News Story

Feds Keeping Subsidized Phones on Hold for Homes in Remote Corners of Michigan

When President Barack Obama came to northern Michigan in February to boast about the spread of the Internet, he told the crowd that more than 90 percent of the homes in South Korea have high-speed broadband. But local businessman Glenn Wilson had a letter delivered to President Obama that day informing him that there are still residents in Michigan with no access to even a telephone because of four years of federal government delays. Wilson is president of Michigan Access, one of three telecommunication companies trying to get service to sparse pockets of the state that do not have access to a land line.

The problem is that the Federal Communications Commission hasn’t designated a carrier, despite being asked as far back as 2007. That has left hundreds without access to land lines in areas where cell phone service can be very unreliable.

The three phone service providers vying for the areas are Allband, Osiris and Michigan Access.  They are already licensed by the state. They need to be designated as the “incumbent” carrier by the FCC so that they can be eligible for reimbursement for up to 70 percent of their expenses for servicing the low-population areas. They also need the “incumbent” status to get area codes and exchange numbers for customers.

FCC spokesman Mark Wigfield said he couldn’t comment until the FCC had picked a carrier.

“The FCC is notoriously slow for letting things sit for a long period of time,” said Allband General Manager Ron Siegel.

Wilson took his gripe to the top. When Obama came to northern Michigan, he had his letter delivered.

The problems are more than just inconvenience. Because many of these sparsely populated areas don’t have cell phone towers, cell phone reception is often very unreliable, and there are concerns about how residents could contact 911.

“I wouldn’t want my life to depend on it,” Wilson said.

There are believed to be eight areas in the state that can’t get land line service.

Wilson said he has spent half a million dollars putting in underground cables and paying for fees to service one of those areas, a 54-square-mile area near Roscommon in northern Michigan.

He said that would service about 30 people.

Because of the high cost to serve such a small population, the carriers are refunded as much as 70 percent of the cost to get the phone service activated. The money comes from the Universal Service Fund, which gets its money from a charge on phone bills.

“Federal, state and local levies on wireless bills add up to an average 16.3 percent more per customer each month,” said Bruce Edward Walker, research fellow and managing editor of The Heartland Institute’s Infotech & Telecom News. “In some states this can add up to $8 to each bill,” he said.

Administered by the Federal Communications Commission, the USF was established to subsidize telecommunications service for schools, libraries, hospitals and rural phone companies and their customers, Walker said. Walker explained that the USF fee was below 4 percent when it began in the 1990s, but it rose to 10.2 percent in 2005 and was increased to 13.6 percent in 2010.

“The USF fees imposed on wireless users in most states create significant barriers for low-income customers, as well as impede the growth of mobile businesses,” Walker said. “In some states, the USF is as high as ‘sin’ taxes applied to alcohol and cigarette sales.”

Walker added: “Landline phone service has become a thing of the past, and the Michigan communities currently without it would more than likely be better served by wireless service rather than waiting for the FCC to move off the dime — preferably wireless service provided without onerous government subsidies.”

What happens without the subsidy?

Wilson said that if he turned on the phones without approval from the FCC, he was told that he would be fined $25,000 per day and would lose his license.

Judy Palnau, spokeswoman for the Michigan Public Service Commission, said the state has done everything it is authorized to do. All three telecommunication companies have state licenses.

Still, it’s not clear when the FCC will decide.

“It’s so stupid,” Wilson said.


See also:

The Universal Service Fund: What Do High-Cost Subsidies Subsidize?

Report Blasts Federal Universal Service Fund

Expansion of Universal Service Fund Debated

Mandatory Phone Books and Filmmaker Welfare in the 'Harrison Bergeron' State

Proposed Bill Moves Michigan Closer to Landline Reform

New Bill Seeks to Rein in FCC Regulatory Authority

Critics Say Google Wants Internet Access - Just Not the Bill for It