FCC officials outline proposed Universal Service reforms

The National Broadband Plan, due next week, will propose that today’s voice-centric Universal Service Fund transition to a broadband fund within seven to 10 years, Federal Communications Commission officials told reporters in a briefing on Friday. The officials also outlined plans to fund no more than one wireline and one wireless carrier per geographic area and to eliminate per-minute access charges.

“We believe—and we think Congress believes—that it’s time to migrate the twentieth century program for voice telephone service to a program that helps deliver broadband,” Executive Director of the Omnibus Broadband Initiative (OBI) Blair Levin said.

Although Levin did not specify broadband speeds, he said the goal would be to make broadband available to more than 99% of Americans without any additional Congressional appropriations within 10 years. The NBP will state, however, that broadband goals will be achievable more quickly if Congress were willing to provide an additional $9 billion in three $3 billion increments over three years, Levin said.

The Universal Service reform plan calls for the transitioned replacement of the high-cost Universal Service Fund with a new Connect America fund and the creation of a mobility fund. The mobility fund would be aimed at “extending 3G service in areas lagging behind the national average,” Senior OBI Policy Advisor Carol Mattey said.

The Connect America fund will target areas where market conditions do not support commercial broadband build outs, said Mattey. The plan also calls for “fast tracking” areas where the cost of extending broadband would be relatively low, requiring only capital expenditures. Such projects, she said, might begin receiving funding as early as 2012. “As we move up the cost curve, we will tackle [projects] where there is a need for ongoing [support] as well,” said Mattey.

Reforms also call for freezing support to small rate of return carriers, who draw most heavily from the USF today, and are shifting more funding toward price cap companies such as AT&T, Verizon, Qwest and mid-size Independents. Of seven million homes that do not have broadband today, only one-third are served by the small rate-of-return carriers while the other two-thirds are in areas served by price cap companies, Mattey said.

Mattey also noted that funding would be determined on a “provider and technology-neutral basis.” In some areas, she said, extending fiber closer to end users might be the best solution, while in other cases, fixed wireless or satellite might be more economical. If more than one provider were interested in serving an area, she outlined the possibility of a “market-based mechanism to select the provider and the amount of support.”

The plan also will call for the phase-out of the per-minute access charge system, beginning in 2012. Instead service providers will be encouraged to develop an alternative methodology for compensating one another similar to what Internet-based providers have established for interconnections.

Mattey said the phase-out of per-minute access charges was necessary to eliminate arbitrage incentives that drive carriers to “mask the characteristics of traffic to avoid charges.” She added, however, that the plan would seek “interim solutions to address arbitrage.”

Universal Service reforms will be rolled out in three phases, Mattey said. The first phase, 2010 to 2011, will involve setting parameters and establishing rulemaking. In the second phase, between 2012 and 2016, legacy support would be frozen and the transition to the Connect America fund would begin. In the third phase, between 2017 and 2020, she said, “all funding ceases for voice-only networks.”