Cable Operators, Verizon Throw Support Behind Universal Service Fund Expansion

NCTA says addition of broadband to fund must be targeted approach

By John Eggerton -- Broadcasting & Cable, 11/17/2009 10:38:48 AM

Cable operators and phone company Verizon both threw their support behind expanding the Universal Service Fund to include broadband, though the National Cable & Telecommunications Association made clear it would have to be a targeted approach.

The fund, which telecom companies like Verizon pay into, supports telephone service to areas that are hard or uneconomical to reach. Broadband is now considered the new lifeline service.

House Energy & Commerce Committee Chairman Rick Boucher (D-Va.) and Lee Terry (R-Neb.) have co-sponsored a bill to make that change, as well as several others. They held a hearing on a draft of the bill Tuesday.

"Broadband will be the indispensable infrastructure for the 21st century," said Rep. Ed Markey (D-Mass.), former chair of the House subcommittee.

In written testimony prepared for the hearing, NCTA President Kyle McSlarrow said that operators agreed that it was "appropriate" to "consider tailoring" the fund to include "carefully targeted subsidies for broadband service."

In addition to capping the growth of the high-cost fund, said McSlarrow, as the draft bill proposes, NCTA suggested it go further to reduce support where it is no longer needed and target it to areas that lack access. Without a cap, said McSlarrow, "it would be imprudent to expand the high-cost fund to cover broadband services," he said. That fund subsidizes service in areas that already have it, but at a price that is higher due to factors including "dense terrain" or sparse population.

McSlarrow also put in a plug for NCTA's request that the FCC look into reducing high-cost support in areas where there is unsubsidized competition. NCTA argues that there is as much as $2 billion in funds being used to subsidize service in competitive areas.

NCTA argues the fund can be reduced by cutting out payments for voice service in areas where there is unsubsidized competition, like the 80% of U.S. households who can get cable voice service.

In his testimony, Verizon Senior VP Peter Davidson said that Verizon's support came because the bill also took "a big step" toward fixing what he said was the broken USF framework before it "layered on any additional priorities."

Those steps include a budget, a new methodology for contributions, competitive bidding for wireless funds, and a deadline for reforming inter-carrier compensation.