IMPROVEMENTS SOUGHT BY OPASTCO IN RURAL BROADBAND BILL

Too many rural phone providers would be left without tax credits in bill by Sen. Rockefeller (D-W.Va.), OPASTCO said in letter to senator last week. Rockefeller’s bill (S-88) offers tax incentives for broadband deployment to rural areas, but OPASTCO Chmn. James Forcier and his fellow board members said they support “the concept” of bill but urged more companies be made eligible for credits. S-88 has 58 co-sponsors and is in Senate Finance Committee, of which Rockefeller is member. While Committee Chmn. Baucus (D-Mont.) has yet to hold hearing on bill, that could change now that new Senate governing agreement will allow committee to have full complement of members this week with one- vote Democratic majority. Similar bill in House (HR-267) by Rep. English (R-Pa.) has 170 co-sponsors and awaits action in Ways & Means Committee.

Rockefeller’s bill would allow anyone investing in equipment providing 1.5 Mbps downstream and 200 kbps upstream rates to rural areas to be eligible for 10% tax credit, and additional credit for “next-generation” speeds of 22 Mbps downstream and 5 Mbps upstream. But Forcier wrote that “much of the technology that is used to deliver advanced services is distance-sensitive… Consequently, it is more difficult and expensive for rural carriers to provide 1.5 megabit service to as large a percentage of their customers.” OPASTCO urged “a more flexible standard” for applying tax credits. It said many small carriers already had begun investing in broadband in rural areas: “In our view, your legislation would be improved by making the proposed tax credits retroactive for the past investments in advanced services capabilities made by these carriers.”

S-88 also would require that at least 10% of carrier’s customers sign up for broadband service before they could receive tax credit. “This ’take requirement’ is an additional hurdle that would be difficult for small companies to overcome,” Forcier wrote. Instead, he recommended bill require carrier to “make available” broadband to certain percentage of its customers. OPASTCO also took issue with bill’s definition of rural area -- “any census tract which is not within 10 miles of an incorporated or census-designated place containing more than 25,000 people, and is not within a county or county equivalent which has an overall population density of more than 500 people per square mile of land.” Forcier wrote that such definition “could exclude many rural residents.” He said larger companies often operated in center of small town while leaving its outlying areas to smaller companies. “Under this bill’s current definition, residents who lived near, but not in, such a town could be left behind.” As alternative, OPASTCO suggested rural area be defined as “any area of the United States not included within the boundaries of any incorporated or unincorporated place having a population in excess of 50,000 inhabitants.”

It was unclear what cost impact would be with those changes, although since all 4 would increase available recipients of tax credit they would lead to increase in impact on U.S. Treasury. Congressional Budget Office (CBO) has not scored either S-88 or HR-267 for its budget impact, but recent statements by Hill leadership suggested such scoring could prove a deciding factor in whether or not given bill advanced.

Two other legislative initiatives OPASTCO supported would lift caps imposed on high-cost universal service support and create separate advanced services exemption for small rural telephone companies. First issue is strongly supported by Senate Commerce Communications Subcommittee ranking Republican Burns (Mont.) but has gained little traction among his colleagues, while latter position was incorporated in bill by Rep. Cubin (R-Wyo.) that passed House earlier this year but has seen no action in Senate. OPASTCO also backed use of Rural Utilities Service (RUS) loans for broadband infrastructure development, essentially using agency that once electrified America to spread fiber across U.S. That idea has met resistance from members of Congress who have concerns about ability of RUS, Agriculture Dept. agency, to handle such complex task.