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FCC Moves to Fund Broadband Across America

The Federal Communications Commission on Tuesday moved to reform a multibillion-dollar universal service program in hopes of fixing an inefficient program and bringing broadband service to the entire nation, including remote areas such as Indian reservations.

In a notice of proposed rulemaking (NPRM), the FCC called for reforms in order to make broadband services available to all Americans and accelerate the transition from traditional circuit-switched telephone networks to IP-based infrastructure.

Federal regulators are moving to consolidate five separate Universal Service Fund programs that support rural telephone networks into one pot of money dubbed the Connect America Fund that could be used to finance the availability of fixed and mobile high-speed Internet access across the entire country.

FCC Chairman Julius Genachowski said up to 24 million Americans cannot access broadband services today because there is no broadband infrastructure in their area.

Reforming the Universal Service Fund in order to provide a meaningful opportunity for every American to benefit from the broadband communications era, is an action consist with the principles Congress set forth in Section 254 of the Communications Act to ensure that all Americans have access to affordable voice and advanced communications services,” FCC Commissioner Mignon Clyburn said.

The Universal Service Fund provides billions of dollars in subsidies to fund telephone and Internet services and has grown from $2.3 billion in 1998 to nearly $9 billion.

But Genachowski said the fund is inefficient and does not hold telecommunications providers accountable. 

Meanwhile, the so-called contribution factor a percentage of interstate end-user revenues that telecommunications companies must pay to support the fund has climbed to 15.5 percent from 5.53 percent in 1998. Telecommunications providers pass these costs along to consumers.

As with many government programs in general, the trends on both the spending and the taxing sides of this equation are simply unsustainable,” FCC Commissioner Robert McDowell said.

The FCC also is proposing to reform the system by which telephone companies pay one another to connect calls. 

Among other things, the NPRM proposes to gradually reduce per-minute charges that telephone companies pay one another to connect calls and tighten rules to prevent phantom traffic” that such companies disguise in order to avoid paying connection fees.

Rural telephone companies have relied on intercarrier compensation fees as a major source of revenues. 

But the FCC said the system provides telecom providers incentives to maintain old telecommunications infrastructure rather than invest in more advanced IP-based networks.

Genachowski said an individual can spend 10 times more to call a friend a few towns over than to call someone on the other side of the world.”

The FCC plans to hold a series of public workshops on its proposals. 


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