The grand bargain of the 2018 Colorado General Assembly might just be in finally finding a way to pay for putting high-speed broadband service into rural communities across Colorado.
That's the hope, at least, for the sponsors of Senate Bill 2, brought to you by some of the same folks who carried last year's grand bargain to reclassify the state's hospital provider fee.
Republicans Sen. Don Coram of Montrose and Senate President Pro Tem Jerry Sonnenberg of Sterling will get the bill started in the Senate. The bill's House sponsors, both Democrats, are Speaker of the House Crisanta Duran of Denver and House Majority Leader KC Becker of Boulder.
Lawmakers and telecommunications providers have squabbled for at least the last seven years about how to cover the costs and resolve some of the public policy issues around getting high-speed internet broadband service to Colorado's most rural and underserved communities.
The idea, at least since 2014, has been to tap into something known as the High Cost Support Mechanism (HCSM). That mouthful describes a fund set up by lawmakers in 1998 to help telecommunications companies provide phone service to rural communities. The cost of that phone service wasn't always profitable for the providers, so the HCSM subsidized the difference between the actual cost and what the Public Utilities Commission allows providers to charge. Fourteen telecomm providers received grants from the HCSM in 2016; 1 nonrural carrier (CenturyLink), 10 rural carriers, and three wireless carriers.
The HCSM is actually paid for by ratepayers. Phone bills include a "Universal Service Charge" or something like it, a 2.6 percent charge from your service provider, which is then routed to the HCSM. According to a recent Legislative Council report, 111 telecomm companies contributed to the fund in 2016. The charge is levied only on voice (for cellular service) or landline phones, not on data services.
CenturyLink, which is the state's telecomm provider of last resort, receives the majority of the HCSM dollars. A provider of last resort is required by law to provide telecomm services in areas where no one else will. CenturyLink officials told Colorado Politics that most small carriers don't seek HCSM dollars, because they can get most if not all of their subsidies to provide high speed service from the federal government.
In 2017, the HCSM fund brought in about $37 million, down from its high point of almost $53 million in 2013. The reason for the decline: people are moving away from landlines and even from voice service on cellphones and more toward data.
Getting high-speed internet service to rural communities is viewed as a matter of economic survival. Small businesses that might consider rural communities can't compete using dial-up modems (remember those?) for internet service. Wiring the state for broadband would be a boon to rural doctors and nurses who can access telemedicine, which allows for remote diagnosis and treatment of patients via the internet. Students in rural schools would have greater ability to access education programs at any level. It would especially help those who want to get a head start on college through concurrent enrollment, which allows students to take college classes while still in high school.
"This bill may be the best opportunity for rural Colorado to be participants rather than spectators in our state's economy," Coram told Colorado Politics.
Rural Colorado is falling further behind, Becker recently said. She noted that parts of her district include rural areas, such as Grand County, and those communities know it's not economical for private companies to provide that service without some kind of subsidy. It's a matter of economies of scale, according to telecomm officials. It's easier and more cost-effective,to wire a community with 1,000 residents per mile than one with only a few residents per mile.
Lawmakers have wanted for the past four years to direct the HCSM money toward broadband deployment, but it's been slow going.
In 2014, lawmakers passed a bill setting up a broadband board that would award grants, paid for with HCSM dollars, to broadband providers who would deliver those services in underserved areas. The hope was that most of the HCSM would eventually cover the difference between the high cost of hooking people up to high speed internet and what providers are allowed to charge by the PUC.
That didn't happen. CenturyLink sued the PUC over reimbursement, a suit that was settled last year.
But as a result, instead of around $9 million per year of the HCSM going to the broadband fund, only $9 million total in the last three years went to the fund.
Lawmakers were frustrated in 2017 when that session's effort died on the last day. Over the interim, sources told Colorado Politics, Senate Majority Leader Chris Holbert of Parker told the providers to work it out.
This year, a broadband solution is headed right out of the gate in the session's first month. SB2 intends to eventually eliminate much of the HCSM by directing 20 percent per year to the broadband fund. In five years, the fund, and its dwindling dollars, would be entirely moved to broadband.
There's still one hitch with the bill, however, from CenturyLink's perspective. CenturyLink officials pointed out the HCSM is intended to provide phone service to every consumer, not broadband, although that's a change lawmakers could also make. "We like the idea of broadband and we want to build it out, too," said Mark Soltes, vice president for public policy and government affairs at CenturyLink. Soltes added that CenturyLink serves more rural customers than any other telecom provider.
The company is fine with seeing the HCSM ratcheted down, although Soltes pointed out there are some technical problems with just how SB2 describes it. The bottom line, however, is that "we want to see broadband money pointed to consumers, not companies."
The bill also redefines the size of an unserved community. Previously, grants to broadband companies serving rural Colorado had to go to communities of 5,000 or less; the bill hikes that to 7,500. According to the federal Economic Research Service, that could bring in almost every county in the state, save those along the Front Range and Mesa County.
Gov. John Hickenlooper for several years has made wiring Colorado for broadband among his top priorities. Under a plan announced in his 2017 State of the State address, 85 percent of Colorado should be connected to broadband by the end of his term and 100 percent by 2020.
But the cost, and a dwindling subsidy for rural broadband providers, may make that timeline wishful thinking. Last week, the governor reported during his annual remarks that 80 percent of the state is now wired. That was met with some skepticism by those who believe the cost of wiring all of Colorado for broadband could easily exceed several hundred million dollars, even up to $1 billion.
There have been strides, made by communities no longer willing to wait for lawmakers in Denver. Last November, Fort Collins voters approved a tax that allows the city to set up its own high-speed internet utility. A similar move in Grand Junction, approved by voters in 2015, would allow the city to partner with broadband providers to address underserved areas in the community, with the city putting up half the cost through grants. And in Rio Blanco County, in northwestern Colorado, voters approved a broadband plan that will deliver up to one gigabyte internet service to residents in Meeker and Rangely.