Future Tense

Connection Racket

The FCC’s plan to fully restore phone and internet service in Puerto Rico comes with some big trade-offs.

In this Dec. 22 photo, 6-year-old Melanie Oliveras González stands on the porch of her house after Hurricane Maria, in Morovis, Puerto Rico.
In this Dec. 22 photo, 6-year-old Melanie Oliveras González stands on the porch of her house after Hurricane Maria, in Morovis, Puerto Rico.
Carlos Giusti/AP

Eight months after hurricanes Maria and Irma, large swaths of Puerto Rico and the U.S. Virgin Islands still don’t have reliable internet access and phone service—denying the Americans that live there a crucial life line as the islands continue their recoveries from the storms. Of the more than 4,600 people who according to Harvard researchers have died in Puerto Rico since last summer as a consequence of Maria, one third of them perished because of delays in receiving medical care—often because they couldn’t contact medical providers or access information about where to get help.

Puerto Rico’s electric utility has restored service to about 97 percent of island, and cell service has largely returned, too. Still, life is barely back to normal. With electricity blackouts, spotty service, and cell sites still down throughout the island, it’s hard to get back to business and sometimes even communicate, a major problem not only for commerce but for hospitals and emergency service workers, too. That would seem to make an announcement from the Federal Communications Commission on Tuesday welcome news. The agency said it plans to grant nearly $900 million over the next 10 years to phone and internet companies operating in Puerto Rico and the U.S. Virgin Islands to help rebuild communications networks there, funds that include an immediate infusion of $64 million for phone and internet carriers. On top of that, the FCC said it would excuse a $65.8 million advance it gave to phone and internet providers in Puerto Rico and the Virgin Islands last October to rebuild their networks.

It’s a massive amount of money from the FCC, and notably, it’s way more than the $200 million the FCC gave for similar purposes after Hurricane Katrina ravaged the Gulf Coast. But it comes with some drawbacks that aren’t mentioned in the press release—drawbacks that highlight the priorities of the current FCC, which has for months been working to gut a program that helps people in extreme poverty pay for cellphone and internet service, and whose plan for Puerto Rico and the U.S. Virgin Islands may well leave the territories with communications services that most of the people who live there can’t afford.

In order to offer up nearly $1 billion, the FCC is drawing from the Universal Service Fund, a pot used to help subsidize phone service with a $9.25-a-month discount for Americans who are 135 percent below the poverty line. The Universal Service Fund is also used to connect phone service to schools and libraries, as well as rural areas where service is especially costly. Telecommunications companies that operate in the U.S. are required to pay into this fund, although they often pass on that cost to their subscribers.

At the same time the FCC is trying to use a large chunk of the Universal Service Fund to help telecom providers pay for rebuilding their networks, the agency is simultaneously making significant cuts to the fund, particularly the portion intended to help poor people pay for basic phone and internet service. That part of the Universal Service Fund is called the Lifeline program, and nearly 20 percent of Puerto Rico’s population relies on it to help pay for phone and broadband service, according to FCC Commissioner Mignon Clyburn (one of the five-person body’s two Democratic commissioners), who issued a statement following announcement of the $900 million funding effort.

The Republican-led FCC voted on a series of cuts in 2017 that would ban telecoms that don’t operate their own network infrastructure but instead resell service from larger telecom companies, from offering Lifeline service. That small policy change would force about 70 percent, or 8 million, current Lifeline recipients to find new service—if they can. The FCC’s chairman, Ajit Pai, also proposed capping Lifeline spending, which would further reduce the number of Americans who can sign up for the subsidy. Together, the two moves would drastically reduce the number of people who can receive Lifeline support as well as the number of providers that offer the income-subsidized service. The additional money made available after the cuts will instead go to the part of the Universal Service Fund that’s supposed to help telecommunications providers build out service in rural areas that are expensive to connect, according to Greta Byrum, the co-director of the Digital Equity Laboratory at the New School and an expert on rebuilding communications networks and resiliency planning after disasters. It’s from that portion of USF money, called the Connect America Fund, that the FCC wants to draw hundreds of millions of dollars for telecom companies to build new infrastructure throughout the islands. The entire Universal Service Fund pays out about $8.5 billion a year, and the Connect America pool totals to more than half of that, at $4.5 billion.

While rebuilding the communications networks on the islands is incredibly important, the large pool of money being set aside to help do so is poised to fund the work of private contractors and existing telecom companies, who according to FCC spokesman Mike Wigfield, are supposed to offer services at “reasonably comparable” rates to what Americans pay in urban areas. $258 million of the nearly $900 million is supposed to go to building out new 4G networks across Puerto Rico and the Virgin Islands, a level of service that’s not available across most of the continental United States.

By forcing providers that accept assistance from the Universal Service Fund to keep rates to the amount people in U.S. cities pay, the FCC is trying to preclude price gouging, always a worry after a natural disaster. But the amounts they do charge may still be too pricy for the vast majority of Puerto Ricans. Although nearly 20 percent of Puerto Ricans are signed up for the Lifeline program, that figure represents only about 60 percent of the households on the island that are eligible for the program. According to the U.S. Census Bureau, 43 percent of Puerto Ricans fell below the poverty line in 2017, a figure that’s surely higher post-Maria. All of that means the FCC’s funding could be going to build networks nearly half of Puerto Rico’s people won’t be able to afford—and others could find hard to pay. “So instead of subsidizing the people of Puerto Rico who rely on Lifeline to afford basic utilities service, this new move from the FCC appears to essentially give $900 million to telecommunications companies to build potentially better infrastructure than what we have in parts of New York,” said Byrum.

Though the FCC says it’s “seeking comment on injecting almost $900 million in medium- and long-term funding into expanding and improving broadband access on the islands,” much of that money isn’t new, and in fact, was already earmarked to go to the area. The FCC already gives $131.3 million a year to islands as part of the Universal Service Fund, according to the agency’s data. The plan then is to add an additional $10.5 million a year for 10 years for rebuilding fixed services, meaning broadband and phone infrastructure that goes to homes and businesses, and about $7 million a year for three years for building out and upgrading mobile networks. That’s an additional $126 million over the course of the funding.

Is all of this really a problem, if the money in the USF is going to the place with the greatest need? Experts in rebuilding critical infrastructure after storms think so. “I’m worried that the precedent that we’re setting here is that we are going to continue to drain the Universal Service Fund every time there’s a series of disasters, which in recent years, have been increasing quite significantly,” said Jesse M. Keenan, a professor of architecture at the Graduate School of Design at Harvard, who focuses on regulatory responses to repair infrastructure after major disasters. Companies in other regulated utility sectors, Keenan says, are required either by federal regulation or their shareholders to have resilience and continuity planning completed in case of a disaster. But that’s not the case in the communications sector, he says, which is comparatively unregulated and is instead relying on the money paid into the Universal Service Fund to help subsidize repairs and improvements to their networks—money that might have otherwise go to help people pay for services who are deeply below the poverty line. “There’s no shortage of disasters, which means that whatever money goes into USF in the future will very quickly be drained into whatever the next disaster de jour is,” Keenan said.

Usually after a major storm, the FCC issues a basic report outlining the scope of the disaster and lists what needs to be done to bring the area back to connectivity. It’s also common for the agency to hold public hearings to assess with the affected community how to best move forward to serve their rebuilding efforts. Such reports and hearings help to plan the response and inform how to respond to other disasters in the future. This time, however, the FCC didn’t do that—no hearings, no report. “This is a shame,” wrote Democratic FCC Commissioner Jessica Rosenworcel in her partial-dissent to the announcement on Tuesday. “Puerto Rico and the US Virgin Islands deserve the same treatment from this agency as communities on the mainland.”

Still, even without a proper assessment of the area’s many telecommunications problems from the FCC, Puerto Rico, and the Virgin Islands need to rebuild their communications systems, if not make them even better than they were before the storm. The increased funding from the FCC should help, even if it’s unclear whether residents of Puerto Rico and the U.S. Virgin Islands will be able to afford the new services, or whether it’s even actually enough to do the job. But what is clear is that the FCC has been working to reduce the scope of its phone and internet subsidy program for people in deep poverty for months, a program that hundreds of thousands of Puerto Ricans rely on to pay for their phone and internet. The people who definitely stand to benefit from the upgrades being funded by the FCC, meanwhile, aren’t just the service providers. In the aftermath of the storms, cryptocurrency enthusiasts have flocked to the territory. They’ll need good working internet and reliable communications infrastructure to build their new enterprises and mine their bitcoins and other digital currencies, and they’ll probably be able to afford it.