FCC votes Unanimously To Launch USF Reform

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The FCC Tuesday unanimously approved proposed new rules reforming parts of the Universal Service Fund, as well as asking for stakeholder input on how to institute more reforms.

The FCC is transitioning the fund, which has been supporting traditional phone, to subsidizing broadband in
unserved areas (a new "Connect America" fund), and is taking steps to reduce abuse of the system of payments communications providers get for connecting to each other's networks (intercarrier compensation).

All the commissioners agreed there needs to be reform, though there remains some disagreement over how it should be done. "This is our best chance yet to get from here to there with a Universal Service system that will truly serve the telecommunications needs of Twenty-first century consumers," said Democratic Commissioner Michael Copps. "It's very likely our last chance for a while, too, because if we can't bring this home now, with all the preparation and effort and expectation that has gone into it, we'll be left with a rickety, tottering, last-century system that did good things for plain old telephone service but hasn't got a shot at taking us where we need to go in the years ahead. "
Republican Commissioner Robert McDowell expressed some disappointment that the reforms did not include the "unbridled growth" of the contribution fact, which has grown from a little over 5% of revenues to more than 15%. He said that growth needs to be reigned in and, preferably, the size of the fund reduced.

He said the FCC was taking a piecemeal approach, but that it was better than none at all. But he gave a shout out to the FCC's suggestion for using "market-based approaches" toward reform. Those include its suggestion that the FCC initially authorize a reverse auction of broadband subsidies to get an initial broadband capital infusion from industry.

There will be plenty of opportunity for stakeholders to weigh in on what they like and don't like about the FCC's proposals, which according to senior FCC officials include setting a baseline broadband speed in the definition of an unserved community.

"We applaud the FCC for moving forward on the important task of reforming the Universal Service Fund, especially the bloated high-cost fund that sometimes provides government subsidies in communities that already enjoy robust competition," said the National Cable & Telecommunications Association in a statement. "Restructuring the Universal Service Fund so it promotes broadband deployment in truly unserved communities is critical to accomplishing the national priority of connecting all Americans We look forward to working with the FCC to accomplish these goals through today's rulemaking proceeding."

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