May 21, 2020 by Tom Cohen

Fallout from the Pledge

 

This post responds to a request: “Will service providers taking the FCC Chairman’s Pledge get reimbursed for not disconnecting customers or incurring other related costs?” 

At the outset, let me say there are good policy reasons for reimbursing providers, especially smaller providers operating in higher cost areas with more low-income consumers. Abiding by the Pledge might harm a provider’s finances, ongoing operations, and ability to upgrade. 

Now, let me explain why the odds are against providers getting reimbursed, at least directly.

There is no doubt that the performance of communications service providers during the COVID-19 emergency has been, and continues to be, exceptional. Providers’ broadband networks have handled the surge in traffic, enabling people to engage in telework, distance learning, telehealth, staying connected with their families and friends, and of course streaming entertainment programming. Just imagine where people—and the economy—would be without this robust and reliable connectivity. In addition, service providers’ employees continue to install service, maintain networks, and address customer issues, even though at times it can be hazardous. And, not only have some 750 service providers taken the Pledge—but most have gone above and beyond the Pledge to help critical healthcare facilities stay connected and provide, with no charge, assistance to schools and other community anchor institutions and to customers in need. Everything that service providers are doing is a testament to their incredible personal and business values.

So, why, at a time when government is providing support to other industry sectors, isn’t it reimbursing providers for the bad debt they are incurring by not disconnecting non-paying subscribers or connecting at no cost people in need?

First, while communications service providers may be facing increased bad debts, many millions of people are unemployed with little savings. In addition, other industry sectors are gasping for air and appear about to go under. Airlines, hotels, retail shops, restaurants, theme parks, theaters, and on and on are facing existential threats. And the list of industries in trouble may grow if people cannot pay their rent or mortgages. As a result, as important as the communications sector may be, the Administration and Congress are far more concerned about—and willing to spend money on—the unemployed and gravely troubled industry sectors.

Second, because so many service providers have taken the Pledge, there is a perception that they are able to abide by it without being reimbursed. This is especially the mindset of progressives, who view the communications sector as an essential utility, which should be subject to much more regulation.  In fact, in the new HEROES stimulus legislation, House Democrats included a mandate requiring communications providers not to disconnect or reduce the service of any customer that claimed to be harmed financially by the emergency, and they did not include any “reimbursement” provision.  While I expect Senate Republicans will not agree to this provision, it indicates the mindset of progressives and likely others—why pay, when you can simply impose an obligation. By the way, the industry needs to pay attention to these types of mandates not just at the federal level—state officials also are looking at imposing these types of requirements.

Third, communications providers are not united in wanting to be reimbursed. Some favor giving consumers enhanced Lifeline support or even vouchers that they then can use to purchase communications services. (The former idea is in the new House bill; the latter has no real traction.)  Others are concerned—and for good reason—there will be strings attached to any reimbursements, e.g., open Internet or rate regulations.

In sum, for all these reasons, it is doubtful that Congress will pass legislation reimbursing service providers for costs they are incurring to comply with the Pledge. Instead, service providers should expect that they will need to keep people connected as long as the emergency continues and will not be reimbursed. My advice is for service providers to urge Congress to keep giving people direct payments and unemployment compensation. At least this support should help pay for communications services.

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