Regulator overhauls fund to get broadband to all Americans

Reuters News
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Posted: Oct 27, 2011 3:24 PM
Regulator overhauls fund to get broadband to all Americans

By Jasmin Melvin

WASHINGTON (Reuters) - All Americans will have broadband access to Internet and telephone services by the end of the decade under new rules adopted by U.S. regulators.

The rules also reform a broken system of phone charges fraught with inefficiency and should result in $2.2 billion in savings passed down to consumers, the Federal Communications Commission estimates.

The FCC voted unanimously on Thursday to modernize its universal service program, aiming to help the 18 million Americans who have no access to broadband where they live and work.

The new rules will shift the roughly $4.5 billion in public money spent annually to subsidize telephone service for rural families to high-speed Internet in rural America and costly-to-serve areas.

Challenging terrain, long distances from existing networks and low population density are among the factors creating gaps in infrastructure as broadband providers consider these areas not profitable to serve.

"We are taking a system designed for the Alexander Graham Bell era of rotary telephones and modernizing it for the era of Steve Jobs and the Internet future he imagined," FCC Chairman Julius Genachowski said at the agency's open meeting.

Broadband buildout to unserved areas could begin in early 2012 under the plan, bringing high-speed Internet to hundreds of thousands of homes in the near term.

The plan approved on Thursday would phase out funding for landline phone service over a period of years as companies move to a competitive bidding process for securing funds for broadband.

Companies now receiving phone service subsidies would get first dibs in some areas to receive support for deploying broadband service.

The rules will also reform the complex system of payments among carriers called intercarrier compensation, gradually reducing per-minute intercarrier compensation charges.

The FCC earlier in the year proposed modernizing the $8 billion universal service fund -- paid for through fees added to consumers' telephone bills -- to spur infrastructure investment while removing inefficiencies in the program.

The new rules overhaul the largest portion of the universal service program to directly support fixed and mobile broadband while phasing out spending on duplicative services offered by several phone companies serving the same area.

The new Connect America Fund created by the rules will have a firm $4.5 billion a year budget, the first budget constraint ever imposed on the program.

FCC Commissioner Robert McDowell said the fund will not be able to exceed its annual $4.5 billion cap through 2017 without agency approval.

"It is my hope that competitive forces will flourish and the development of new technologies will create additional efficiencies throughout the system," McDowell said.

He added that such advances should substantially diminish the need for subsidies in this area, and perhaps the day would come when Congress could deem no support is necessary.