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PUC High Cost Support Mechanism Rulemaking: 'Reform' that could backfire on rural Colorado

The Colorado Public Utilities Commission recently opened a rulemaking process to review Colorado's High Cost Support Mechanism - a fund established to reimburse carriers for providing land-line phone service in sparsely populated areas of Colorado.

  • The Colorado Community Access Alliance supports regulatory reform that assures rural Coloradans as many options as possible for affordably addressing their telecommunications needs.

  • It is vital to remember that any reform of the rules governing the telecommunications market in rural Colorado--to be truly effective rather than counterproductive--must acknowledge the effect of current state and federal policies as well as the economic reality in the market. Otherwise, proposed reform could end up working at cross-purposes with itself and backfire on the rural consumers it is supposed to help.

    • Colorado cannot afford to implement reform just for the sake of reform; the result could be disastrous for rural consumers.

    • Any regulatory mechanism for implementing reform must take into account and balance the closely related factors that affect any provider's ability to serve rural consumers.

    • Reform also must recognize the unique role Colorado's rural telecommunications providers play in the communities they serve.

Pending PUC Changes May Undermine Rural Telecom Service

  • Changes to Colorado's rural telecommunications regulations, proposed by the PUC, fail to account for these fundamental considerations and stand to undermine rural telecommunications service.

    • The PUC's proposal uses a piecemeal approach to reform--potentially destabilizing rural telecommunications providers and jeopardizing service. Provisions that aim to curtail critical revenue to rural providers from the Colorado High Cost Support Fund, as well as to arbitrarily cap originating access rates rural providers may charge other providers, ignore how such revenue sources are interconnected, together comprising a pivotal funding stream that enables rural providers to serve their consumers.

    • These crucial support mechanisms were implemented in the first place because rural telecommunications service otherwise would be cost-prohibitive. Rural providers must serve a sparse population over great distances, resulting in a high-cost, low-revenue market. By failing to address such factors cohesively, the proposed changes ignore the unique circumstances of rural providers, which are regulated differently than are other providers at both the state and federal levels.

    • The proposed new rules also attempt to set vague definitions and standards for letting the PUC eliminate those vital support mechanisms that are needed to sustain rural service. Allowing utilities commissioners to make an open-ended determination that there is "effective competition" in a given area from providers offering "similar services" is a recipe for creating an uneven, unfair and utterly unworkable market.

    • The PUC's proposed changes further ignore the fact that similar, federal support mechanisms for defraying the high cost of rural service--notably, the Universal Service Fund--are being cut back as well. The upshot is to further erode the ability of rural providers to serve Colorado consumers.

PUC Needs to Support--Not Undermine--Rural Telecom Providers

  • Undermining the rural telecommunications market would have far-reaching consequences.

  • Twenty-five small rural communications companies--many of them co-ops or family-owned companies--serve 30,000 customers across almost 25,000 square miles in our state. Many of the companies were created because no other company would serve those areas.

  • That was true long ago at the dawn of the telephone era--and in some key respects, the basic economics that governed the rural telecommunications market then remain the reality today.

  • A Colorado State University Economic Impact Study recently found that Colorado's rural telecommunications providers sustain 430 jobs and generate $63 million a year for local economies.
Copyright 2012, Colorado Community Access Alliance