Consumer groups bash industry proposal to reform phone fund

A coalition of consumer advocacy groups bashed an industry proposal to reform the Universal Service Fund Tuesday, arguing that the plan is aimed at protecting "excessive" telecom company profits at the expense of consumers.

In a letter to the Federal Communications Commission (FCC), the groups warned that America's Broadband Connectivity (ABC) Plan, which was drafted by the major telecom companies, would hurt the most vulnerable consumers.

"While we recognize that USF reform is truly needed, we cannot accept the premise of the ABC Plan – that consumers, especially the most vulnerable, should bear the burden of increased costs while allowing the companies to maintain excessive profits with no oversight or accountability," they wrote.

 The letter is signed by the Consumers Union, Consumer Federation of America, the National Consumer Law Center, National Association of State Utility Consumer Advocates and the AARP.

The $8 billion Universal Service Fund was originally intended to subsidize the expansion of landline phone service in rural areas. FCC Chairman Genachowski wants to transition the fund to support high-speed Internet deployment. 

He will unveil his detailed proposal for reforming the fund on Thursday. According to senior FCC officials, Genachowski's proposal will not be a wholesale adoption of the industry-backed ABC plan.

The FCC is expected to vote on the plan at its next meeting later this month. 

The telecom industry defended its proposal, arguing it would be good for the public.

"The ABC plan will create enormous benefits for consumers," Edie Herman, a spokeswoman for the ABC Plan said. "Most importantly it will bring broadband to millions of people who do not have access today. A key element of the plan is moving to a more rational intercarrier compensation system that reflects today’s all distance world of bundles and packaged services."

The consumer groups argue that the industry's proposal to increase the Subscriber Line Charge (SLC) is unjustified and would raise costs for consumers. The industry's proposal to scrap certain regulations would leave "consumers with no rights or protections when it comes to broadband service," they wrote.

"Rather than endorsing or pursuing the ABC Plan, the Commission should move forward on a plan that promotes the public interest and provides for affordable universal service," they wrote.

--This post was updated at 4:29 p.m.

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