WASHINGTON—Customers of at least one rural telecommunications cooperative are cutting the cord at the rate of five to 10 per month, J. Frederick Johnson, executive vice president and general manager of Farmers Telecommunications Cooperative, based in Rainsville., Ala., told RCR Wireless News.
Johnson said that number includes only the customers cutting the cord from Farmers’ landline business to sign up for its wireless subsidiary, which currently serves about 11,000 customers. Johnson said he faces at least 4-percent attrition monthly as customers cut the cord for wireless service provided by Cingular Wireless L.L.C., Verizon Wireless or Sprint Nextel Corp. Those numbers, which Johnson believes could even be higher because of the customers that move into his service territory but never sign up for wireline service, represent real competition even though many policy makers believe competition only exists if it is on the same platform.
“I have lost 4 percent of my customers to wireless,” said Johnson. “In rural America, when your customers leave you and go somewhere else for telecom—that is real competition.”
Johnson made his comments as part of a luncheon briefing on whether deregulating telecommunications is the best course for rural America. The briefing was sponsored by the Foundation for Rural Service.
FRS supports the continuation of universal service, but Johnson said universal service should not be used to create artificial competition. For example, he said it costs him $20 million to serve two square miles, but a wireless carrier can put up a tower and base station for less than $25,000 and serve the same two square miles—and get the same subsidy.
At the luncheon, FRS released “Telecommunications Deregulation: A Balancing Act for Rural America.” The report is written by L. Marie Guillory, principal of Guillory & Hjort P.L.L.C.
Guillory believes regulations to keep the universal-service system in place are necessary. “I believe the regulation is needed to ensure federal funding of the universal-service fund,” she said.
The FRS paper says that a “flexible regulatory approach is necessary to meet the divergent needs of large and small communications providers, and to enable both to provide consumers throughout the nation high-quality cutting-edge telecommunications services.”
Intercarrier compensation—the system used by telecommunications operators to pay each other to carry traffic—is also an area where regulation, not the free market, is necessary, said Guillory.
“Without regulation, the obligation to pay each other to carry traffic would be left to business negotiations. What is wrong with that? What is wrong with that is unequal power,” said Guillory. “Maybe the big guys can negotiate among themselves, but experience has taught us that this might not be the case with rural carriers—so why risk it?”
The need for some regulation and a continuation of the current system is a policy area where rural carriers differ from larger wireline carriers, said Guillory, noting that rural carriers were generally not in favor of an advertising campaign by USTelecom—the wireline trade association—that said the “last time our telecommunications laws were updated PDA meant ‘public display of affection.’”
Guillory acknowledged that the current telecommunications regulatory system is complex “but it produced the system we wanted—nearly ubiquitous access to telephone service.”
Rural carriers are heavily dependent on the system built into the Communications Act, said Guillory, noting that the system provides incentives and predictability for rural carriers.
As Congress examines telecommunications reform, it needs to keep in mind that there are differences between urban and rural areas, according to Guillory’s report.
“Consideration of the unique needs of rural areas takes on added importance in an era when state boundaries are becoming less and less relevant. State regulators can no longer exert control over national and global services that often substitute for basic local telephone service. The nationwide scope of services requires a national response but that response must not ignore the unique circumstances of rural, remote and insular areas,” reads the report.
