A federal watchdog agency this month recommended the FCC stop using one of two reimbursement programs in its rural-broadband program due to its high potential for fraud, a situation that allowed at least three small carriers to charge $34 million in ineligible payments.
Although small rural providers serve only 5% of US households, they receive $2.5 billion, or about 56%, of the $4.5 billion the Federal Communications Commission spends annually on rural broadband via the Universal Service Fund budget. This money is spread across 1,078 regions or "study areas." Small providers, which the FCC calls rate-of-return carriers, can choose payment via the cost-accounting support/high-cost program -- which reimburses them for costs incurred and uses operators' financial statements, receipts and other documentation. Or providers can opt for the 2011 model-based support program -- designed using modeling, industry data and feedback, to eliminate paperwork and receipts -- and intended to encourage investment in future-facing, faster and often costlier broadband technologies. The program worked, with almost 60% of operators using model-based payment.
However, the other portion – about 40% -- were on the accounting-intensive high-cost program that was exposed to fraud risk. According to the General Accounting Office (GAO), some of that fraud risk transformed into reality. Consider:
That Sinking Feeling
Surfing the waves kept its original meaning after Sandwich Isles Communications failed to deploy broadband everywhere it was contracted, using at least $1.3 million for a residence -- not infrastructure -- the FCC charged. (Image source: Oliver Sjöström from Pexels)
Amid legitimate invoices for fiber-optic cable, antennae and splicing tools, a few operator executives "hid" humongous, ineligible bills that (somehow) were approved. Taxpayers shelled out at least $27 million in ineligible costs to Sandwich Isles Communications of Hawaii for items such as owner Albert Hee's $1.3 million home and $43,000 vehicle. Additionally, Sandwich Isles claimed to deliver broadband to areas of Hawaii where nobody lived or worked -- in a pre-IoT age. The alleged scam lasted between 2002 and 2013; ultimately Hee and his ISP were fined $50 million and Hee was sentenced to 46 months in federal prison on tax charges.
In August 2018, FCC's Office of Inspector General (OIG) reported a rate-of-return carrier claimed about $80,000 in ineligible expenses -- including family travel, tuition reimbursement and donations -- between 2012 to 2015 for reimbursement. The provider stopped receiving support from the high-cost program in 2015 and the FCC "recovered the improper payments through offsets to the support the carrier otherwise may receive," the commission told GAO.
In another case, a rate-of-return carrier self-reported to NECA and USAC its purported costs of providing services. A subsequent FCC OIG investigation determined the operator included costs for a nonregulated, commercial mobile radio service in this information; ultimately, the FCC figured out it had overpaid the provider almost $7 million between 2005 and 2010. Today, a petition for reconsideration is pending, the GAO said. For each dollar spent on services that are not part of USF or Connect America Fund, that's a dollar that does not go toward operators truly delivering on the promised service.
These are only the instances that were found, according to the GAO.
"These cases came to FCC's attention only after the carriers had already been improperly receiving high-cost support for years, and FCC's OIG staff said that skilled bad actors may remain undetected. FCC has adopted reforms in recent years intended to improve the accountability of rate-of-return carriers' funding," the watchdog agency reported.
But with each audit taking about 1,000 hours, the GAO's recommendation that the FCC eliminates the high-cost reimbursement program could garner traction, especially during an election year.
Deploying DOCSIS 3.1 across its entire footprint gave Rogers Communications the ability to offer speeds of up to 1 Gbit/s,
contributing to a broadband segement that generated about 60% of the Canadian operator's $3.05 billion (US) in Q4 cable earnings.
On Jan. 23, Broadband World News hosts a Calix-sponsored webinar that explores several ways CSPs can enhance customer experience and find new business opportunities to avoid devolving into a speed race where nobody wins, not even the customer.
As the pool of savvy, fiber-rich operators across the US rural and regional landscape wanes, the financial community will grow even more interested in acquiring or investing in them, a CoBank report says.
It wasn't long ago that TV was ranked by subscribers as the most important service in the bundle provided by their communications service provider (CSP). Recent research indicates that for nearly three quarters of subscribers, broadband is now the most important service. Broadcast TV is the most important service to only 15% of North American consumers, replaced by OTT video streaming platforms like Netflix, Amazon Prime and Disney+. In addition, many different competitors are moving aggressively to stake a claim in consumers' homes.
In 2020, CSPs need to fight back by transforming their business models, which are becoming more reliant on a single source of revenue: fixed broadband services.
This webinar will focus on helping CSPs transform their business models by placing a firm focus on delivering a sensational subscriber experience and by offering compelling new services that generate value for subscribers. These actions will reinforce the CSP's strategic position in the home network and position themselves for growth in the next decade.
Key topics include:
Being the first to market with WiFi 6 technology, in response to consumer purchases of new devices over the holidays;
Having the insights needed to proactively resolve issues, often before your subscribers even know that there are issues;
Providing help desk agents with the visibility they need to resolve common subscriber issues more quickly;
Delivering a mobile app, in response to consumer demands for the ability to do some things themselves, rather than having to call technical support; and
Addressing consumer concerns around device security, privacy and control with enhanced security and parental controls.
In this insightful Light Reading radio show, Kurt Raaflaub, Head of Strategic Solutions Marketing, will outline the key service provider challenges, deployment considerations, next-gen Gigabit technologies, and service models to win market share in the rapidly growing MDU market.