The FCC unanimously voted to completely overhaul the Universal Service Fund (“USF”) last Thursday, in a move that marks a historic change in policy for the Commission. Part of a telephone subsidy regime that stretches back to 1934, the USF was established in 1997 to help expand telephone service into rural areas. The funds from the program came from what amounted to a tax on telephone service, with the fund capped at $4.5 billion a year. While the USF's funding source will remain the same, the FCC's ruling has drastically altered the focus of the program, with the subsidy now going to expanding broadband internet access in rural areas not currently served by internet service providers.
The FCC's vote to drastically alter the USF is remarkable for a host of reasons, with the unlikelihood of the change not least among them. The fund itself is a regulatory maze, with telecom giants drawing comparisons to health care and social security reform. All parties involved in the Fund have known that a big change to the program was necessary for quite a while; former FCC chairman Kevin Murphy came close to redefining the program in 2008, though the proposal ultimately failed to garner enough support. That makes Thursday's vote all the more remarkable, with some news outlets remarking that “[FCC Chairman Julius] Genachowski’s political victory in overhauling the largest part of the 15-year-old Universal Service Fund most likely will become his legacy.” The historical impact of the ruling was not lost on Genachowski, who called the decision “a once-in-a-generation overhaul of universal service.”
The FCC believes that the shift in focus from telephone to broadband access will have a number of positive effects. The first to benefit will undoubtedly be the 18 million Americans who currently do not have broadband internet access. Access will come in the form of both wired and wireless technologies, as the Fund will be used to subsidize the development of 4G coverage in underserved locations. The FCC hopes the USF will allow all 18 million unserved Americans to have broadband access by 2020, with 7 million receiving access sometime in the next six years. Chairman Genachowski touted the power of broadband internet to fundamentally alter the ways individuals and businesses interact with one another, citing positive changes in the lives of rural Americans that ranged from improved education to economic growth to superior health care for senior citizens.
"Chairman Genachowski touted the power of broadband internet to fundamentally alter the ways individuals and businesses interact with one another, citing positive changes in the lives of rural Americans that ranged from improved education to economic growth to superior health care for senior citizens."
The FCC also hopes to realize additional benefits of the plan outside of those inherent to increased internet accessibility. The Commission hopes to create 500,000 new jobs as the new broadband infrastructure is rolled out over the next six years. From a regulatory standpoint, Genachowski lauded the move as bringing “increased clarity to areas of uncertainty created by tensions between new communications services, like VoIP, and old rules.” Finally, Commissioner Robert McDowell was pleased that the new policies will “contain the growth of the Fund.” While Congress has yet to formally approve the change, ranking Congressmembers on both sides of aisle were pleased with the new spending controls and the focus on broadband expansion.
Even with all the above benefits, the FCC’s vote isn’t all roses and butterflies. While the major goals behind the USF revamp, like fiscal responsibility and broadband infrastructure development, are undeniably noble, it may very well be that the ends don’t justify the means. The major national broadband and telephone carries now have a right of first refusal to these underserved areas, meaning that smaller (and potentially cheaper) service providers won’t be able to bid for these expansion zones. That said, given the fact that these major telecom companies have been terribly slow in expanding into these areas, it appears that the pros of the FCC decision far outweigh the cons.
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