FCC Subpoena Contemplated as Congressmen Criticize Low Alaska Support, Unclear Waiver Process

Members of Congress were receptive to complaints from aggrieved tribal carriers about an FCC cost model that finds it’s cheaper to build in Alaska than the rest of the country, and a waiver process they say is costly and subject to the whims of the Wireline Bureau. At a hearing of the Natural Resources Subcommittee Tuesday, Young could barely contain his contempt for an agency he accused of arrogance and micromanaging: “They must be smoking pot!” An FCC spokesman declined to comment.

Since the FCC approved the Connect America Fund, the agency has refused to be held accountable, Young said. “FCC staffers have ducked meetings with congressional officials,” he said. “Maybe we ought to have a little subpoena or something. Bring them up here and just bang the bejesus out of them. And if we don’t do that, shame on us.”

Representatives from the Alaskan carriers took turns criticizing the FCC for a regression model that finds it’s cheaper to build and operate broadband in Alaska. The Arctic Slope Telephone Association Cooperative (ASTAC) wants to upgrade its satellite middle-mile service, connecting it instead to privately financed undersea fiber with 32 terabytes of bandwidth (CD Feb 28 p19). Four of ASTAC’s nine exchanges would immediately benefit from the landing, which could bring speeds of 100 Gbps, said ASTAC CEO Steve Merriam. In order to connect to the fiber, the coop will need significant upgrades, but a flawed quantile regression analysis model could impede the carrier’s ability to get the money in time, he said. “Because of bureaucratic fiat, if we miss that opportunity, that’s my legacy and that’s not one that I choose to live,” he said. “It’s criminal."

A special Alaskan variable in the model was supposed to account for the dispersed location of customers, the short period when construction is feasible, and the harsh weather. But the FCC assigned a negative capital expense coefficient to all of Alaska, which leads to the model’s conclusion that it’s 46 percent less expensive to construct in Alaska than in the rest of the U.S., Merriam said. Given that Alaska has the lowest minimum temperature in the country, it “defies all logic” that ASTAC is receiving “the lowest allowance in the country for both capital and operating expenses due to climate,” Merriam said.

"Who wrote this model up?” asked Young. “The idea that it’s cheaper in Alaska? Anybody who knows anything. ... They must be on pot! It doesn’t make sense!” Rep. Daniel Benishek, R-Mich., said it’s an “obvious, ridiculous computation” to say that it costs less to build in Alaska. The errors, coupled with an onerous waiver process to try to correct them, display a certain agency “arrogance,” he said. “How can we sit here and try to fix it when we have obvious errors and arrogance to deal with?” he asked. “The arrogance of not even showing up for the committee is just unacceptable as far as I'm concerned,” Benishek said. “We have to do something to address this.” The best way to get the FCC’s attention, Young responded, might be “to stop their damn money.”

A draft of the CAF rules contained language that tribal areas could live with, said Albert Hee, president of Sandwich Isles Communications in Hawaii. But the final version of the rules removed all that language and substituted it with a discretionary waiver process, Hee said. “That was our experience as well,” said Merriam. They worked in good faith with the commission, but “nothing that we talked about was adopted."

Sandwich Isles applied in December 2011 for a 10-year waiver of the $250 per-line per-month cap on high-cost universal service support. “After 498 days, the FCC denied our waiver,” Hee said (CD May 13 p13). The waiver cost the telco $2 million in outside consultants, Hee said. “It was, and remains, a mysterious black box. There are no standards for the waiver.” Hee said he was told it was Sandwich Isles’ responsibility to come up with a waiver proposal that was acceptable to the Wireline Bureau. When Sandwich Isles asked what the standards would be, the bureau “just smiled and said nothing,” Hee said. “So I feel sorry for the other companies that are still going through this waiver process. I have no idea how they're going to fare because there are no standards for it. It is completely discretionary."

"This government agency would now like us to be like every other American. We're not. We have higher costs; we live in areas that every other American doesn’t want to live in,” Hee said. “That’s the problem with what is being done here. They refuse to accept that there are exceptions, and by giving the bureaus the discretion on how to implement these rules, they have essentially given the bureau policymaking decision. And when they implement rules, or change rules midstream, and we have continuing obligations, each day that they take to make a decision, we still have to pay for the obligations that we made.”

In denying Sandwich Isles’ waiver request, the bureau criticized the telco’s corporate expenses that are 623 percent higher than the average for companies of similar size. Sandwich Isles has “significant and wasteful expenses, totaling many millions of dollars, including significant payments to a number of affiliated and closely-related companies,” the bureau wrote (http://bit.ly/15hd0kb). Asked about the affiliates by Rep. Colleen Hanabusa, D-Hawaii, Hee responded that many companies use affiliates to provide service. “We have been operating this way, with affiliates, from the very beginning,” Hee said.

Young praised the agency’s newest commissioners, Democrat Jessica Rosenworcel and Republican Ajit Pai, for recognizing that the cost models are only as good as the data put into them. Merriam praised what he called Pai and Rosenworcel’s “open door” policy, and for listening to carriers’ concerns. The real problem is that the previous commissioners delegated all authority to the Wireline Bureau, which is made up of people who are “not nominated” and “not accountable to anybody,” Merriam said.

"Two commissioners can change the policy of a bunch of minions,” Young responded, urging any commission staffers present in the room to bring that message back to their bosses. “This new commission ought to have enough brains to get out of the rain and do the thing that’s correct for what universal service is all about."

"This affects every rural area in the United States,” Young said. “I really think this is one of those grand plots. You and everybody at this table knows that if there is no communications as people have been exposed to it, people are going to leave and go into the urbanized areas. The analogy I always use is, it’s easy to control a flock of sheep when they're in a corral. That’s what I think a great many of our society -- including this government -- want to do, is to put everybody in a big corral so they're easy to control. There won’t be a need for universal service if you don’t live in a rural area. ... Watch out for the herder who tries to put you in a corral because that -- freedom!”