When rancher Keith Anderson wants to exchange e-mails with his children or read articles about agriculture, he does what most people today do: He walks over to his computer and logs onto the Internet.

Unlike most people, however, Anderson has access only to dialup speeds – where the time to load modern, graphics-heavy web pages is measured in minutes, not seconds.

And Anderson is paying $60 a month for this connection.

By contrast, an Internet user in Rapid City can get a connection more than 300 times faster – for $20 less per month.

At first glance, Anderson would seem like the kind of person being targeted in the Federal Communication’s National Broadband Plan – a roadmap to “ensure every American has access to broadband capability.”

But some state regulators and rural Internet providers worry that the National Broadband Plan is going to leave people like Anderson behind even as it ushers urban residents into a world of affordable, lightning-fast Internet access.

“The National Broadband Plan that’s been released by the Federal Communications Commission, while well-intended, contains a lot of bad news for South Dakota,” said Dusty Johnson, an outgoing Republican commissioner on the South Dakota Public Utilities Commission.

The National Broadband Plan has three general goals – that all Americans should have access to high-speed Internet, that all should be able to afford it and that all should be able to acquire the skills to take advantage of it.

The plan to expand digital literacy draws nothing but praise from broadband companies and public officials. It’s the other two goals that worries people like Public Utilities Chairman Steve Kolbeck, outgoing Gov. Mike Rounds and GoldenWest Telecommunications chief executive Denny Law.

As a whole, nearly two-thirds of Americans use broadband Internet at home. That number, however, is significantly lower in rural areas where only 50 percent use broadband.

With limited resources to promote Internet access, which underserved populations should receive the most assistance to expand telecommunications access and affordability?

Historically, the answer has been rural areas. Dating back to the 1930s, rural residents have received support to provide universal telephone service. Currently, that takes the form of the Universal Service Fund, supported by a small fee tacked on to every phone bill.

Money is then doled out from the Universal Service Fund to support rural telephone networks — $95 million to South Dakota companies just last year.

Beneficiaries of the fund say that public support is essential to providing the levels of service they now offer.

“What the Universal Service Fund allows us to do is to provide comparable services to customers in rural areas as they would receive in urban areas, at affordable rates,” said Law. “It takes some of the uneconomic conditions (in rural areas) away.”

But the National Broadband Plan would create a new fund, the Connect America Fund. Its goal would be to support Internet service with speeds of at least 4 megabits per second – with no regard for the location of the user.

And under the plan, the Connect America Fund would receive up to $15 billion from the Universal Service Fund to accomplish its goal.

The fear of rural advocates is that the Connect America Fund would focus on impoverished urban areas, where high population density makes it possible to get more bang for the buck – leaving rural areas with a financial shortfall.

“When you take away that support these rural companies rely on, they’ll be stranded,” said Kolbeck. “The investment these companies have made in these networks needs to be supported by these funds in order to continue to provide broadband to their customers.”

Johnson predicted that the changes proposed in the National Broadband Plan could lead to significantly higher bills for both Internet and telephone service in rural areas.

“Right now, monthly dial tone in Kennebec probably costs about $30,” he said. “It would cost about $130 without that Universal Service Funding.”

Those prices are too high, he said.

“If you destroy that Universal Service Fund regime, you make telephone and Internet service too expensive to have in rural America,” said Johnson. “Then you get this death spiral where because rural America isn’t connected with the rest of the country, there are fewer job opportunities here, people move away and service just gets that much more expensive.”

Mark Tubbs, a rancher northwest of Edgemont, said he pays $50 a month for unreliable Internet service just a bit better than dialup. That’s about as much as he’s willing to pay for Internet access – if his prices went up significantly, he’d probably cut his service.

Anderson said he’s in a similar situation.

“We’re paying $60 a month now, and that’s about all we feel we can afford,” he said.

Jill Maguire, who owns a ranch southeast of Rapid City, said the Internet is crucial enough to her life and business that she’d keep paying even if prices increase from her current $90 bill for telephone and Internet.

“It would smart a little bit, but when you calculate driving into town, I think the value is certainly still there,” Maguire said.

Another proposed change in the National Broadband Plan – eliminating the per-minute fees phone networks pay to other networks to transfer calls – also has rural companies worried because they tend to receive more money than they pay in these inter-carrier compensation fees.

“Over the years, the inter-carrier compensation has gotten to a point where it’s kind of an additional subsidy,” said Tom Simmons, senior vice president of public policy at Midcontinent Communications, which services larger South Dakota towns and cities and pays more than it receives in inter-carrier compensation. “I think the government is saying, let’s call a horse a horse. If it is a subsidy, let’s put it under the category of subsidy in U.S. funding.”

A final concern rural advocates have is that the plan leaves them behind when setting its long-term goals. By 2020, the National Broadband Plan calls for every American to have at least 4 megabits per second broadband – but for 100 million Americans to have drastically faster 100 megabits per second connections.

“That is a good goal,” said Johnson. “It’s only when you see how the plan reads, when they begin to release more specifics, that you see how much rural South Dakota gets left out of the kind of progress they envision.”

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Because more densely populated areas are more cost-efficient to provide Internet service for, Johnson and others fear that those 100 million people will largely live in cities. And though the plan wouldn’t restrict Internet companies from offering service faster than 4 megabits per second, it wouldn’t provide assistance for faster connections, either.

“Quite frankly, if there is no economic assistance available to go beyond that, it is probably quite difficult if not impossible to go beyond that,” said Law.

A 4-megabit Internet connection is sufficient to watch standard-definition video online with only a slight delay. But it can’t handle a two-way videoconference or other high-bandwidth live activities, and it requires much more waiting when doing activities like watching high-definition video.

Not everyone is as worried about the National Broadband Plan’s impact on rural Internet access.

“It’s pretty standard for most incumbent businesses to be concerned by any policy or regulatory changes proposed,” said Bruce Mehlman, co-chairman of the Internet Innovation Alliance, a nonprofit committed to universal broadband deployment and adoption through market solutions. “I think much of what is being considered – but not all – could benefit rural areas, rural customers and rural telcos (telecommunications companies) willing to consider new ways of doing business.”

“I don’t think the government has any intention to leave any customers – including rural customers – stranded,” said Simmons.

But Gov. Rounds and the PUC believe there is something to worry about.  Rounds and all three PUC commissioners visited Washington, D.C., a month ago to meet with the members of the Federal Communications Commission and express their concerns.

“Our message was, we need high-speed Internet access, and broadband is critical to the development of small communities in rural areas,” Rounds said.

Two of the FCC commissioners were skeptical of the South Dakota delegation’s claims, participants in the meeting said. Two others, and the staff of the absent fifth member, were sympathetic.

“They were very interested and they wanted to have the discourse,” Rounds said. “I don’t think they realized how serious of an issue it was for us to be identified as not needing the broadband accessibility.”

The current plan is still a draft, and the proposed regulations aren’t expected to take effect before the end of 2011.

“I think our friends at the rural telecommunications companies are getting out ahead of all this stuff and setting the stage for an upcoming debate,” said Simmons.

Advocates for rural broadband say they’re optimistic they’ll be able to make the final plan work better for rural America.

“They provided us with a lot more time than we were expecting to make our case, to point out specific flaws in the National Broadband Plan,” Johnson said. “We heard a willingness to work with us to the extent that they could to make changes to the National Broadband Plan to maybe harm South Dakota less than the plan that’s currently envisioned.”

Contact David Montgomery at 394-8329 or david.montgomery@rapidcityjournal.com


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