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FCC Plans to Use Fees to Expand Broadband Access

February 09, 2011

A revamped version of the $8 billion Universal Service Fund (USF) could be used to expand broadband access in underserved areas. On Tuesday, the Federal Communications Commission (FCC) proposed a plan to redirect the portion of the USF that provides incentives to extend phone service to high-cost areas to instead support high-speed data networks. A new program, the Connect America Fund, would consolidate several USF programs, eliminate some of the programs' inefficiencies and increase the availability of affordable broadband service. The proposal is the latest step in a series of changes planned by the FCC to implement its National Broadband Plan.

FCC Chairman Julius Genachowski quoted House leaders from both parties who have characterized the USF as "broken" and "unsustainable." Though once necessary to connect rural residents to essential communications services, the USF has become wasteful and inefficient, even as contribution rates have increased. The USF's contribution factor has more than doubled since 2003, from 7.3 percent to 15.5 percent, according to the New York Times. In some cases, telephone service has been subsidized in areas where several providers were already competing or where federal costs totaled more than $20,000 per year.

Under the new plan, the FCC will begin consolidating programs within the USF that provide rural telephone access and close loopholes in Intercarrier Compensation rules. Savings from those cuts would be shifted to the Connect America Fund, which would support the rollout of broadband services and competition in underserved areas. "At the end of this transition," said Mr. Genachowski, "we would no longer subsidize telephone networks; instead we would support broadband."

Restructuring the USF is part of the FCC's ongoing effort to implement the National Broadband Plan introduced last year. The plan calls using the USF to expand the availability of high-speed data access and improving the fee collections process. The commission also has proposed a Mobility Fund that would increase access to 3G wireless access in rural areas.

Read the announcement at: http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-304522A1.pdf.

FCC officials also have begun seeking comments on how to reform its data collection on broadband and telephone services. A new Notice of Proposed Rulemaking (NPRM) has been issued to find out what changes are needed to ensure that the commission's methods keep pace with market changes and to streamline data collection. Under the current regulations, broadband providers are required to report the number of subscribers in each census tract they serve, while local and mobile telephone providers provide details at the state level. The National Broadband Plan calls for more detailed data on subscribership, actual availability, penetration, performance, prices, churn, and bundles, as well as a publicly-available map of service levels. This data is used by the commission to determine eligibility for programs, including those associated with the USF.

Read more at: http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-304518A1.pdf.