Cable Ops to FCC: Don't Rush ISP-Based USF Contributions

Google says to expand USF to ISPs, but not to Internet apps and services like email and instant messaging

By John Eggerton -- Broadcasting & Cable, 8/7/2012 10:52:03 AM

The American Cable Association and the National Cable and Telecommunications Association were on the same page when it comes to reforming the contribution side of the Universal Service Fund, which is that the current system is in need of repair, but said it should not rush into a broadband remake. Google countered that the FCC should take the plunge, but confine that expansion to ISPs.

The fund is paid into by telecom companies to subsidize telecom service in hard-to-reach (thus uneconomical) areas. The FCC is migrating the subsidies from traditional phone to broadband, and is looking to expand the contribution base to broadband as well.

In reply comments to the FCC's USF contribution reform rulemaking, ACA asked the FCC on Monday to focus on relieving smaller operators -- the ones it represents -- of burdens under the current Universal Service Fund contribution regime, and to collect more data on the cost-benefits of broadening the contribution base to include broadband revenue.

ACA says it is "premature" to expand the assessable contribution base to include ISP service because it could work against the broadband expansion and adoption the FCC is trying to stimulate. ACA also opposes increasing assessments for faster tiers of service.

"There are simply too many unknowns for the FCC to leap to make broadband service assessable and to make any assessment increase with higher-performing tiers of service, especially if such an assessment discourages adoption and the deployment of networks with higher-performing broadband services," said ACA president Matt Polka in a statement.

In its filing, NCTA also said that the current contribution methodology is flawed, but said there is no consensus for how to reform it. "While some immediate fixes to the current contribution regime may be accomplished in the short term, there is a need for further discussions between the commission and all affected parties before major changes to the current system should be enacted," NCTA said.

Google is one of the companies pushing hard to expand the contribution base to include broadband, but it says that should not extend to "innovative Internet applications and services," which it says would "undermine their enormous economic and social benefits."

NCTA used most of its reply comments to warn that taking a cut of their ISP revenues could hurt the Connect2Compete initiative, in which major cable operators have agreed to offer low-cost broadband to low-income families. NCTA says that levying additional charges on broadband will affect adoption.

"While some immediate fixes to the current contribution regime may be accomplished in the short term, there is a need for further discussions between the commission and all affected parties before major changes to the current system should be enacted," said NCTA.

Google counters that the FCC should reject those arguments. "All recent broadband data show an inexorable trend of increased broadband deployment and uptake that will not be impacted by a modest assessment on broadband Internet access services," said Google.

Both NCTA and its largest member, Comcast, in a separate filing, told the FCC that whatever it does, it needs to treat competing services -- which would include VoIP, instant messaging, emails, and other Google staples -- in a competitively neutral manner, regardless of technology. Which means tax them, too.

Google argues that to the extent those technologies rely on underlying telecom service, they already contribute indirectly to USF.