USF already supporting broadband

Debate about how to reform the Universal Service program seems destined to continue for the forseeable future — and while the debate rages, we’re likely to see a lot more attacks on today’s program.

These attacks typically take the form of outraged questions about why the program continues to fund voice networks when so many people are canceling voice service. The implication is that the money paid to rural carriers is simply being thrown out the window.

Although I would like to see today’s Universal Service Fund transition to a focus on broadband rather than voice, I have to object to the idea that funding provided to rural telcos through today’s program is wasted. In reality, Universal Service funding already helps support broadband deployment.

The reason is that a large part of the infrastructure that underlies voice and broadband is common to both networks. This includes the local loop fiber or copper and electronics infrastructure between the customer and the central office — and Chad Duval, a principal with accounting firm Moss Adams, told me the local loop is often the single largest component of cost that a carrier recovers through the Universal Service Fund.

There are essentially three network components that the high-cost portion of the Universal Service program helps fund: the loop, switching and interstate common line costs, Duval explained. And the only one of these components that doesn’t have a big role in supporting broadband data delivery is switching. Duval also noted that switching costs have been declining as carriers migrate to less costly packet-based softswitches.

The upshot is that Universal Service funding under today’s voice-focused program undoubtedly has been an important factor in helping U.S. telcos make broadband available to about 95% of U.S. homes. And because most rural carriers already have deployed broadband, few of them are using Universal Service funding strictly for voice support.

I don’t mean to imply that the system isn’t due for retooling. Today’s system has numerous flaws, but its voice focus is not the main problem.

More troubling issues include the fund’s support for wireless carriers based on landline costs and its dependence on what many view as an irrational access charge system. That system has driven some competitive carriers to extreme measures to avoid paying access charges while at the same time enticing some of those carriers to even more extreme measures in an effort to collect those charges. Whatever Universal Service funding has been wasted undoubtedly relates more to those issues than to the voice-focused nature of the program.

The notion that supporting voice networks is wasteful reminds me a lot of the debate when voice over IP initially emerged 15 or so years ago. At the time, some people argued that voice service should be free because voice traffic only needed a tiny bit of bandwidth on high-speed data networks — an argument that totally overlooked the cost of the final loop to the customer.

That loop is there to support voice or data or both. Measured on a per-customer basis, it undoubtedly remains the most costly component underlying increasingly converged voice and data networks. And as we look ahead to reforming the Universal Service program, the goal should be to continue to provide a way of covering the costs of these critical network components in high-cost areas.