In an address to the Information Technology and Innovation Foundation, FCC Chairman Julius Genachowski offered a preview of what the telecom industry should expect to see from the commission at its February 8th meeting with regard to Universal Service Fund reform. And in a briefing with reporters this afternoon, other senior FCC officials added a few additional details about what to expect.

The FCC will release a notice of proposed rulemaking aimed at transitioning the Universal Service Fund (USF) program to support broadband, rather than voice and phasing out today’s inter-carrier compensation system that includes subsidies to support telecom service in high-cost areas. The NPRM will recommend a two-phase implementation, with some fairly specific recommendation for the first phase and more broad goals for the second phase.

Phase one recommendations, Genachowski said, will provide “certainty” about whether VoIP should be subject to inter-carrier compensation requirements  and will include a specific proposal to contain the costs associated with the USF program as it transitions to focus on broadband. Recommendations also will include “more reporting requirements” and “better measurement of the performance of the fund as a whole.”

Phase one also will focus on bringing broadband to unserved areas, the chairman said. In his remarks, he made several references to a “rural-rural” broadband divide, noting that some rural areas have higher-speed connectivity than some urban areas, while others lack any availability of broadband service.

In the second phase, Genachowski said, Universal Service support for voice service will be totally phased out but he emphasized the idea that “we will make sure all Americans have access to voice service and can make calls from their homes.” Per-minute inter-carrier charges also will be eliminated during this phase, Genachowski said.

“We will work with Congress and all parties on this plan,” Genachowski said. He also vowed to “work closely with the states” and to ensure that the process is data-driven and fact-based.

In addition, Genachowski said reforms should be based on four pillars. These include modernizing Universal Service to support broadband, fiscal responsibility, accountability and market-driven, policies.

Neither Genachowski nor the other FCC officials discussed the data rates that would be recommended for the new Universal Service fund but the officials said that a specific speed recommendation would be part of the NPRM. The entire plan will have about 250 pages, the officials said. Although tomorrow’s actions will focus on the high-cost portion of the Universal Service fund, Genachowski also said the commission will address the low-income Lifeline and Linkup portion of the program next month.

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4 thoughts on “FCC to Begin Delicate Process of USF Reform, Shift to Broadband

  1. Sounds like a shift from traditional land line telephone tax to a broadband connection tax, or perhaps double taxation if you have both. Ouch! Just like the FCC to drive prices and bureaucracy higher. But they're missing the point. End users will seek lower cost, higher performance alternatives that these taxes are supposed to achieve, but are abused by State authorities, and fines paid by carriers as it's cheaper. The entire wire line access industry will collapse under the weight of these antiquated rules and levies. Innovators will go elsewhere. Today, the global market is more attractive than the US. American consumer services will fall further behind technologically. We've moved our delivery servers offshore. No coming back.

    1. John Q – you forgot to mention the sky will fall.

      These are classic arguments that don't take the full picture into account. Despite the few extreme cases of inefficiency, which get all the press, the fact of the matter is USF and ICC work. Do they need reform – yes, but not radically so. The overwhelming majority of USF cases result in great access to telecom/broadband services for the citizens of rural America, which is its goal.

      The very few cases of inefficiency should not be the basis for reform. Just look at the rural territories served by carriers who operate under so called incentive regulation. There you will find rural citizens who do not have access to good telecom/broadband services.

      If you're going to reform, look to what works, not what doesn't.

  2. It's hard to determine the impact but it appears that the current unlevel playing field will be tilted even furthur. I beleve the wireline companies could compete if the wireless carriers and VOIP providers were required to pay their share.

  3. In an ironic way, this will be good for rural telcos. While USF and ICC have sustained us for all these years, in some ways they are holding us back now. We need to make the transition to an all IP company and the current system prevents that. In an ideal world, the new regime will not bankrupt us, but will also allow us to smoothly make the transition to an IP company, and then turn us loose.

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