Rural Locations Out of Wireless Loop

Only a handful of wireless enterprises receive federal help to expand.

Green acres may be the place to be—but not for decent cell phone service.

Despite the rapid deployment of wireless services in North America, most rural areas still lack both digital service and competitive pricing. The result is poor service for those doing business off the beaten path and lack of coverage for travelers who venture outside metropolitan areas.

Duncan Vickers, CIO of British Columbia Gas Inc., in Vancouver, said that the companys telecommunications provider, Telus Communications Corp., was cooperative in deploying Cellular Digital Packet Data service to rural areas because safety reasons mandated it but that it took some prodding.

"There were a couple of areas where they were reluctant to put it in, and we sort of had to bully them into it," Vickers said. "When there are only a few customers, why should they deploy it?"

The result is high prices for not-so-great service as small companies provide analog service in places where bigger companies dont want to tread with digital offerings.

"You wind up with analog slumlords," said Ken Dulaney, an analyst with Gartner Group Inc., in San Jose, Calif. "Only little companies want to deal with these things. It doesnt economically make sense to put equipment out there. ... Youre talking about population densities of one person per 3 square miles."

The Federal Communications Commission has been working to improve rural telecommunication service for decades. The Communications Act of 1934 promoted rural service in general, and efforts in the 1970s and 1980s attempted to introduce competition in rural areas by setting up taxes dedicated to funding rural services.

The Telecommunications Act of 1996 implemented several rural services, including two subsidies for customers that cushioned monthly bills and funds that subsidize telephone companies in rural areas.

"The question becomes, Who are the eligible carriers to provide these services?" said Travis Larson, a spokesman for the Cellular Telecommunications Industry Association, in Washington.

Under FCC regulations, Larson said, wireless providers fall under the category of Eligible Telecommunications Carriers, or ETCs, which means they are eligible for government subsidies for rural services, making the expansion less cost-prohibitive.

The problem is that so far, it has been up to state public utility companies to decide when and which companies become ETCs. Thus far, only a handful of wireless companies have received ETC status. In some cases—as has been the case with Sprint PCS in Kansas—the status is granted only in cities, where it isnt needed.

Tom Wheeler, president of CTIA, has been lobbying for better government funding for rural areas, using other countries as examples of success and comparing the needs of rural America with those of the Third World. In many cases, Wheeler argues, wireless services would be cheaper than wireline services offered by the local exchange carriers in rural areas.

"Third World countries are skipping the stringing-of-copper phase of telecommunications and jumping straight to wireless," Wheeler said in a speech earlier this year. "Similarly, a First World powerhouse like Japan is skipping the wired Internet phase and jumping straight to wireless."

Wheeler points out that Western Wireless Corp., of Bellevue, Wash., has sought permission to provide competitive wireless service as an ETC from several states, including Kansas, New Mexico, Oklahoma and South Dakota. (A look at a map of cellular digital coverage in the states shows that they lack service except in the cities.) Western Wireless has received either delayed responses or outright rejections.

"What is holding back e-quality to the rest of rural America?" Wheeler asked. "The rules. Today, in rural America, the rules favor the incumbent monopoly telephone company. At the very same time, new technology has destroyed the rationale upon which those rules were based."

Indeed, customers started challenging "the rules" as best they could from the onset of cellular service. "When youre really, really in a rural area, the cost to put in a line is prohibitive," said British Columbia Gas Vickers. "We have customers who, in the first year of cellular existence, put in a tower instead of a normal line."

The FCC has stated publicly that public utility companies shouldnt block access to such subsidies but, so far, has not specifically required funding for wireless carriers. As such, "wireless carriers begin the race at a serious disadvantage" and are discouraged from offering service to rural areas, Larson said.

Sprint PCS, Smith-Bagley Inc., Verizon Wireless, Western Wireless and others have lobbied for ETC status and are still waiting.

"In the United States, [travelers] require a dual-mode phone" because of a lack of digital service in rural areas, Gartners Dulaney said. "Sprint, which was going digital, had to keep dual-mode phones. ... Any map of digital service in the States will show a lot of white space."