Cell-phone service provider T-Mobile wants to become the third wireless company to get federal subsidies to expand coverage in Hawaii.
If approved by the state Public Utilities Commission, the company would be eligible for a slice of about $9 million a quarter provided to Sprint Nextel Corp. and Mobi PCS from the Universal Service Fund, a federal program initially designed to ensure that phone companies would extend land lines to customers in high-cost rural areas.
The program has since been expanded to allow cell-phone companies to collect a subsidy comparable to land-line companies to provide rural customers with competing services. Local rural wire-line communications company Sandwich Isles Communications Inc. receives about $6.6 million a quarter from the fund to provide wired phone and Internet services.
Combined, Sandwich Isles, Sprint Nextel and Mobi are expected to receive about $61 million in subsidies this year to provide service to about 4,700 so-called "loops," which is roughly equivalent to phone numbers served. That equates to nearly $13,000 in subsidies per phone number each year.
That average subsidy, which is among the highest in the nation, goes to provide phone service in rural areas where traditional wire-line service isn’t affordable without a subsidy. The eligible area includes Hawaiian Home Lands, the 200,000 acres of property formerly owned by the Hawaiian monarchs that is set aside for use by eligible Hawaiians.
Although the program benefits rural residents, it has come under increasing criticism as wasteful and inefficient, and the federal government has sought ways to bring the subsidies under tighter control.
High-priced services in areas like Hawaii also lead to higher taxes for all long-distance users. That’s because all telecommunications service providers pay into the fund. The level of fees paid by consumers varies with the number and types of services they have. The fee can total $2 or more a month.
The proliferation of companies seeking subsidies has forced the Federal Communications Commission to explore ways to rein in spending. One step already taken was to limit the amount of subsidies wireless companies can receive to the total amount they received in spring 2008.
That means that if T-Mobile becomes eligible, it won’t necessarily draw more federal money into the state. Instead, the company would attract funds that otherwise would go to Sprint Nextel and Mobi.
The PUC is expected to decide whether to approve T-Mobile’s eligibility for subsidies sometime after Nov. 9.
PUC Chairman Carlito Caliboso said the agency will consider whether it’s appropriate to allow another competitor to use Universal Service Funds to expand their Hawaii network. That will include making a determination of how T-Mobile’s use of subsidies would improve customer service in rural areas, said Dean Nishina, executive director for the Hawaii Division of Consumer Advocacy.
A T-Mobile spokesman did not respond to a request for comment.