FCC Chairman Genachowski unwraps USF overhaul plans

Federal Communications Commission (FCC) Chairman Julius Genachowski detailed his plans to revamp the Universal Service Fund (USF) and Intercarrier Compensation (ICC) last Thursday. The plans immediately drew fire from several quarters.

Federal Communications Commission (FCC) Chairman Julius Genachowski detailed his plans to revamp the Universal Service Fund (USF) and Intercarrier Compensation (ICC) last Thursday. The plans immediately drew fire from several quarters.

Genachowski’s vision for a new “Connect America Fund,” which still needs to be adopted by FCC commissioners before it can be enacted, dovetails with the National Broadband Plan’s promise to refocus the USF and ICC to make them more conducive to broadband service roll outs. The changes, Genachowski asserted, also would boost wireless services, increase private investment, and spur near-term and long-term job creation.

The Connect America Fund initiative has three main elements, according to a press statement from the FCC:

  1. Close loopholes like phantom traffic and traffic pumping, and other arbitrage schemes like CMRS-in-the-middle, where some carriers divert wireline traffic to wireless networks to avoid paying ICC. The plan would also provide greater certainty about compensation for VoIP calls that either begin or end on the public switched telephone network.
  2. Decrease ICC charges over what the statement termed “a measured but certain multi-year transition path,” starting with bringing intrastate access rates to parity with interstate rates.
  3. To aid the transition process, some companies would be eligible to receive transitional support from the Connect America Fund.

To limit the growth of the Connect America Fund, Genachowski proposed a competitive bidding process among providers for obtaining universal service support. This process would evolve to a fully competitive system.

“Our plan would deliver tremendous benefits for consumers,” Genachowski asserted in a speech at FCC headquarers. “Accelerated broadband build-out and upgrades to networks mean that millions more consumers of all ages will be able to enjoy the economic and social benefits of broadband. And consumers overall will be treated more fairly, thanks to the elimination of deep inequalities ingrained in the current system, cuts in wasteful spending, and constraints on the growth of a fund that is paid for by consumers. We estimate that wireless consumers will see more than $1 billion in annual benefits from ICC reform alone.”

However, the plan did not receive widespread praise.

"Because any plan to reform the universal service regime will have a significant impact on consumers and competition in the broadband marketplace for the next 20 years, it must be forward looking, recognizing and taking advantage of today's competitive marketplace and the hundreds of broadband providers across the country, including many offering a robust service over cable television infrastructure that is a preferred choice by most consumers,” said Matthew Polka, chairman and president of the American Cable Association. “Unfortunately, the chairman's plan does not achieve this critical objective. Instead, the chairman's plan locks in a sole-source contract worth billions of dollars for years to a handful of incumbent large telecom companies to deploy broadband at maximum speeds that are below average. It favors one small group of providers over others to the disadvantage of consumers. By excluding hundreds of broadband providers willing, able, and eager to compete to provide service to consumers living in rural areas where government support is provided, it will deprive these consumers of receiving the best possible service at the lowest possible price.”

Meanwhile, the US Telecom Association, several of whose members had offered its own suggestions for USF and ICC reform in a treatise called America’s Broadband Connectivity (see “ACA to FCC: Reject telco USF reform plan”), took a neutral stance. “We applaud Chairman Genachowski for his commitment to connecting all Americans to high speed broadband, and for his understanding of the critical importance of universal service and intercarrier compensation reform to this goal,” said USTelecom President and CEO Walter B. McCormick Jr. “While we have some concerns what he outlined today, we appreciate that he and his fellow commissioners are looking to find the right balance that will benefit consumers, advance the public interest, accelerate broadband investment, and create jobs. We appreciate his leadership, and look forward to continuing to work with the commission on this complex undertaking.”

Verizon, one of the signatories to the America’s Broadband Connectivity initiative, was equally noncommittal. "We congratulate Chairman Genachowski for putting forward a plan to reform the broken intercarrier compensation and universal service programs. If done right, the reforms will connect millions of rural Americans to broadband networks and transform these programs to meet the needs of consumers in today's Internet- and broadband-centric society,” said Kathleen Grillo, Verizon senior vice president, federal regulatory affairs. "The FCC has a unique opportunity to put in place policies that will bring all the benefits of broadband connectivity to millions of additional consumers. Verizon stands ready to continue working with the FCC, the industry coalition, and other policymakers to help get the job done."

However, at least one party liked what it heard. "CTIA strongly agrees that comprehensive reform of the federal Universal Service Fund and Intercarrier Compensation System is necessary in order to ensure these government programs meet the changing needs of U.S. consumers,” said CTIA President and CEO Steve Largent. “We are pleased Chairman Genachowski has acknowledged the Universal Service Fund must take into account the rapid consumer adoption of wireless services, and we look forward to learning more about his proposals for a dedicated, robust Mobility Fund.”

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