Funding for rural wireless faces threat

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Nebraskans who have grown frustrated with spotty cell phone service in rural Nebraska, should hang up and pay attention to an erupting battle over billion-dollar subsidies.

The Federal Communication Commission has proposed capping the amount of subsidies paid to improve cell phone systems in rural parts of the United States.

Cell phone companies are battling the proposal, but they face a powerful and entrenched foe in the landline companies who fear future cuts in the subsidies that they have been receiving for years.

The cap could be particularly detrimental to Nebraska, which only recently has begun to receive federal subsidies to improve cell phone service, and because state officials so far continue to funnel all state subsidies to landline systems even though the state collects millions of dollars from cell phone customers.

Alltel Vice President Bill Ashburn said that the cellular company received about $20 million last year that it is using to improve its cell system in places such as Red Cloud, Falls City, Humboldt, Johnson, Cook, Ainsworth and Imperial.

The proposal to cap funding would put a “big-time” crimp in its plans to “build out more areas” in rural Nebraska, Ashburn said.

The FCC says it wants to cap cell phone subsidies while it comes up with a plan to reform the whole subsidy system known as the federal Universal Service Fund.

The theory of the Universal Service Fund is that subsidies are required to induce companies to provide service in high-cost areas such as rural Nebraska where customers are few and far between.

In Nebraska, where the number of cell phone lines has exceeded the number of landline phones since last year, the vast bulk of subsidies go to landline companies, even though cell phone users pay millions of dollars into the state and federal funds.

Reform is definitely needed for a number of reasons. One is that new Internet-based phone systems aren’t required to pay into the fund. The concept needs to be modified to keep pace with developing technology.

Rep. Lee Terry has introduced legislation in Congress that would reform the fund in several ways, including an intriguing provision that would allow the fund to be used to subsidize broadband service to rural Nebraska.

But there is little justification for capping on cell phone subsidies. Cell phone companies have some powerful arguments on their side. Since 1998 cell phone companies have received only $2 billion in subsidies compared to $24 billion for landline companies. In 2007 the amount of subsidies going to cell phone companies is expected to rise by only $300 million, according to the FCC.

It seems reasonable to allow cell phone companies to finally get a more equitable share of the subsidy while Congress works on reform. Nebraskans would appreciate fewer dropped calls when they roam across the wide open spaces of their state.