FCC votes unanimously to revamp rural phone fund as broadband subsidy

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Copps called the principle of universal service “the lifeblood of the Communications Act” and argued that everyone in the country will benefit from increased broadband access. The other commissioners echoed his views, and said the plan would eliminate waste and redundancy in the program.

FCC Chairman Julius Genachowski predicted the plan would provide all Americans with high-speed Web connections within 10 years and provide $2 billion in benefits to consumers.

“Today’s vote by the FCC will have a meaningful impact on consumers across the nation,” said House Telecom subpanel ranking member Anna Eshoo (D-Calif.) in a statement. “The reforms adopted to the USF and ICC system fulfill one of the key recommendations outlined in the National Broadband Plan, and will increase access to broadband in rural America, eliminate duplicative subsidies, and finally bring the USF High-Cost program and the ICC system into the 21st century.

Stakeholders were cautious about commenting on the 500-page plan before parsing the details, but both rural telecom providers and consumer advocates expressed concern about the proposal favoring large telecom carriers or raising prices for consumers. The commissioners were adamant that the proposal would not result in price increases.

In response to political pressure to limit spending, the fund will be capped at the current level, $4.5 billion, for the next six years, with existing funds immediately re-directed to supporting broadband access. That includes an additional $300 million to start the process of building out rural networks. The program is funded by a charge on consumers’ monthly phone bills, which Republican Commissioner Robert McDowell noted has risen from 5.5 percent to 15.3 percent since its introduction.

“The tax trend is simply unacceptable,” McDowell said, while calling for reform to the contribution method in the first half of next year. 

Incumbent telecom carriers receiving high-cost funds will have the option to continue serving their current territories under the new plan, provided they commit to connecting all high-cost portions of their coverage area.

The order also creates a mobility fund that will start with a $300 million infusion of capital next year and will eventually distribute $500 million annually to expand wireless broadband access along the nation’s roads and highways. Those funds will be distributed by reverse auction, with the first expected to take place during the third quarter of 2012.

Several of the commissioners framed the plan as anticipating the future communications needs of consumers, and touted the plan’s recognition of wireless as a crucial aspect of universal service. 

When asked why mobile didn’t constitute a greater proportion of the plan, as opposed to wired broadband, Genachowski cited budgetary constraints. The commission chairman called the amount of money dedicated to mobile “very significant,” arguing it would bring the country much closer to its goal on universal mobile service. 

The commission also moved to reform the intercarrier compensation rates while making allowances for carriers that claim the changes would pose a significant financial hardship. The changes include compelling phone companies to negotiate in good faith with Voice over Internet Protocol companies regarding the cost of completing calls. 

Some stakeholders argued the commission did not go far enough to ensure VoIP providers are integrated into the larger communications network.