GCI objects to 26% cut in Rural Health Care payments

  • Crew with STG Inc. wait for a heavy-lift helicopter to deliver a section of tower as part of the $300 million-plus TERRA project that was completed last year by GCI to connect a total of more than 80 rural communities with broadband internet. GCI is protesting a 26 percent reduction in its claims for reimbursement from the Federal Communications Commission Rural Health Care program that is intended to bridge the gap between costs for urban and rural providers. (Photo/Courtesy/STG Inc.)

Alaska internet service providers are getting millions of dollars to provide lower-price service to rural health care centers, but not as much as they asked to cover their costs.

The Federal Communications Commission provides cost assistance through its Rural Health Care program, intended to help rural medical clinics afford internet connections to facilitate telemedicine services without breaking the bank.

By law, internet service providers have to serve rural health care clinics at the same cost they give to urban health care clinics, and to make up the difference, they can apply for funding through the RHC program.

The catch is that they have to justify the rates they’re charging for rural connections. After an investigation, the FCC found that two non-Alaska carriers were inflating their rural rates to increase their payments from the program in 2017 and fined the companies about $40 million.

The agency then requested more information from the participating companies to justify the rural rates they charged. That proved to be an issue for Alaska telecom providers, where internet connections are notoriously expensive and limited outside urban centers.

The FCC announced Oct. 10 that GCI, one of the two largest internet providers in the state, would receive $77.8 million in funding through the program. That’s about $28 million less than the company requested in its cost estimates.

“Among the carriers that received an information request was one of the largest carriers in Alaska, GCI Communications Corp.,” the release states. “As a result of this particular inquiry, the (FCC’s Wireline Competition) Bureau has determined that GCI has now provided sufficient information to justify $77.8 million in RHC funding for FY 2017, a 26 percent reduction from the $105 million originally sought.”

GCI objected, saying in an Oct. 12 press release that the reduction from the funding request essentially forces the company to swallow $28 million in services that had already been provided.

“GCI strongly disagrees with the Bureau’s decision,” said GCI President and Chief Operating Officer Greg Chapados in the release. “The decision ignores the fact that our services are competitively bid in a competitive market. It also fails to provide any compelling explanation of the methodology behind the reduction in support payments. It does not even set forth the specifics of the methodology.”

The company challenges the Wireline Competition Bureau’s authority and “intends to pursue all available remedies,” according to the release. GCI Director of Corporate Communications Heather Handyside said in an email the company didn’t have any more to add to the press release at present.

In its press release, the FCC emphasized the “fiscal responsibility” of the decision to reduce the funding to GCI.

“Critically, this fiscally responsible determination will not require participating rural health care providers in Alaska to pay more for their telecommunications services or risk losing those services,” the release states. “By law, telecommunications carriers cannot cut off or deny service to existing rural health care provider customers for failure to pay a rate higher than the urban rate. Moreover, the methodology outlined in the Bureau’s approval letter will provide additional regulatory certainty and thus support continued investment in technologies that support telemedicine in communities across Alaska.”

GCI stated that it has invested hundreds of millions of dollars into building out infrastructure for its network in rural Alaska and that the decision does not hold with industry practice, economics, policy or prior audits conducted back to 1997, in the earliest days of the RHC program.

Alaska Communications, the other major internet provider in the state, previously outlined to the Journal the difficulties in meeting the information request specifications for the FCC to approve its rural rates.

As of Oct. 16, most of the requests from the providers the company served in 2017 had been approved, but a handful had not yet been approved and therefore not funded, wrote Alaska Communications Director of External Affairs and Corporate Communications Heather Cavanaugh in an email.

The RHC program has grown significantly in recent years, with growing concern from providers as requests for funding outstripped the funding provided. In June 2018, the FCC increased the available funding from $400 million to $571 million, which has since been scaled to $581 million for inflation, according to FCC spokesman Mark Wigfield in an email.


Elizabeth Earl can be reached at [email protected].

11/02/2018 - 10:39am