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Bonnie Sutton

US Regulator Proposes Wide Reforms of Rural Telephony Subsidy - 1 views

julius Genachowski Rural telephony Universal Service fund Connect America Intercarrier compensaton

started by Bonnie Sutton on 06 Oct 11
  • Bonnie Sutton

    By: Simon Davies | 6th Oct 2011: 4:57pm

    The US telecoms regulator has outlines plans to reform the Universal Service Fund (USF) and Intercarrier Compensation system (ICC) that are used to subsidise services in rural areas.

    FCC Chairman Julius Genachowski said that despite spending $4.5 billion per year, USF is failing to get broadband to approximately 18 million Americans in rural areas. This plan would ensure money is spent in a more targeted and efficient way, bringing greater fairness and benefit for consumers who pay into USF each month.

    In a speech announcing the proposals, he said that the USF is wasteful and inefficient. The fund pays some companies almost $2,000 a month -- that's more than $20,000 a year -- for a single home phone line. He also noted that in many areas it subsidizes companies even though there is a competing provider -- typically a cable company -- providing voice and broadband service without a dollar of government support.

    The Chairman then offered his plan to transition USF to a Connect America Fund. This Fund would have two core goals:

    The transition from USF to a Connect America Fund would start a near-term build-out to hundreds of thousands of consumers in 2012, and would ultimately help get broadband to the 18 million Americans who can't get it today.

    The fund would also provide universal availability of affordable mobile broadband through a new Mobility Fund. Deployment of mobile broadband would be extended to more than 100,000 road miles. In addition to a one-time shot-in-the-arm effort to accelerate deployment of 4G networks in 2012, this Fund would provide significant ongoing support for rural mobile broadband.

    On the ICC side, Chairman Genachowski said, "Like USF, the current ICC system is unfair to American consumers. It forces hundreds of millions of consumers across the country to pay higher bills to subsidize monthly local telephone bills as low as $8 for other consumers. Our reforms would result in major consumer benefits."

    The proposed ICC reforms include three main elements:

    (1) Immediately 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, ensuring symmetry in the treatment of such traffic.

    (2) Phase down ICC charges over a measured but certain multi-year transition path, starting by bringing intrastate access rates to parity with interstate rates.

    (3) Help companies transition by employing a tightly controlled recovery mechanism. The plan would permit some companies to receive transitional support from the Connect America Fund, but that support would be accompanied by obligations to serve the public as well as strong oversight and accountability.

    "By eliminating billions of dollars in hidden subsidies that are currently built in to wireless and long-distance bills, consumers can expect reduced costs, better value for their money, or both. We estimate that wireless consumers alone would see more than $1 billion in annual benefits from ICC reform." the Chairman added.

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