FCC chairman unveils plans to overhaul rural phone service fund to provide high-speed Internet access


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Federal Communications Commission Chairman Julius Genachowski on Monday unveiled a plan to overhaul a much-criticized program that helps provide phone service to far-flung rural areas, proposing to focus it on expanding high-speed Internet access to those same locations.

The $8-billion Universal Service Fund is paid for by telecommunications companies, who must contribute a percentage of their long-distance revenue, often passing those fees on to their customers. The decades-old program has successfully spread phone service to residents in hard-to-reach areas that often are unprofitable for companies to serve, Genachowski said in a speech to the Information Technology and Innovation Foundation.


But the fund has become highly inefficient, he said. In some cases, it pays more than $20,000 a year to provide a single home with phone service.

‘The program is still designed to support traditional telephone service. It’s a 20th century program poorly suited for the challenges of a 21st century world,’ Genachowski said. ‘In its current state, the program is not getting the job done. It’s leaving millions on the outside looking in, and wasting taxpayer dollars every year.’

Reforming the Universal Service Fund was a priority of the FCC’s National Broadband Plan, which was released last year with a goal of ensuring that at least 100 million homes have access to affordable networks delivering Internet services at speeds much faster than today by 2015.

Genachowski said in an interview that his main goal is to modernize and streamline the fund.

‘We want to eliminate the waste and inefficiency from the program as it exists now and then use those savings to fund Internet service in unserved America,’ he said.

Genachowski’s plan calls for major changes, particularly to the complex payments known as Intercarrier Compensation that telecommunications pay each other as they transmit calls over their networks. He wants to use the savings from that and other changes to help pay for a new Connect America Fund.


‘At the end of this transition, we would no longer subsidize telephone networks; instead we would support broadband,’ Genachowski said in his speech. ‘As we do this, we will make sure that all Americans continue to have access to voice service and can make calls from their homes. Voice will be ultimately one application that consumers can use over their fixed or mobile broadband connections.’

The FCC is set to take an initial vote on the plan Tuesday, starting the process of receiving public comments on the new rules.

Telecommunications companies have pressed for years for changes to the Universal Service Fund and Genachowski said he has received positive feedback from the industry to his ideas.

‘There’s certainly difference of opinion about the best way to fix it. Those are questions we have to resolve,’ he said in the interview. ‘It’s understood the program itself is unsustainable.’

Verizon said it supported Genachowski’s call for changing the fund and said he presented ‘ a good road map.’

But Genachowski is wading into controversial territory. Some rural lawmakers want the Universal Service Fund expanded to extend high-speed Internet access, while others have called for the fund to be eliminated because they said it is no longer necessary.


Genachowski said he’s trying to chart a middle course and rejected calls for killing the fund.

‘While the world has changed, the importance of universal service has not,’ he said in his speech. ‘We simply shouldn’t let millions of Americans be bypassed by the broadband revolution.’


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-- Jim Puzzanghera