MCN Guest Blog

Building Momentum for USF Reform

2/14/2011 9:12 AM

The Federal Communications Commission has at long last begun action to transform the existing inefficient and outdated system of universal service subsidies.

For too long, consumers have borne the increasing burdens of a system that is riddled with inefficiency and waste, that ignores modern-day competitive realities, that misallocates scarce funds and that is ill-suited to meet the challenge of expanding broadband access to all Americans.

Last week’s speech by FCC chairman Julius Genachowski, outlining a framework for universal service, is a welcome sign that the FCC is serious about reform. While we all await the specifics of new rules, the guiding principles outlined on Feb. 7 establish a framework that is appropriately premised on the necessity of enacting current reforms to achieve our future goals. In that regard, NCTA welcomes the commission’s renewed commitment to the following principles:

Fiscal responsibility: As the chairman recognized, the transition to a modern, broadband-focused mechanism must be accomplished without significant increases in the overall size of the program. The Universal Service Fund is paid for by American consumers and we believe that any proposal that fails to include meaningful limits on the total size of the program would be a non-starter in the current economic and political climate.

Targeted support: The key to achieving the commission’s broadband goals in a fiscally responsible manner is appropriately targeting any new broadband support mechanisms. Unlike the current high-cost support mechanism, which supports multiple providers in some markets and supports incumbents in markets where competitors are providing service without support, any new broadband mechanism should support only a single provider and only in those areas where the market is shown to be ineffective.

Accountability: One of the biggest problems with the current universal service high-cost mechanism is that the commission distributes over $4 billion in support every year without establishing specific, measurable goals for the program or imposing any real obligations on the recipients. As the chairman noted, any broadband support program must start with a clear goal - bringing service to unserved areas - and must include increased disclosures about the operating performance and financial condition of recipients that are designed to achieve the goal of providing broadband access.

We recognize that USF reform will not be easy. It has proven to be notoriously difficult to implement in the past, and it would be a mistake to gloss over the significant challenges associated with modernizing a multibillion-dollar program that hundreds of incumbent phone companies have grown to depend on. Nevertheless, we remain convinced that reforming universal service support in a manner that remains faithful to these principles will promote access to broadband services across the nation without overburdening consumers that pay into the fund and without harming continued private investment in areas where government subsidies are unnecessary.
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James Assey is executive vice president of the National Cable & Telecommunications Association.

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