FCC Makes It Official: USF Now Covers Broadband

By 4-0, the Commissioners of the Federal Communications Commission voted to "create a new Connect America Fund with an annual budget of no more than $4.5 billion, which will extend broadband infrastructure to the millions of Americans who currently have no access to broadband."

Connect America is part of the restructuring of the Universal Service Fund, which since 1996 has been used to ensure that all Americans — largely rural — have affordable access to voice telephone. Today's vote expands that mandate to include broadband, which is essential to modern life.

Since more than 83 percent of the approximately 18 million Americans that lack broadband access live in areas served by the former Bell companies and other large and mid-sized carriers, the Connect America Fund initially targets an additional $300 million above current funding levels to these areas to expand high-speed broadband.

Beginning in 2013, these incumbent carriers will be eligible for targeted subsidies to deploy broadband to all high-cost areas with no broadband provider in their state footprint. If the incumbent carrier declines participation, the subsidy will be provided to one carrier based on a reverse auction.

Universal service support to small rural carriers will be capped at the current $2 billion funding level for the next five years, although the carriers will be subject to corporate operations expense and other limits.

The change for the first time goes beyond wireline to include a new Mobility Fund. "As part of this reform, the FCC recognizes the growing importance of mobile broadband and makes it an independent universal service objective for the first time in history," the FCC stated.

The FCC also adopted significant changes to rationalize the outdated system of payments that long-distance and wireless companies make to local carriers (known as "intercarrier compensation" or "access charges"). These access charges will gradually come down to cost, blocking carriers' abilities to "game the system." To ensure that local carriers receive adequate replacement revenue, the new plan allows companies to add a small charge to the monthly bill. The FCC claims it will add an average of 10 to 15 cents per month, with a monthly bill capped at $30. The FCC estimates that "consumers will receive more than three times the benefit" in lower calling prices on their long-distance and wireless bills to offset these higher fees.

The FCC is promoting Connect America and the Mobility Fund not simply as public services, but as a job stimulus. "Efforts to expand high-speed Internet to rural America over the next six years will increase economic growth by $50 billion over that period, the FCC estimates," and the Commission claims that "Expanded broadband access will generate approximately 500,000 jobs (in rural communities) over the next six years."

Speed Matters supports creation of the Connect America Fund and the FCC's general framework for reform. While the FCC has published the general outline of USF Reform, the devil will be in the details of the yet-to-be-published final Order.

FCC creates 'Connect America Fund' to help extend high-speed internet to 18 million unserved Americans; creating jobs & increased consumer benefits (FCC News, October 27, 2011)

FCC approves $4.5 billion broadband fund (Washington Post, October 27, 2011)