FCC Takes Next Step Toward USF Migration

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Washington — The
Federal Communications
Commission has taken
another step toward
shifting phone subsidies
to fund broadband service.

Last week, the agency
approved, with a mix of
partial concurrences and
dissents, a rulemaking
and notice of inquiry to
reform its Lifeline/Linkup
program, which subsidizes
landline phone
service for eligible lowincome

The agency has already taken steps to reform
the Universal Service Fund’s high-cost
fund, and must
still address issues related to the piece of the
cross-subsidy that is passed along from telecom
providers to customers.

The Lifeline/Linkup reforms include starting
the migration of the fund to broadband,
as the FCC last fall voted to do with the USF
program. It also essentially gets rid of the
linkup portion of the program, which incentivized
companies to sign up users — what
FCC chairman Julius
Genachowski called a
“bounty” for companies
that was not working, in
part, because it encouraged

There was unanimous
support among the commissioners
for broadband
migration, as well
as for limiting waste,
fraud and abuse.

But there was disagreement
over whether
some of the planned
savings from reducing
waste, fraud and duplicative
payments should
be used to fund pilot
broadband migration programs — GOP
commissioner Robert McDowell concurred,
which is short of approval — and the manner
in which the FCC will require 100% recertification
of current eligible subs, to
which Clyburn concurred. The meeting was
even delayed for over an hour as some lastminute
negotiating went on, recalling the
days of FCC chairman Kevin Martin.

Genachowski, a Democrat, said following
the meeting that commissioners were able to
come to agreement on a way forward with reforms
by agreeing on target savings, as well as
a way to measure those savings. Commissioner
Mignon Clyburn, also a Democrat, said at
the meeting she had problems with capping
the program.

McDowell dissented from the portions of
the rulemaking that used the FCC’s authority
under section 706, which requires the agency
to “encourage the deployment of advanced
telecommunications to all Americans,” to
buttress the move of the subsidy to broadband.
McDowell has been leery of the FCC’s
use of that broad mandate to justify broadband

Among the major components of the reforms
are creating a national accountability
database to weed out duplicative support and
a database to check eligibility; confining that
subsidy to one per household; audits for eligible
carriers receiving more than $5 million
in subsidies; cutting back support for service
with high activation fees; targeting $200 million
in savings for 2012, and up to $2 billion
over three years. McDowell said he was not
convinced the number would be that high.

McDowell said that the reforms put
an exclamation point on the need to reform
the contribution side of the subsidies,
pointing out that some consumers
— and not all of them well-heeled — crosssubsidize
the low-income participants.