Rural telecom and broadband providers in the U.S. face big challenges in connecting their most remote customers, as the U.S. Federal Communications Commission transitions away from old telephone subsidies, a group of providers told lawmakers.

The FCC‘s eligibility rules for carrier subsidies under the new Connect America Fund, a broadband-focused revamp of the agency’s Universal Service Fund, seem to have arbitrary caps and target carriers serving the most rural areas, said John Strode, vice president of external affairs for Ritter Communications, an Arkansas voice and broadband provider. High-cost carriers have their subsidies capped under the new fund, he noted during a Senate hearing Tuesday.

The high-cost carriers are capped “with no examination” by the FCC of why their costs are higher than other carriers, he said. Some carriers have legitimate reasons for high costs, because “some service areas are very, very expensive to serve,” Strode told the Senate Commerce, Science and Transportation Committee‘s communications subcommittee.

The new FCC rules, adopted in November 2011, make it difficult for rural carriers to plan ahead and to invest in new services, Strode said. Ritter has cut costs and laid off workers as a way to offset changes in telecom subsidies and declines in intercarrier compensation rates, he said.

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