FCC Proposing Moving Fund That Supports Universal Telephone Service to Broadband

Money would be moved in three stages by 2020

The FCC Friday (March 5) said that it was proposing
transitioning the fund that supports primarily universal telephone service to a
universal broadband fund in three stages by 2020, and to do so without
increasing the size of the fund--now between $8 billion and $9 billion.

That will be part of the national broadband plan presented
to Congress March 16, according to the FCC's broadband team, which outlined
some of the Universal Service Fund (USF) reform plan to reporters Friday.

It will do so primarily through the high-cost portion of the
fund ($4.6 billion), which telecom companies, phone and cable pay into to
underwrite service to areas too expensive to attract private investment.

It has proposed to create two funds, a Connect America fund
which the high-cost fund will morph into over time, and a mobility fund to
underwrite wireless broadband, which the commission has said will be an
increasingly important player.

While broadband plan top advisor Blair Levin said the plan
has been structured to migrate the fund to broadband without any additional
congressional outlay, the FCC will also suggest to Congress that a one-time, $9
billion infusion to the new Connect America fund over three years would
speed up the process.

The goal is to get more than 99% of American's connected by
2020. It is also to end fund support for voice-only service by that date.

The Connect America fund will be technology and provider
neutral, which means the fund may underwrite fiber, or satellite or wireless,
whichever is the most cost-effective.

Connect American fund will focus on areas "where there
is no private-sector business case," and only one network in each area.
The mobility fund will focus on extending coverage for mobile.

The FCC will put funds first into areas where it will be the
cheapest to provide broadband access, or what they called the low-hanging
fruit.  If that money attracts more than
one potential provider, the broadband team said they would employ an as yet
undetermined "market mechanism," to pick a winner.

It will also concentrate on build-out in the first phase of
the plan and ongoing support afterwards.

The mobility fund is intended to get 3G wireless to areas
that lag the national average for availability.

The FCC is proposing phasing out per-minute charges for
inter-carrier compensation, calling it "irrational and inefficient."

Levin conceded that migrating the fund required some hard
calls in terms of shifting money from current recipients, but pointed out as he
has before that the FCC is not playing Santa Claus, but dealing in the real

One area where they will be shifting some of that fund
support to broadband will be from Competitive Eligible Telecommunications
Carriers (CETCs),  That's mostly wireless
phone providers, where there could be cases in which wired service and wireless
service for a parent, and plans for the kids, could all be getting USF support.

"There has always been something suspect about the CETC
process, "said Federal-State Joint Board on Universal Service Commissioner
John Burke in a statement.  "The
current approach to funding multiple carriers to provide service where
ostensibly there is not [an] economic business case to support even one has
never made much sense.

The National Association of Regulatory Utility Commissioners
commented that Congress had expected the FCC to have to make some hard calls
and that it looked like a "solid framework."

National Cable & Telecommunications Association President Kyle McSlarrow said it supported the broad goal of moving the fund to broadband support, and the specific goal of targeted reductions in support. ""We applaud today's statements by members of the broadband team which recognize the need to transform the Universal Service Fund into a mechanism that supports broadband deployment and adoption without increasing the financial burden on American consumers," McSlarrow said in a statement. "As NCTA has demonstrated, reducing unnecessary USF high-cost support in specific areas where competitors have entered without government subsidy will enable the Commission to redirect significant funding to areas that still lack any broadband access."

Top AT&T lobbyist Jim Cicconi seconded support for the vision and the goal, but suggested there waa still much work to do.

"Reforming universal service and ensuring affordable broadband are the two most critical components of achieving universal broadband," he said. "The FCC Broadband Team's recommendations are the first steps in what will be a difficult process to achieve a broadband vision that we think everyone in this country should care deeply about.... We are only going to achieve success if we all work together to fashion solutions. We fully support Chairman Genachowski's efforts and vision here and we will work with the Commission to achieve the goal of universal broadband."