Universal Service Fund Reform Threatens Big Changes

The Universal Service Fund has stood unchanged since 1996, subsidizing telephone carriers to bring voice service to high-cost, rural areas. Without the federal government's $4.5 billion intervention, a lot of rural residents would have either very expensive service - or no service at all.

FCC Chairman Julius Genachowski's proposed changes to the USF include expanding subsidies to include broadband. As one news report put it:

"The idea is that in a world where high-speed Internet access is as essential as landline phone calls once were, the subsidy system should now pay to bring broadband to the 18 million rural customers who do not have it."

Genachowski's plan includes two programs: the Connect America Fund for broadband and the "Mobility Fund" to subsidize wireless in rural areas. These changes, though, threaten many existing companies.

"For companies that currently rely on the funds - many phone carriers - a lot of money is at stake. This overhaul could be a make-or-break transition for some industries."

Genachowski has said that current phone companies would retain a right of first refusal under the new regime, but not all are reassured.

Phone fund overhaul has companies scrambling for money (nextgov.com, Oct. 19, 2011)