Wireless Groups: Carolina West Waiver Shows Steep Challenges Faced by Small Providers
Carolina West is getting support for a petition from June 2024 seeking a waiver that would permit it to receive supplemental high-cost universal service support. The Competitive Carriers Association urged the FCC to grant a blanket waiver or initiate further proceedings on expanding the availability of support beyond Carolina West. CCA also filed at the FCC a new report by the Brattle Group discussing the unique challenges faced by rural carriers. Comments were due Monday in docket 19-197 and posted Tuesday.
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A year ago, FCC commissioners approved an order establishing a multi-round reverse auction to pay out up to $9 billion to bring voice and 5G mobile broadband service to rural areas of the U.S. otherwise unlikely to see 5G (see 2408290022). Now-Chairman Brendan Carr dissented at the time, saying the launch of the fund should be delayed until it’s clear what projects the BEAD program will support.
The issues raised in the petition “are not unique to Carolina West,” CCA said. As laid out in its petition, Carolina West receives 21.7% of the high-cost support it received in 2006, the group said. “During that time, market conditions and dynamics changed significantly and the failure of the Commission to implement a [Mobility Fund II] or successor support mechanism for mobile service resulted in stretching Carolina West’s business case for many of the communities it serves beyond the breaking point.”
Carolina West meets the requirements for a waiver, CCA said. Its petition “details the unique geographic challenges and population characteristics of the impacted areas” and “demonstrates that rate increases would be ineffective to raise additional capital to support ongoing operation in the relevant areas.” The carrier also documents the added costs and loss of roaming revenues it has seen, the dearth of alternative providers in areas served by its towers, “its corporate expenses, its rates and plans, details of its service area and where it is the sole provider of mobile service, relevant revenue and expense data,” CCA said.
Compared with the traditional way economists model the telecom industry, “the isolation, ruggedness, and low-density nature of rural America make it difficult for economies of scale to set in, and marginal costs also remain high for rural providers,” the Brattle report said. The wireless “market is ripe for the national providers to engage in cream skimming in the dense towns, rural adjacent highways and corridors,” the report said. “Cream skimming can cause a collapse of the cross-subsidizing dynamic, which rural providers rely on to provide mobile service to the most remote parts of America.”
Discussions about rural broadband policy have focused on such issues as the availability of spectrum and the role that satellite operators will play, Brattle said. The conversations “risk overlooking a foundational economic principle: markets alone cannot ensure socially optimal levels of service in high-cost, low-density areas.”
The Rural Wireless Association similarly supported a waiver. Carolina West's challenges “are illustrative of the systemic challenges faced by other mobile carriers operating in high-cost rural areas -- declining roaming revenues, rising operational costs, and the absence of a dedicated operations expense support mechanism -- which necessitate industry-wide reform,” the group said.
Appalachian Wireless also filed in support of Carolina West. “The lack of ongoing funding to support operational costs for unprofitable sites is an existential threat to the long-term viability of rural wireless carriers,” the provider said. Every day that funding is delayed “compounds the strain on rural wireless carriers, slows the pace of expanding coverage, and increases the possibility that unprofitable sites will have to be decommissioned.”