Telcom Bill Signals Reform

March 23, 2012


Scheffel's bill seeks to end a subsidy scheme dating back to the 1980's

DENVER – A bill, which aims to modernize Colorado’s decades-old telecom policies by creating a fair playing field for competitive providers to receive subsidies to expand broadband in less populated areas, was passed by the Senate Business, Labor and Technology Committee.

“This has been an intense effort over many, many months to try to effect appropriate legislative change in an extraordinarily complex area,” said Sen. Mark Scheffel (R- Parker). “We’re hoping and believing this bill will spur free market competition.”

As fast as communication as evolved – from land lines to wireless to voice over internet protocol service (VoIP) – so has the competition among service providers of high tech, high speed communications systems.

Senate Bill 157 evolved after 18 months of meetings between stakeholders and the measure’s sponsors Sens. Scheffel and Lois Tochtrop (D-Denver), and Reps.Carole Murray (R-Castle Rock), and Angela Williams (D-Denver).

By 2025, the bill would eliminate the High Cost Support Mechanism fund that was established in the 1980s to expand telecommunication services in less populated areas where the costs of infrastructure could not readily be recovered without subsidizing rates charged to customers.

“The playing field has not been level in a very long time, and what this legislation does for the very first time is make it level,” said Scheffel.

The High Cost Support Mechanism fund grew to roughly $53 million last year, monies derived from a 2.9 percent fee charged to land-base and wireless phone customers.

CenturyLink received an estimated 93 percent of the subsidies, Fort Morgan-based Viaero Wireless that serves the eastern and south central areas of the state received 5 percent, and the remaining 2 percent was divided among smaller providers.

The bill would create the Broadband Capitol Investment Fund that would receive an initial $5 million from High Cost Support Mechanism in March 2013 to launch the program that will be administered by the Governor’s Office of Information Technology. Unclear is whether that money will be used for OIT administrative services or be available subsidies to eligible communication carriers.

Communication service providers – from national giants as Comcast and AT&T to smaller entities as Viaero Wireless and Rye Telephone Company – favor the bill’s promise of a level playing field to compete for subsidies to expand services to rural communities.

The bill would establish the Broadband Capital Investment fund to provide subsidies in rural areas where there are less than five communication carriers. Applications for subsidies and potential rate hikes would be subject to review and approve of the Public Utilities Commission.

CenturyLink that provides more than 75,000 access lines and serves more than 400,000 customers in rural areas would not be eligible for subsidies to offsets rates.  CenturyLink, which built more than 75 percent of the communications infrastructure in the state, would be deregulated and free to raise rates if needed.

“This debate is not about providers, what type of company you are, where you’re located,” said Bill Sourds, president of AT&T Colorado. “This debate is about consumers and how technology is changing and how consumers are consuming information.”

He recalled thatColoradohad once been on the cutting edge of the communications industry as the birthplace for cable. But, unlike other states that update their telecommunication laws every couple of years,Coloradohas lagged behind.

“We agree with the premise that the technological landscape is changing rapidly,” said Jim Campbell, regional vice president of legislative affairs for CenturyLink. “But, this legislation is flawed in many ways.”

“This bill presumes that rural customers don’t deserve to receive high cost support, “said Campbell, who questioned why CenturyLink’s clients would be denied a subsidy to offset their rates although customers of another provider could receive the subsidies.

If the bill is signed into law,Campbellsaid the loss of subsidies to maintain and improve rural communication will be significant. The company, he said, would have to consider laying off employees or raising rates.

“This bill legislates discrimination,” declared Kenny Wyatt, president of the mountain region for CenturyLink. “On day one, it discriminates against our customers in rural Colorado.”

The rural customers of CenturyLink will be deemed to live in a competitive area, said Wyatt, and that will result in price increases without the subsidy to offset their bills.

Rep. Shawn Mitchell (R-Broomfield), asked, “Why isn’t the creation of the broadband fund not a clear violation of the Taxpayers’ Bill of Rights?”

“This fund is going to shift $25 million a year, a year, over to the OIT… It’s not really a tax. Everybody pays a little bit more on their phone bills so that rural customers don’t have to pay the full cost of their phones,” responded Tim Goodwin, attorney for CenturyLink.

“But when you shift that fund into a new agency, the OIT, I think you have a problem with TABOR,” said Goodwin.

Tochtrop corrected that the funding is only $25 million over 12 years, but it may not sunset in 2025. But, she laughed, the legislators on the committee will be gone by then because of term limits.

“This bill makes it incumbent upon urban Coloradoto subsidize services to ruralColoradothat are not health, safety and welfare concerns,” said Sen. Ted Harvey (R-Highland Ranch), in opposition to the bill.

Harvey said that the High Cost Support Mechanism fund had been primarily set up and funded by urban Coloradans to expand services to rural Coloradans to ensure communications access to 911 emergency services – not non-essential services as those covered under SB 157.

Wendell Pryor, director of Chaffee County Economic Development Corporation, said that the bill would help businesses, tourism and schools in his community.

Pryor said that the county is like a “donut hole” with its valleys and mountains that make cell phone and internet access very difficult, and that much of the county has no access to internet or cell phone coverage. Those services, he said, are critical to attracting businesses that bring jobs to the rural communities.

Bonnie Petersen, executive director of Club 20 on the Western Slope, said, “I live inGrand Junctionand under the definition of competitive (areas) in this bill, it’s served by five providers or more. Yet, I live across the street from the city limits… I cannot get a cable TV provider to cross the street to deliver service to me.”

Petersen said that she can see cell phone towers, but her own service is limited and unreliable. She expressed concerns about the telecommunication access in her city as well as 20 counties on the Western Slope. But, she said, by the bill’s language, she doesn’t trust in those problems being resolved.

“I believe it should be an even playing field, said Petersen. “But is this the right legislation? Do we have the right data? Is this the time?”

After hearing nearly seven hours of testimony for and against the bill on Monday, the Senate Business, Labor and Technology Committee reconvened Wednesday and voted, 5-1, to forward the amended bill to the Appropriations Committee. Harvey voted against the bill; Mitchell was absent.

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