In the 1990s, a 2.9 percent surcharge was placed on your phone bill to make funds available for telecom providers who undertake bringing telecommunication services to Colorado's rural communities. The proceeds of the surcharge are managed by Colorado's Public Utilities Commission via the Colorado High Cost Support Mechanism (Support Fund).
In 2010, the surcharge collected and paid out nearly $55 million. While most of that money went to telecom providers in rural areas, between $10-$20 million was paid to telecom providers in urban areas. For example, the Support Fund paid providers in places like Parker and Colorado Springs — possibly once rural, but no longer.
A bill has been proposed to re-direct those funds from urban areas back to rural communities in Colorado. A bipartisan group of legislators and telecommunication companies have joined together to forgo the urban subsidy. They have proposed Senate Bill 157, the Telecommunications Modernization Act of 2012 (Telecom Act). The Telecom Act will eliminate the payments to urban providers and shift those dollars to rural communities where they are truly needed.
The Support Fund is currently dispersed among Colorado's telecom providers based upon a formula that allows almost 30 percent of the Support Fund's dollars to be paid to companies that provide service in urban areas — which results in shifting those funds away from rural providers to the tune of nearly $15 million. I assert that this $15 million of misdirected assistance needs to be sent to Colorado's rural communities.
The Telecom Act eliminates payments to providers in urban areas and sends those dollars to rural areas where high costs and sparse competition force prices upward. For example, in a city where there are five or more telecom providers who serve more than 90 percent of the population, the subsidy goes away.
One reason legislators from both sides of the aisle are supporting the Telecom Act is because it also removes burdensome regulations on urban providers where robust competition works to keep service quality high and prices low. Most telecom providers recognize that by removing the stranglehold of excessive regulations, competition will improve service and lower costs — and result in lower prices to consumers.
As you might guess, a company that is currently receiving the subsidy for providing service in urban areas is, quite naturally, reluctant to give up this "free money." It wouldn't surprise us to see it go to great lengths to keep those dollars rolling in, even if it means those dollars are taken away from rural communities.
The Telecom Act may not be popular with a company that currently gets an urban subsidy, but it certainly will be popular with the residents of rural Colorado who will get much-needed assistance. It will also be popular with small, local telecom providers. By shifting more funds to rural areas where competition is sparse, there will be an incentive for more companies to enter new markets, compete for customers, and drive quality of service up and prices to consumers down.
In a testament to the common sense nature of the changes, AT&T, Comcast, the Colorado Cable Telecommunications Association, Sprint, the Colorado Telecommunications Association, Verizon and Viaero Wireless support the Telecom Act and are all willing to forgo an urban subsidy in order to compete against each other on a level playing field. With their help, Colorado has the chance to finally provide modern telecom services to all Coloradans.
It is well known that provision of telecommunications services is significantly more costly in sparsely populated rural areas than in urban centers. But, the economic benefits that flow from a "connected" rural population will enrich all Coloradoans. It is time we modernize our telecommunication laws and send our limited support dollars to the areas where they are most needed — rural Colorado.
We urge our communities' local business groups, elected officials, and consumers to call for the passage of the Telecom Act. Let's make rural Colorado connected.
TDS Telecom employee
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