ACA Calls For Cutting Telco USF Subsidies

Trade group says it will free up $1-2 billion from USF

The American Cable Association has come up with a plan to free up $1 billion-$2 billion from the Universal Service Fund to help expand that program to cover broadband deployment.

ACA, which represents small and mid-sized cable operators, wants to cap the fund and "limit or deny" high-cost funding to telcos it says already face effective competition--say from ACA members providing cable VoIP service--or are no longer subject to price regulation from states.

That came in a filing Monday at the FCC, which is collecting input on revisions to the USF fund, which communications companies pay into to subsidize service to low-income households and rural and remote areas.

The fund currently underwrites phone service, but the FCC and key legislators have said it needs to be extended in a big way to the digital age's version of lifeline communications, broadband. There have also been problems with waste, fraud and abuse.

"ACA maintains that the USF, as currently structured, hurts consumers who pay into the system via their carriers and unfairly serves the interests of larger entrenched incumbent voice providers who face competition, putting competitors at a decided disadvantage," said ACA president and CEO Matt Polka in announcing the plan. "As a result, ACA recommends that larger incumbent voice providers subject to effective competition and free to price services as they wish should be largely ineligible to draw support from the USF program to subsidize voice services," he said.

ACA also says the fund should not underwrite the cost of multiple connections or hand sets for a single user, including businesses, and it wants the FCC to lower the de facto contribution base for cable VoIP providers. The USF contribution is currently 12.3% of if interstate and international revenue. But if a provider can't separate out interstate from intrastate, interstate is assumed to be 64.9% of revenue, which ACA calls discriminatory and wants lowered.

It also wants the contribution based on numbers and connections rather than revenues.

Co-opting the FCC's current mantra, ACA calls its plan a data-driven, fact-based approach to dealing with "decades of difficult and ineffective oversight."