FCC Needs to Improve Performance Management and Strengthen Oversight of the High-Cost Program
GAO-08-633: Published: Jun 13, 2008. Publicly Released: Jul 10, 2008.
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In the Telecommunications Act of 1996 (1996 Act), the Congress said that consumers in "rural, insular, and high-cost areas" should have access to services and rates that are "reasonably comparable" to those in urban areas. To implement the 1996 Act, the Federal Communications Commission (FCC) modified and expanded the high-cost program. The program provides funding to some telecommunications carriers, facilitating lower telephone rates in rural areas. GAO was asked to review (1) the effect that the program structure has on the level of support and types of services in rural areas, (2) the extent to which FCC has developed performance goals and measures for the program, and (3) the extent to which FCC has implemented internal control mechanisms. GAO reviewed relevant documents; interviewed federal and state officials, industry participants, and experts; conducted 11 state site visits; and conducted a survey of state regulators, available online at GAO-08-662SP.
The high-cost program's structure has resulted in the inconsistent distribution of support and availability of services across rural America. The program provides support to carriers in all states. However, small carriers receive more support than large carriers. As a result, carriers serving similar rural areas can receive different levels of support. Currently, the high-cost program provides support for the provision of basic telephone service, which is widely available and subscribed to in the nation. But, the program also indirectly supports broadband service, including high-speed Internet, in some rural areas, particularly those areas served by small carriers. The program provides support to both incumbents and competitors; as a result, it creates an incentive for competition to exist where it might not otherwise occur. There is a clearly established purpose for the high-cost program, but FCC has not established performance goals or measures. GAO was unable to identify performance goals or measures for the program. While FCC has begun preliminary efforts to address these shortcomings, the efforts do not align with practices that GAO has identified as useful for developing successful performance goals and measures. For example, FCC has not created performance goals and measures for intermediate and multiyear periods. In the absence of performance goals and measures, the Congress and FCC are limited in their ability to make informed decisions about the future of the high-cost program. While some internal control mechanisms exist for the high-cost program, these mechanisms are limited and exhibit weaknesses that hinder FCC's ability to assess the risk of noncompliance with program rules and ensure cost-effective use of program funds. Internal control mechanisms for the program consist of (1) carrier certification that funds will be used consistent with program rules, (2) carrier audits, and (3) carrier data validation. Yet, each mechanism has weaknesses. The carrier certification process exhibits inconsistency across the states that certify carriers, carrier audits have been limited in number and reported findings, and carrier data validation focuses primarily on completeness and not accuracy. These weaknesses could contribute to excessive program expenditures.
Recommendations for Executive Action
Status: Closed - Implemented
Comments: In the Telecommunications Act of 1996, the Congress said that consumers in "rural, insular, and high-cost areas" should have access to services and rates that are "reasonably comparable" to consumers in urban areas. To respond to this task, the Federal Communications Commission (FCC) modified and expanded the high-cost program. In 2010, the high-cost program disbursed over $4 billion to some telecommunications carriers, thereby allowing these carriers to charge lower telephone rates than otherwise would be available to consumers in high-cost, rural, and remote areas. While Congress clearly established the principles underlying the high-cost program, in 2008, we found that FCC had not established performance goals and measures for the program. Thus, it was not clear what outcomes the program was intended to produce nor what outcomes the program had achieved. Therefore, to better ensure that the high-cost program supports the purpose it was intended to fill, we recommended that FCC clearly define the specific short-term and long-term goals for the high-cost program and subsequently develop quantifiable measures that could be used to determine the program's success in meeting its goals. In October 2011, FCC established performance goals for the high-cost program. These performance goals include: (1) preserving and advancing universal availability of voice service; (2) ensuring universal availability of modern networks capable of providing voice and broadband service to homes, businesses, and community anchor institutions; (3) ensuring universal availability of modern networks capable of providing mobile voice and broadband service where Americans live, work, and travel; (4) ensuring that rates are reasonably comparable in all regions of the nation, for voice as well as broadband services; and (5) minimizing the universal service contribution burden on consumers and businesses. In addition, FCC established performance measures for three of these goals; for example, FCC will measure the number of residential, business, and community anchor institution locations that newly gain access to broadband service. As FCC noted, these goals and measures will enable it to determine not just whether federal funding is used for the intended purposes, but whether that funding is accomplishing the intended results, including its objectives of preserving and advancing voice, broadband, and advanced mobility for all Americans.
Recommendation: To strengthen management and oversight of the high-cost program, and to better ensure that the high-cost program supports the purpose it is intended to fill, the Chairman of the FCC should first clearly define the specific long-term and short-term goals of the high-cost program and subsequently develop quantifiable measures that can be used by the Congress and the FCC in determining the program's success in meeting its goals.
Agency Affected: Federal Communications Commission
Status: Closed - Implemented
Comments: In the Telecommunications Act of 1996, the Congress said that consumers in "rural, insular, and high-cost areas" should have access to services and rates that are "reasonably comparable" to consumers in urban areas. To respond to this task, the Federal Communications Commission (FCC) modified and expanded the high-cost program. In 2010, the high-cost program disbursed over $4 billion to some telecommunications carriers, thereby allowing these carriers to charge lower telephone rates than otherwise would be available to consumers in high-cost, rural, and remote areas. We found that the internal control mechanisms for the high-cost program exhibited weaknesses. First, annual certification was the primary tool used to enforce carrier accountability for the use of high-cost program support, yet we found that the certification process did not have standardized requirements. FCC required that all states annually certify that all federal high-cost program support provided to eligible carriers in their state would be used only for the provision, maintenance, and upgrading of facilities and services for which the support was intended. We found that states had different requirements for what information carriers had to submit and as a result, carriers were subject to different levels of oversight and documentation requirements to determine that high-cost program support was used appropriately. Second, carrier audits were the primary tool used in monitoring and overseeing carrier activities, yet we found that the audits had been limited in number and types of reported findings. Third, we found that the validation processes to ensure the reliability of carrier financial data focused on the completeness of the data, but not the accuracy of the data. Therefore, to ensure a robust internal control environment that supported performance-based management, we recommended that FCC identify areas of risk in its internal control environment and implement mechanisms that would help ensure compliance with program rules and produce cost-effective use of program funds. FCC has taken steps to address the three problems we identified. In October 2011, FCC established a national framework for certification and reporting requirements for all recipients. In particular, FCC extended the current federal annual reporting requirements to all carriers, including those designated by states. All carriers must include in their annual reports a progress report on their five-year buildout plans, data and explanatory text concerning outages, unfulfilled requests for service, complaints received, and certifications of compliance with applicable service quality and consumer protection standards and of the ability to function in emergency situations. In addition, in 2010, FCC took steps to enhance carrier audits. There are now two programs in place to safeguard the Universal Service Fund-the Beneficiary/Contributor Compliance Audit Program (BCAP) and Payment Quality Assurance program. According to FCC, audits done pursuant to BCAP are intended to: (1) ensure that recipients of program support are in compliance with the FCC's rules; (2) prevent, detect, and deter waste, fraud, and abuse; (3) recover funds for rule violations; and (4) ensure equitable contributions to the program. Further, FCC noted that the compliance audits will verify the accuracy of the underlying data. FCC noted that its efforts will ensure that carriers' public interest obligations are satisfied, that state and federal regulators have the tools needed to conduct meaningful oversight, and that public funds are expended in an efficient and effective manner.
Recommendation: To strengthen management and oversight of the high-cost program, and to ensure a robust internal control environment that supports performance-based management, the Chairman of the FCC should identify areas of risk in its internal control environment and implement mechanisms that will help ensure compliance with program rules and produce cost effective use of program funds.
Agency Affected: Federal Communications Commission