NTCA urges self-reliance through regional and national networks

ORLANDO--With recent merger and acquisition activity among national carriers limiting rural providers’ choice of access and purchasing power and threatening their very future, the National Telecommunications Cooperative Association urged members to consider or reconsider cooperating on the construction of regional and national networks.

Kevin McGuire, vice president of business and technology, and Dan Mitchell, vice president of legal and industry affairs, both at the NTCA, addressed the membership yesterday to highlight the urgency of cooperative strategies and identify a new FCC initiative that could help fund those networks.

“We all need to work together to ensure our future,” McGuire said. “Now is the time to look at this issue because today we are in a much different world. Consolidation means less choice; less choice means less purchasing power and less purchasing power means higher prices.”

Mitchell said things are changing fast. He cited a survey of NTCA members that showed 50% of providers have two or fewer choices of access network providers and that the options have declined even further due to M&A activity.

“We will be at the mercy of AT&T and others as we progress into the future,” Mitchell said. “But if we begin to partner and think as one, we can build a network similar to the [] and become self-reliant.”

He added that the three-legged stool of revenue sources for rural providers--end user rates, access charges and USF--are not as certain today as they were five or 10 years ago. “We have the opportunity to shape the change to preserve our future,” Mitchell said.

He urged members to look for other opportunities to take advantage of funding to create self-reliance. “It is time to remove our dependency on large, vertically integrated companies and use resources within our own rural family to control our destiny,” Mitchell said.

One such opportunity is to build state and regional networks. Approximately 15 state networks already exist, including networks in Indiana, Iowa, Missouri, New York and Wisconsin.

“By linking these networks together we can form the foundation of a National rural fiber optic network,” McGuire said.

Obviously, funding is an obstacle, but Mitchell said there is a potential new funding mechanism available through the FCC’s Rural Health Care Pilot program. The program will provide up to 85% of an applicants cost of deploying a dedicated broadband network including design and deployment.

The two-year test program will fund approximately $55 million to $60 million over the next two years. It is designed to promote telemedicine capabilities in rural areas. If successful, Mitchell said, it could support $300 million more in additional funding on an annual basis.

“By taking advantage of this program you would bring a tremendous public service to your communities and you would be laying the critical infrastructure…and creating self-reliance in the converged voice, video and data markets,” McGuire said.

He said that if rural providers can prove the pilot program can work, it would helps the FCC's goal of deploying broadband service throughout the entire U.S.

It also would give rural operators the opportunity to bid on national, regional and government contracts.

“Don’t let large companies impose their market power on an ongoing basis,” Mitchell said.

There are a few flies in the ointment at this stage such as the FCC’s vagueness on whether the networks must be dedicated to health facilities and who will pay for ongoing operational support.

However, if rural providers don’t take advantage of the pilot program and prove its worth, up to $300 million in additional funding could be lost.