Carriers, trade groups propose broadband fund

A new plan from Verizon, AT&T and small carrier groups would end traditional telephone service subsidies

A U.S. Federal Communications Commission program that subsidizes telephone service in rural areas would transition into broadband subsidies under a plan released Friday by six telecom carriers and three trade groups representing small carriers.

The proposal, called America's broadband connectivity plan, would bring broadband service to 4 million U.S residents who do not have it now, supporters said. The plan would phase out subsidies for rural telephone service under the Universal Service Fund (USF) administered by the FCC, with the subsidies for traditional voice service ending in 2016.

It's time to revamp the outdated USF, supporters said during a press conference. "I think we ended up in a very good place for consumers and for the future of the industry," said Kathleen Grillo, senior vice president of federal regulatory affairs at Verizon Communications.

Also supporting the plan are carriers AT&T, Frontier Communications, Windstream, CenturyLink and FairPoint Communications. Three trade groups representing small carriers, the National Telecommunications Cooperative Association (NTCA), the Organization for the Promotion and Advancement of Small Telecommunications Companies and the Western Telecommunications Alliance, have also signed on to the proposal.

The agreement between the carriers will help ensure the "sustainability of the networks that are used to deliver high-quality, affordable services to customers today in many parts of rural America," said Michael Romano, NCTA's senior vice president for policy.

The proposal is similar in some ways to recommendations for USF reform and intercarrier compensation in the FCC's national broadband plan, released in March 2010. But the carriers' proposal, a response to an FCC request this year for comments on USF reform, contains more specific recommendations and brings together a wide range of telecom and broadband providers.

The new proposal would cap the so-called high-cost fund in USF at US$4.5 billion a year, the current budget for the program that subsidies telephone service. Starting a year from now, some money in the high-cost fund would begin to support broadband. The money would be split between subsidies for wired broadband services and mobile and satellite broadband services.

Subsidies for satellite broadband could be used in remote areas too expensive to cover by wired or mobile broadband, said Michael Rhoda, senior vice president of government affairs at Windstream.

Broadband providers would have to give customers 4Mbps downstream service to qualify for subsidies under the plan. The proposal also includes recommendations for reforming the FCC's intercarrier compensation system, the rules governing what telecom carriers can charge for carrying each other's traffic. The intercarrier compensation proposals attempt to address fraud and arbitrage that result from differing rates in the system, supporters said.

Former U.S. Representative Rick Boucher, a longtime advocate of USF reform, praised the proposal. "Modernization of the USF to bring high-speed Internet services to unserved areas directly addresses the nation's foremost telecommunications challenge -- the need for universal broadband," Boucher, honorary chairman of broadband advocacy group the Internet Innovation Alliance, said in a statement.

Comptel, a trade group representing several telecom and broadband providers, said it supports part of the proposal. But the proposed intercarrier compensation rates are "unlawful," the group said. The targeted rates run counter to current law giving state public service commissions the authority to determine those rates, the trade group said.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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Tags telephonyComptelWindstreamtelecommunicationInternet Innovation AllianceCenturyLinkOrganization for the Promotion and Advancement of Small Telecommunications CompaniesFrontier CommunicationsKathleen GrilloRick Boucher4g3gMichael Rhodaat&tWestern Telecommunications AllianceU.S. Federal Communications CommissiongovernmentNational Telecommunications Cooperative AssociationbroadbandVerizon CommunicationsFairPoint CommunicationsMichael Romanoregulation

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