Rural Nebraska could lose high-quality broadband service unless the state provides money to offset a loss in federal subsidies, telecommunications experts told lawmakers Tuesday.
The small carriers are at risk because of new regulations that will reduce the federal payments for cable, fiber optic and DSL connections in remote areas, said Michael Balhoff, a consultant from Maryland.
Rural areas are more expensive for carriers because the service has to cover greater distances to reach relatively few paying customers. Balhoff told the Legislature's Transportation and Telecommunications Committee that without the subsidy, some remote areas would turn into an "economic wasteland" with little or more expensive service.
"Small carriers are very significantly at risk, and that risk will grow through the year 2020," Balhoff said.
The hearing was called to study the role of Nebraska's Universal Service Fund, administered by the Public Service Commission. Money from the fund comes from a state fee tacked onto consumers' telephone bills. It serves several functions, including support to make sure costs and availability of telecommunications and information services are reasonably comparable between rural and urban areas.
In addition, it provides grants to extend broadband service to unserved and underserved areas, grants to build towers in unserved and underserved areas and money to connect rural and critical access hospitals to urban hub hospitals.
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Without the fund, consumers in rural areas likely would see a lower-quality or higher-cost service or possibly none at all, said Cheryl Parrino, a consultant who testified for Nebraska Rural Independent Cos., a trade group. Parrino said fiscal uncertainty and limited money at the federal level will require Nebraska to play a larger role in keeping the system working.
Parrino said Nebraska's universal service fund provides funding only for the most high-cost remote areas and still requires rural customers to pay higher rates for voice service than urban residents. It also caps the expenses that providers can incur for state aid.
Harold Furchtgott-Roth, a former Federal Communications Commissioner from 1997 to 2001, said the federal government's high-cost universal service fund is plagued with uncertainty and can't be counted on to provide support in the future.
The fund distributed $86 million to the state in 2012 but was on track to disperse less than $80 million this year. Nebraska ranks 25th among states in the funding it receives despite its large geographic area and rural population, Furchtgott-Roth said.
Eric Thompson, a University of Nebraska-Lincoln economist, told lawmakers his research has shown a correlation between broadband service in small towns and business activity. Smaller towns with broadband services also tended to have more 18- to 34-year-olds and residents with college degrees, he said.
The broadband service also was crucial to providing medical services in rural areas, said Dr. Mandy Constantine, executive director of Telehealth at the Nebraska Medical Center in Omaha. Constantine said remote consultations have helped reduce health care costs in Nebraska and made it easier to monitor a patient's recovery in a remote area.
"This is the wave of the future," she said. "It's here now, and it's only going to extent further and further."
The hearing was part of a legislative study to ensure statewide access to broadband service.