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Will bad data make rural Alaska miss the broadband revolution?

The effort to get more people across the United States connected to a basic, modern level of telephone and Internet service has undergone recent reforms that could leave Alaskans watching the technology revolution pass them by instead of tapping into it.

Through the Universal Service Fund, administered by the Federal Communications Commission, the nation's hardest-to-reach consumers have historically had an advocate in the way of guaranteed access to service. Carriers that reach the farthest corners of America, in the highest-cost areas to do business, have had access to federal funds to help build infrastructure and stabilize costs.

But a reform order issued in 2011 has realigned how the money is distributed, and it lumped Alaska into a data-driven reimbursement funding formula that also applies to telecommunication companies in states across the nation which don't share Alaska's geographic challenges. Suffice it to say, Alaska appears to have gotten a bum deal amid what one FCC commissioner has termed a "monumental change."

The kooky results have left Alaskans demanding to know how in the world the FCC came up with its data -- data that shows Alaska as a less costly place than the Lower 48 to build new projects. Yet San Juan, Puerto Rico, with its warmer weather and presumably year-round construction season, was rated as a more expensive place to operate.

It matters because the ratings affect the way telecoms are ranked for reimbursement.

Breaking bad data

Alaska's congressional delegation, the Alaska Federation of Natives, and affected telecoms have implored the FCC to revise its Alaska analysis. And at least one small telecom in Alaska, Arctic Slope Telephone Association Cooperative, is actively encouraging its customers to get involved in the fight.

"Restore FCC Funding to Rural Alaska!" declares a web-based form letter ASTAC is encouraging its customers and rural residents of its Arctic service region to fill out and send to Alaska's congressional delegation.

ASTAC services 92,000 square miles in Alaska, and only recently was able to convince the FCC that the North Slope -- which contains some of the most remote territory in Alaska -- has only 220 drivable miles of road instead of the some 2,429 miles the commission came up with.

Apparently the commission included in its tally caribou trails, Jeep trails and old military survey corridors -- routes unused by regular vehicle traffic. It took ASTAC $100,000 of time and consultant work to persuade the FCC its data was bad, said Steve Merriam, the company's CEO and General Manager.

Under the revised funding formula, ASTAC will lose more than $473,000 in Universal Service Fund money in 2013, double that amount in 2014. It's a financial hit the company can absorb for only so long. Alaska is far behind the rest of the United States when it comes to modern wireless, Internet and broadband services, Merriam said, and with reduced USF spending in Alaska, the state is at risk of widening, instead of narrowing, the digital divide.

"The FCC just isn't listening," Merriam said. "Common sense has to rule at some point."

New connectivity, new costs

A major concern is the ability of ASTAC to tap into a new, super-fast, fiberoptic submarine broadband cable, being constructed to connect financial markets in Asia with those in London. The Arctic Fibre will swing by the Seward Peninsula, Northwest Arctic and the North Slope Borough, and continue through the Northwest Passage along Canada en route to the U.S. East Coast and overseas.

Alaskans have the ability to take advantage of the line through spurs and landings to the subsea line, a technology advance Merriam calls "a generational game changer for rural alaska."

But for ASTAC, it won't come without upgrades to its system, upgrades that will cost money to implement. Already, the Rural Utility Service lender Merriam approached for the loan questioned how, under the new Universal Service Fund's funding structure, a small company like ASTAC would have a way to repay the loan.

"The greatest impact to any company is the chilling effect that the (FCC's data analysis) model has introduced into the financial markets. Banks hate uncertainty as much as the telcos, and the model makes future earnings and the ability to repay loans unpredictable," Merriam said.

He also characterizes connecting to the Arctic Fibre as a one-time opportunity. If communities don't create access to the cable as the cable is being constructed, slated for 2015, costs to retrofit after the fact will skyrocket prohibitively, he said.

"It's criminal if we miss an opportunity to connect to fiber because of bureaucracy," he said. "The greatest harm to the people right now is the uncertainty that this has created. When the underlying (data analysis) model is the reason for the disparity, trying to make it up on the backs of companies that don't fit a one-size-fits-all model is just bad public policy."

That disparity has fueled ASTAC's effort to turn the rural residents it serves into political activists.

"The commission is using a flawed regression model that does not designate our lands as 100 percent tribal, that concludes it is 46 percent less expensive to construct in Alaska than in the Lower 48 states, and assigns Arctic Alaska the lowest allowable costs in the U.S. to construct and maintain facilities. I know these premises are false," reads ASTAC's easy-to-sign-and-send form letter to Alaska's congressional delegation.

It continues: "All Americans have been promised broadband by the FCC, but the FCC's actions preclude rural Alaska Natives -- the first Americans -- from participating. Broadband is vital to our economy, too. We will not tolerate this injustice."

Impossible, senseless problem

For its part, the delegation has also been vocal. It warned the FCC in 2011 about overlooking the unique conditions of meeting the needs of Alaskans: Remote, roadless communities, many either unserved or underserved; harsh weather; short construction season; high fuel and energy costs; tribal lands.

By 2012, after the FCC's reform order had been issued on the Universal Service Fund, more letters co-signed by Alaska's delegation came in. The trio complained that the FCC's actions stood to underfund Alaska by more than $20 million, and raised urgent concerns about the immediate effects the changes were having on a small carrier serving the Bering Sea fishing fleet.

At an Indian Affairs subcommittee hearing on Universal Service Fund reform held in June 2012, Sen. Lisa Murkowski was skeptical the FCC's stated flexibility for companies with unique situations in Alaska was overstated, and raised concerns about the lending issue Merriam has now run into. That same month, U.S. Rep. Don Young, R-Alaska, warned that the changes, rather than bringing about the transformation of telecommunications for the neediest and hardest to reach, threatened the "demise of service to rural and tribal America."

In March of this year, U.S. Sen. Mark Begich, D-Alaska, addressed the issue at a Commerce Committee hearing. With agitation and awe, he spit back some of the FCC's findings to the commissioners. How, he wanted to know, could they have possibly deemed ASTAC's service area -- the traditional home of Alaska's Iñupiat people -- as only 23 percent tribal? How could they have come up with a formula showing Alaska was 46 percent less expensive to do construction work in than the Lower 48?

"That's impossible," he told the commissioners.

He also cited a study showing 60 percent of Alaska had inadequate telecommunication service, and said it would take an estimate $250 million just to get the state covered with 3G phone service.

At the hearing, the commissioners acknowledged that Alaska may not fit the blueprint they'd been using to evaluate funding to companies like ASTAC, but stopped short of committing to any fixes.

Before it was over, Begich urged them to, "Fix this problem that doesn't make any sense."

He and Young have both introduced bills threatening to withhold funding if the Alaska problem isn't swiftly corrected. And Begich has introduced a bipartisan bill that he says "will call on the Comptroller General at the General Accountability Office to evaluate the impact of the reform order for rural areas."

Contact Jill Burke at jill(at)alaskadispatch.com