In terms of access to modern telecommunications systems, tribal lands are among the most poorly served areas in the United States. In fact, according to the U.S. Federal Communications Commission (FCC), only about ten percent of homes on tribal lands have access to high-speed broadband internet service. This is in sharp contrast to the rest of the United States, where more than 95 percent of the population has access to broadband Internet. Nowhere in the United States is the digital divide more apparent than on tribal lands.
In an effort to bridge the digital divide and bring about the social, educational, healthcare and economic benefits that high-speed broadband Internet provides, many tribes have taken matters into their own hands. They have formed their own Internet Service Providers (ISPs) and taken the lead in bringing broadband to their communities. By forming their own ISP tribes are able to maintain control of their broadband Internet and be sure that the services offered meet the needs of the community.
Some tribes are going a step further and seeking to control not just their high-speed Internet, but their entire telecommunications networks as well. They are accomplishing this by becoming Competitive Local Exchange Carriers (CLECs) and Eligible Telecommunications Carriers (ETCs).
Overview of CLECs and ETCs
A Local Exchange Carrier (LEC) is a telecommunications term that essentially refers to the local telephone company. LECs are divided into incumbent (ILECs) and competitive (CLECs). The ILECs are usually the original, monopoly LECs in a given area. In other words, LECs are the big phone companies such as Verizon, AT&T and other giants. In the telecommunications field, a CLEC is the phone company’s biggest competitor. CLECs are small, locally-owned telecommunications companies that offer most—if not all—of the same services offered by the giant LECs. With CLECs, voice, data and video services are offered in much the same way the larger company offers them, but usually at a much lower cost to consumers.
In terms of delivering services to the end user, CLEC systems are generally on par with the LECs. Service quality is equal because in many cases, through lease agreements CLECs use much of the same infrastructure that the LECs use. Other times, CLECs build their own networks from the ground-up. Some CLECs use a hybrid approach wherein they piggyback on existing LEC infrastructure and fully build out the network using their own equipment. In these instances, the CLEC leverages LEC’s most valuable assets but is still able to offer the end user significant performance and services improvements at favorable prices.
In contrast to a CLEC, an eligible telecommunications carrier (ETC) is a telephone service provider that agrees to offer service to all customers in a particular area. The key difference between a CLEC and an ETC is that CLECs provide a broader range of services (e.g., voice, data, video, etc.) whereas an ETC just provides telephone service.
Why tribes are pursuing CLEC and ETC status
There are a number of reasons why with increasing frequency, tribes are pursuing CLEC and ETC status. First and foremost is the fact that most tribal lands are sparsely populated and tend to be located in remote areas. Consequently, for most traditional phone and Internet providers, the potential return on investment is not sufficient enough to warrant the provision of services in these isolated tribal communities. And for those tribal communities that are served by the large telecommunications companies, services are often costly and of poor quality.
Paul Walk, Vice President of Technology for Native Link Communications, LLC says, “When it comes to regulated telecommunications, tribes have good reason to be cautious. There is a fear associated with state regulated services, as the state has no legal jurisdiction over most tribes. This fear has been partially put to rest with the formation of the Office of Native Affairs and Policy (ONAP), a division of the FCC created to help inform tribes and lobby for comments to help better drive FCC policies. The FCC recognizes that states have no jurisdiction over tribes and thus created a path for tribes to apply for regulated designations directly through the FCC bypassing state authority. We have worked for numerous tribes that are frustrated over the high prices and poor coverage associated with the large telecommunications and broadband service providers. In most cases we find that tribes as well as their residents pay four to ten times the national average for services that are inferior to those enjoyed by their non-tribal neighbors—at far lower rates. The tide is however changing as tribes look to take hold of their destiny through control of communications. Establishing a CLEC or ETC is part of that process”
In addition to supporting self-determination by handing control over telecommunications systems directly to the tribe, CLECs and ETCs also open doors to a number of different funding opportunities. The goals of these funding programs are to: (1) preserve and advance universal availability of voice service; (2) ensure universal availability of modern networks capable of providing voice and broadband service to homes, businesses, and community anchor institutions; (3) ensure universal availability of modern networks capable of providing advanced mobile voice and broadband service; (4) ensure that rates for broadband services and rates for voice services are reasonably comparable in all regions of the nation; and (5) minimize the universal service contribution burden on consumers and businesses. The total funding for all of these mechanisms is currently capped at $4.5 billion annually. A summary of each program is provided below.
- Connect America Fund: The Connect America Fund (CAF) is essentially a revised, more modern version of the Universal Service Fund program. The goal of the CAF is to facilitate access to high-speed broadband Internet among the more than 18 million Americans, mostly rural, who lack it. The key difference between the new CAF and the old Universal Service Fund is that the latter was voice-centric. In contrast, the CAF takes a broader view by focusing on broadband. Programs administered by the CAF include:
- Lifeline: This is a government benefit provides discounted phone service for qualifying low-income individuals and families. Lifeline helps ensure that eligible consumers have the opportunities and security that phone service brings, including being able to connect to jobs, family, and emergency services. Through Lifeline the consumer pays a nominal fee of several dollars per month with the FCC paying the carrier to cover the remainder of the cost. Native Americans who reside on federally recognized tribal lands may qualify for a Lifeline credit of up to $25.00 per month, subject to a minimum telephone payment of $1.00 per month.
- Link-Up: Through this program the federal government covers the majority of the cost associated with installation of a phone line in qualifying low-income households. Native Americans residing on federally recognized tribal lands may qualify for a Link-Up discount of up to $100.00.
- Universal Service Program for High Cost Areas: The purpose of this program is to ensure that consumers in rural, insular, and high-cost areas have access to telecommunications services at rates that are affordable and reasonably comparable to those in more populous areas. The program allows eligible carriers serving these areas to recover some of the operating costs associated with the provision of services in the targeted unserved or underserved communities.
- Mobility Fund: The Federal Communications Commission (FCC) says that the purpose of the Mobility Fund is to support the provision of mobile voice and Internet service for consumers in areas where these services are not provided. The Mobility Fund uses a reverse auction to make one-time support available to service providers to cost-effectively extend mobile coverage in specified unserved areas.
- Remote Areas Fund: Through the Remote Areas Fund, $100 million will be made available annually to support broadband deployment in unserved areas where alternative technology platforms such as satellite and unlicensed services can be deployed in an affordable manner. The Remote Areas Fund is expected to be implemented in 2013, with the details of the distribution mechanism to be released sometime this year. Because the Remote Areas Fund focuses on deploying broadband in unserved communities, only CLECs are eligible to apply for funding through this program.
Choosing one over the other
Due to both the self-determination aspects and the access to potential funding mechanisms they provide, a number of tribes are conducting studies to determine the risk versus reward associated with becoming either a CLEC or ETC. The largest determining factor in the decision-making process is whether or not the tribe is planning to offer services beyond tribal lands. If the answer is yes, and the tribe plans to provide voice services, then obtaining the state-issued CLEC is necessary.
If however, the tribe plans to simply provide high-speed Internet as an Internet Service Provider (ISP) either on- or off tribal lands, neither a CLEC nor an ETC is required because the provision of broadband Internet is not subject to the same regulations as voice and wireless services. Tribes that wish to provide voice or other regulated services on territory can apply directly with the FCC for their ETC status without first establishing a LEC as required for non tribal providers.
Access to funding mechanisms is the other key determinant regarding whether or not a tribe should pursue a CLEC or an ETC license. While both open up doors to qualification for grants and other incentives from the federal government, the opportunities available to each can differ. For example, tribal ETCs are eligible to apply for funding from the tribal Mobility Fund however; CLEC’s without the ETC designation are not. ETCs also qualify for High Cost reimbursement. Providing voice services opens the door to more funding than any other services a carrier can offer. Many states are now designing grant opportunities that require a CLEC license for eligibility such as the California CASF fund. It should also be noted that many utility companies deny access to their network infrastructure without a Certificate of Public Convenience and Necessity (CPCN), which is included in the CLEC license.
Obtaining a CLEC or ETC
State utility commissions are the primary agencies responsible for approving both ETC and CLEC status. However, as mentioned before, unlike other entities, tribes are eligible to apply directly through the FCC in order to obtain ETC status. By going directly to the FCC, tribal governments are able to circumvent state jurisdiction over their tribal territories. Nevertheless, should the tribe desire to provide voice services beyond tribal lands, it will need to apply for authority to do so through the state utility commission by obtaining a CLEC license and in many instances ETC status.
Tribes also have another advantage over other entities in that they are eligible to apply for ETC status without first becoming a CLEC (or LEC or ILEC). With the exception of tribes, all other entities are required to become CLECs first, before seeking ETC status. Regardless of the applicant, CLEC status can only be obtained through the state utility commission, not directly through the FCC.
Cost and other hurdles
Obtaining CLEC or ETC status can have clear advantages for tribes and tribal residents. Besides opening doors to funding opportunities that would otherwise not be available, both CLECs and ETCs support tribal self-determination by enabling tribes to fully control their telecommunications systems. There are however, aspects that must be considered before a tribe seeks to become either a CLEC or ETC.
Regulatory compliance is one aspect that must be taken under consideration before deciding to pursue either CLEC or ETC status. Both structures come with a host of regulatory and reporting requirements that can place a heavy burden on already-taxed administrative personnel. Some tribes may decide that the added regulatory obligations require too much effort for the potential reward. Cost is another consideration. Obtaining either CLEC or ETC status can cost anywhere from about $1,200 up to $10,000 or more. As such, any tribe exploring either status should conduct a feasibility study to determine which structure—if any—can provide the greatest overall benefit and cost savings.