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New FCC Rules Bringing Higher Phone Rates in Many Small Towns

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PALO, Iowa - Local phone companies in Palo, Wellman, Onslow, Center Junction and other cities will soon be seeing higher rates due to new federal regulations intended to promote broadband deployment.

The residential increases range from 12 percent at the Palo Cooperative Telephone Association to 40 percent for Wellman Cooperative Telephone Association customers. They were the subject of filings last month to the Iowa Utilities Board, and take effect Dec. 1.

The most obvious trigger for the timing of the increases was the removal of local switching support for the companies in August by the Federal Communications Commission, according to Curt Eldred, board member of the Rural Iowa Independent Telecommunications Association, and manager of Clarence Telephone.

Local phone companies used the federal support to pay for the local switch in their central office, Eldred said.

Telephone companies may also be raising rates in advance of a July 2013 regulator change that requires local phone companies to have their rates within a specific range known as a floor and ceiling. Eldred expects Clarence Telephone Co. to file a rate increase next spring in advance of that requirement.

The intention of the new "bill and keep" regulation is to get local phone companies to get more of their revenue from their local rate base and reduce their reliance on the federal Universal Service program.

Many companies don't have their rates high enough to fall within the required range, and must raise them in order to continue receiving support from the Universal Service program.

The changes to the Universal Service support program are partly to free revenues for the FCC's Connect America program. It aims to increase broadband Internet availability in areas that are costly to serve, often by supporting wireless services.

Eldred said the new regulations are so complex that they are challenging for local phone company management to understand and implement, let alone explain to customers why they are affecting rates.

Sensitivity to higher rates is a concern to the independent phone companies, which do not want customers to drop their land lines in favor of cellular service.

One reason the news isn't too bad for many of the customers affected is that basic phone rates are relatively low in many of the rural communities. The 40 percent residential service increase at Wellman's phone company, for instance, is only $4 per month because the current residential service rate is $10.

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