FCC Universal Service Overhaul Would Extend Broadband to Underserved Areas

[Source: PCMag.com, by Chloe Albanesius, February 8, 2011]

The Federal Communications Commission on Tuesday will vote to overhaul the $8 billion universal service fund (USF), a program intended to provide telecom services to under-served areas, and transition to from a focus on telephone service to broadband service.

"In the 21st century, high-speed Internet, not telephone, is our essential communications platform, and Americans are using wired and wireless networks to access it," FCC Chairman Julius Genachowski said in a Monday speech.

USF, however, "is still designed to support traditional telephone service. It's a 20th century program poorly suited for the challenges of a 21st century world," he said.

The USF is a public-private fund intended to provide telecom service to all Americans. Though some E-rate funds have been used to provide Internet access to schools and libraries, the USF has primarily been focused on telephone service. The FCC wants to overhaul the program so that its main goal is to provide broadband to all.

"At the end of this transition, we would no longer subsidize telephone networks; instead we would support broadband," Genachowski said.

Reforming the USF, however, has been on many a FCC chairman's wish list for years. But oversight, corruption, and pushback from fund recipients has made that task difficult. The FCC has taken baby steps along the way – opening up E-Rate to the Web, updating a rural health care program to allow patients to access broadband-based care, and proposing a Mobility Fund, which would provide one-time support for states deploying mobile broadband networks.

Before any real change can be made, Genachowski said, the FCC must address its problems. For example, about $100 million is currently provided to companies so they can provide telecom service in areas that already have service via non-USF recipients – in some cases, USF doles out $20,000 per year per household. Another rule intended to encourage new investment actually rewards companies that lose customers – with more money, according to Genachowski.

"Simply put, the current … system is unsustainable," he said.

The proposal the FCC will vote on tomorrow takes a four-pronged approach: eliminate waste and inefficiency throughout the current program; use savings to spur investment in high-speed Internet in un-served areas; stimulate investment in broadband by reforming the Intercarrier Compensation system; and increase accountability for recipients and for government, and more effectively measure the performance of USF.

Intercarrier compensation is money that one carrier pays to another to route traffic to the appropriate place, but carriers have long complained that those charges are too high.

Universal service reform was part of the FCC's national broadband plan, which said the commission "should conduct a comprehensive reform of universal service and intercarrier compensation in three stages to close the broadband availability gap."

The FCC's ability to regulate broadband was called into question last year when a court ruled that the agency had no right to hand down a network management enforcement action against Comcast. The FCC later unveiled net neutrality rules that it said established its right to handle broadband, based on the Communications Act. A senior FCC official said Monday that the USF rulemaking will discuss the FCC's authority to support broadband through USF.

The official also said the FCC does not believe congressional action on the issue is necessary. If Congress wants to allocate more funds to accelerate the build-out of broadband, the FCC is ready and willing to accept that money. If Congress passes a bill that takes a different approach to the FCC, meanwhile, the commission will implement that vision, but at this point, the FCC is confident it has the tolls it needs to complete USF reform, the official said.