FCC looks to overhaul telephone subsidies

Universal Service Fund (USF) reform at the U.S. Federal Communications Commission hasn't commanded as much attention as the recent debate about the so-called spectrum white spaces.

However, reform of the fund, which subsidizes telephone and some broadband service to rural and other underserved areas of the U.S., is on the FCC's Tuesday agenda, as is a debate over whether to allow new broadband devices to access the white spaces of unused television spectrum.

The FCC is scheduled to hear reports and vote to move forward on proposals that would reform both the USF and intercarrier compensation (ICC) rules, which determine the rates telecom carriers pay for using each other's networks.

Opponents of both proposals, advanced by FCC Chairman Kevin Martin, have called for time to study the plans. The details of Martin's proposals have not been made public, and opponents of the plans say Martin is trying to push them through without significant public debate.

"It is incomprehensible that the FCC would hastily determine the future of the Universal Service Fund without sufficient time for review by the public," Senator Olympia Snowe, a Maine Republican, said in a statement Friday. "Rural carriers in Maine depend on the USF and ICC to provide telephone and wireless services to remote areas and rash overhauls of these programs could place costly burdens on consumers, not to mention possible service setbacks."

Debates over the USF and ICC are highly technical and can be difficult to explain. However, billions of dollars are literally at stake, and critics say proposals from FCC Chairman Kevin Martin could result in increased fees or taxes on customers' phone bills.

The USF's 2009 budget is US$6.7 billion, not counting the $4.2 billion E-Rate program, which helps schools and libraries in poor areas connect to the Internet. The U.S. government raises the funds through a tax on telephone service, and some mobile carriers collect the tax as well.

A host of groups has called for USF reform in recent years, with some critics saying the program's focus on traditional telephone service doesn't address needs for broadband and mobile-phone service in rural areas. The Telecommunications Act of 1996 expanded the USF program, but there have been few changes since then.

Several people, including Democratic presidential candidate Barack Obama and FCC member Michael Copps, have called on the USF to shift its focus toward subsidizing broadband instead of traditional phone service.

"Bringing broadband to the far corners of the nation is the central infrastructure challenge our country confronts right now," Copps said late last year. "Broadband is our generation’s infrastructure challenge, but we have fallen behind other nations in getting high-speed services out to our people. We have put ourselves in an untenable competitive position by denying the tools of high-speed opportunity to most Americans."

Martin is pushing a plan that would reportedly put a $1-a-month USF tax on any device that has a telephone number assigned to it, including VoIP (voice over Internet protocol) phones. USF fees are now based on a percentage of a customer's phone bill, and for many people, the $1 tax would be an increase.

The IDG News Service is a Network World affiliate.