USF tug of war

As providers try to hang onto limited Universal Service Fund money, only the FCC can break the deadlock -- but where it will throw its weight is anyone's guess

It's not the first time the Universal Service Fund program has been at the center of an industry tug-of-war. But never before have so many different interests pulled in so many different directions — and regulators' most recent attempt to break the deadlock lacks the necessary muscle to force an outcome.

Aimed at providing affordable communications services to areas that are costly to serve, the USF high-cost program has grown substantially in recent years, in large part because more providers offering more technologies are now drawing from it. Spurred by concerns that the program had become too costly, the Federal-State Joint Board on Universal Service last year set out to recommend reforms.

If adopted, those reforms could yank USF money from some parties, but resources still could be strained. And because the recommendations lack an implementation timeline and leave many critical elements unresolved, they virtually ensure that the tug-of-war will continue.

“To meet the deadline, the Joint Board had to make compromises,” said John Rose, president of the Organization for the Promotion and Advancement of Small Telecommunications Companies. Noting that he expects the FCC to take action on the proposal in 2008, Rose added, “What the FCC eventually does could take a different form and probably will.”

Next page: THREE FUNDS