Smaller Providers See KAC Costs Mounting, Don't Expect 2nd Re-Up

Many small and mid-sized broadband and voice providers quickly signed up for the Keep Americans Connected pledge extension (see 2005140063). Now, some said in interviews, expenses associated with KAC could start to become serious if it goes beyond its current June 30 span. Some don't expect the FCC pledge to get another extension.

Some major ISPs told Wall Street that KAC-related expenses are expected to be in the hundreds of millions of dollars (see 2005120017). The FCC didn't comment Thursday.

Pledges to not end service due to pandemic-related bill nonpayment, to waive pandemic-caused late fees and open Wi-Fi hot spots to all are what many smaller providers would have done anyway, said Patricia Jo Boyers, Boycom Vision president and ACA Connects chairwoman. "That's in the DNA of people who operate in the communities they live in." Associated bad debt is "a hardship [but] it's not going to make or break me," she said. She said the general expectation is the pledge requests won't go past June 30. She said for some operators, like Boycom, aspects of what they do under KAC will continue: “We're not going to suddenly say July 1, 'you all are cut off.'”

Going beyond June 30 "would start to become problematic" but isn't expected, said Vast Broadband CEO Jim Gleason. "It's not without cost," especially since Vast hasn't received federal Paycheck Protection Program support and has been paying employees the commissions they likely would have earned if not for the pandemic. He said re-upping for the June 30 pledge was important to support the country and to avoid alternatives like potential regulation. He said KAC could ultimately lead to some increased business, help in customer retention and in burnishing the brand. With a "significantly better economy" expected in Vast's footprint over the next several weeks, the cable ISP will step up collection efforts after June 30 and work with customers on establishing repayment plans, he said.

The voluntary program going beyond June 30 would be surprising and the costs borne by providers "clearly a problem," said Susan Bitter Smith, Southwest Cable Communications Association executive director. She said cable providers could sustain it, but the parts that cut into revenue, such as waiving late fees, would be more challenging than expanded services like Wi-Fi hot spots. She said no SWCCA members hesitated to re-up pledges through June 30. The tipping point where expenses become problematic would come sooner for smaller systems, she said.

In the first round of pledges, more than half of NTCA members signed, said Senior Vice President-Industry Affairs and Business Development Mike Romano. More signed on when FCC Chairman Ajit Pai asked providers to extend their offers, he said. He was told some members mistakenly thought they had signed on the first time, Romano added. 'I'm sure some looked at it and said, 'I can't afford to.'"

Concerns

Some legislators and industry representatives are concerned about the mounting potential impact to cable and telco bottom lines if the commitment continues much longer. They believe the Keeping Critical Connections Act (HR-6394/S-3569) would address the concerns. The bill would set up a $2 billion fund at the FCC to compensate ISPs with fewer than 250,000 customers for free or discounted broadband services during the emergency to low-income households that can't pay (see 2003240064).

Over two-thirds of participating NTCA members polled had uncollectibles increase at least 10%, Romano said. "If you are a small provider, there's only so much you can do for free. They've got loans to pay back," plus equipment and supplies to buy, and employee payroll.

House Consumer Protection Subcommittee ranking member Cathy McMorris Rodgers, R-Wash., raised concerns during a Wednesday ACA teleconference about a bid by House Democrats to require ISPs to not disconnect or alter telecom services during the pandemic, saying it's an attempt to make the pledge terms "mandatory." The House-passed Health and Economic Recovery Omnibus Emergency Solutions Act (HR-6800) includes language to bar ISPs and voice providers from terminating or otherwise altering service to individual customers and small businesses because of inability “to pay as a result of disruptions caused by the public health emergency” (see 2005130059). “I will continue to fight” efforts to mandate the pledge terms, McMorris Rodgers said.

"When the FCC put out a request for the pledge, it was a natural for us" to sign, said Arvig Director-Customer Operations and Southern Markets Mark Birkholz. It was also an easy decision to extend, he said. The provider is likely to extend the pledge again if asked, especially if its customers are still working from home, he said: "We're on that page if it's going to help folks out. They may find their next job online. We won't take that away from them."

"We signed on right away," said Golden Belt Telephone General Manager Beau Rebel. As a cooperative, "we do everything we can to keep our members connected," he said. Rebel said extending the pledge was important "until we can return to more normalcy and get more things open." He's in favor of federal help if there are more extensions, he said: "All of America is hurting, but how long can we provide free service?"

Hill County Telephone "decided on our own we would probably extend" the commitment, CEO Craig Cook said. The provider has seen a "not small," five-figure monthly dollar impact due to the pledge, from lost monthly revenue, plus additional operational expenses and equipment it takes to go above and beyond the pledge by helping school districts, he said. "It's a small price to pay to take care of our customers. We don't expect to be in dire straits if the pledge is extended."

When Big Bend Telephone signed in March, it decided to "find what we could do over and above," said General Manager Rusty Moore. BBT worked with schools, hospitals and local agencies. It extended school connectivity to students' living rooms using fiber, fixed wireless, DSL or wireless hot spots depending on the school district. When the FCC asked for the pledge extension, "it was not even a hesitation," Moore said. He would like to see federal assistance if the FCC asks for more. "We'll get to the point where at some point, the helpers need help," he said. "There's nobody carrying us on our bills. PPP doesn't apply to people like us." Small carriers across the country are "feeling the crunch" of their pledges, he said.