companies. “They need to make sure they can pay the money back."
FCC Chairman Julius Genachowski has promised to make a USF revamp one of his top priorities over the fall and winter. “The FCC is working cooperatively with RUS to address our shared goal of advancing broadband in rural America,” a commission spokeswoman said. “We are moving forward to give companies the clarity and predictability they need to make informed business decisions."
Smithville Communications of Elletsville, Ind., walked away in July from a $38 million BIP loan, Executive Vice President Cullen McCarty said. The company worried that the zero return rate and reverse auction in the USF section of the National Broadband Plan weren’t “conducive to investment,” he said. “We just can’t do it with what the FCC has currently put on the table.” The company had already taken about $90 million from a general loan fund at RUS. Smithville executives met with Wireline Bureau officials in July, and they were “pretty solid in their position,” McCarty said.
Other companies haven’t bothered to participate in the BIP application process because of the lack of clarity, Rural Cellular Association President Steven Berry said. “That uncertainty is causing a lot of carriers to say, ‘Listen, we're just going to stand pat,'” he said. “Most of our carriers have already started down the path or built out 3G. All of those carriers have been very aggressive about building. If you want new broadband capabilities, you're asking how you can get them to invest. … If we don’t know what the rules are, and we don’t know what the reimbursements are going to be, then we better hold still."
Genachowski’s staff has discussed rolling back some of the most contentious aspects of the plan’s rural funding proposals, to make it easier on rural telcos, but no decision has been reached, an FCC official said. Genachowski’s team expects rulemaking notices on intercarrier compensation, high-cost USF and the contributions methodology to be ready for the December commission meeting, the official said.
The FCC issued Friday a protective order covering proprietary information received as it works on USF and intercarrier compensation overhaul. It lets commenters claim that their filings are confidential and to redact documents accordingly. It requires commenters to submit two copies of such documents to Lynne Hewitt Engledow of the Pricing Policy Division of the Wireline Bureau. Anyone reviewing the confidential information will be required to sign a non-disclosure agreement.