WASHINGTON – U.S. regulators proposed switching a $4.3 billion subsidy from rural phone service to supporting high-speed Internet service.
The Federal Communications Commission voted 5-0 on Tuesday to offer changes to the Universal Service Fund, which is financed by a charge on long-distance calls paid by telephone subscribers. The agency asked for comments. It faces no deadline for a vote on final rules.
“The Universal Service Fund is broken,” and “plagued with waste and inefficiency,” FCC Chairman Julius Genachowski said at Tuesday’s monthly commission meeting. The proposals would “streamline and modernize” the program, he said.
Companies including Windstream Corp. and Frontier Communications Corp. receive subsidies from the program.
AT&T Inc., the largest U.S. telephone company, said yesterday in an e-mailed statement that the FCC should “carefully but expeditiously move forward.” Genachowski’s proposal is “a good road map” for changing policies, Kathleen Grillo, senior vice president at Verizon Communications Inc., the second-largest U.S. telephone company, said yesterday in a separate e-mailed statement.
“The five of us are determined to go forward with honest reform as soon as possible,” Commissioner Robert McDowell, one of the FCC’s two Republicans, said at the meeting.
Changes by 2020
The changes to the so-called High-Cost program may take place by 2020, according to the FCC’s National Broadband Plan released last year.
The program would be replaced by the Connect America Fund to help pay for phone service and other applications, the FCC said in the plan. “The goal of reform is to provide everyone with affordable voice and broadband,” the agency said.
In 2010, the program paid $4.3 billion to carriers operating in areas where it’s costly to deliver telephone service, Eric Iversen, a spokesman for the Universal Service Administrative Co., an independent nonprofit that runs the fund, said in an interview.
From 14 million to 24 million Americans lack access to fast Internet connections, or broadband, “and immediate prospects for deployment to them are bleak,” the FCC said in a report last year.
The revised program should pay only for broadband in areas where private businesses don’t, and subsidize only one provider in each area, the agency said in its 2010 broadband plan.
‘Unsustainable Path’
The Universal Service Fund is “on an unsustainable path,” in part because long-distance revenue that underpins its funding is shrinking, Genachowski said in a July speech in Seattle. The program delivers subsidies unevenly to different areas, he said.
The agency should broaden the funding base beyond long-distance revenue, the FCC said in its broadband plan. It said some parties want the fund to assess fees on broadband users, and didn’t endorse a method.
“Equity would suggest that a fund that distributes support for broadband ought to require those same services to contribute,” Commissioner Michael Copps, a Democrat, said at the meeting.
Subsidies can make up 60 percent or more of revenue for the smallest carriers in rural America, according to the broadband plan.
The FCC also proposed changes to the system of payments that telephone companies charge for connecting calls from other companies. Carriers pay about $14 billion in transfer payments yearly, according to the broadband plan.
The subsidy now relies on “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,” Copps said. “We have an obligation to complete the transition plan this year.”
