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.
In a flurry of activity throughout the week, Donald (DJ) LaVoy, Deputy Under Secretary for Rural Development at the US Department of Agriculture, and his team spent about $145.8 million in the non-urban or suburban areas of seven states.
Calix reported revenue of $120.19 million – up 4% – in Q4 2019, putting a bounce in the step of company president and CEO Carl Russo and a shine to Calix's ongoing transition from hardware vendor to a provider of platforms enabled by cloud, APIs and subscriber experience.
Looking to curtail e-waste and improve the bottom line, BT will require customers to return routers and set-top boxes, although subscribers will not have to pay a fee when they receive regular broadband equipment.
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.
Over the next two years, approximately 60% of service providers (both large and small) will adopt virtualization on a wide scale across their networks, according to the latest survey report from Ovum. Why are providers making these moves? Is there an easy way to start?
Learn how and why service providers are using virtualization to transform their networks. This webinar will look at how providers are leveraging virtualization to create more flexible and agile networks while also providing a better customer experience. Expert speakers from netElastic and Heavy Reading will address the industry drivers for network virtualization, the benefits that can be realized, the challenges to face and the results of virtualization being achieved by providers today.
Key topics will include:
Current network infrastructure and the move to virtualization
Benefits and challenges of network virtualization
How providers can get started
Service provider success stories: the decision to virtualize, the solution, and results