The Federal Communications Commission has voted unanimously to reform the Universal Service Fund and intercarrier compensation system. It is creating a new Connect America Fund, with a budget of US$4.5 billion to meet the end-goal of this policy shift: extending broadband infrastructure to rural Americans, as opposed to subsidizing rural phone service.
That in itself could be seen as controversial: Certainly there are people in these areas — to say nothing of their representatives in Congress — who do not wish to see these subsidies end and have no interest in broadband-based services. [*Update – Nov. 3, 2011]
However, that issue only scratches the surface of the potential conflicts triggered by this reform.
Winners and Losers
The policy change is pitting carriers such as AT&T against providers poised to benefit from the change, such as Comcast.
The new policy also is dependent on the premise that the FCC has the authority to regulate VoIP calls, which has not been established yet.
The FCC, for its part, prefers to focus on the end-game.
“The FCC’s reforms will transform antiquated systems designed for the telephone era — the Universal Service Fund and a related system of payments between phone companies known as Intercarrier Compensation,” FCC spokesperson Mark Wigfield told the E-Commerce Times.
By contrast, the Connect America Fund will extend 21st century broadband and mobility to rural America, he said.
Just Part of the Transition
For rural Americans who don’t want to part with their telephone subsidies, tech analyst Jeff Kagan expressed his sympathies — but added they will have to accept the transition.
“There are limited dollars available. so the FCC has to reapportion its resources,” he told the E-Commerce Times. “In general, communications are moving to broadband. It delivers telephone, TV and the Internet. We are only at the beginning of that curve.”
Transitions “are always noisy, awkward and messy,” he said. “Eventually, we will get there. We may see pushback, stalling and other tactics, but we will get there.”
The Question of VoIP
Carriers, needless to say, don’t have to be convinced of the value of broadband. However, the FCC’s position is going to lead to policy warfare between companies that focus on broadband and those that focus on more traditional services, T. Barton Carter, a professor of communication and law at Boston University, told the E-Commerce Times.
AT&T has been reported as saying it will not collect the necessary fees, he noted.
“What complicates this whole issue is VoIP,” Carter continued. “The FCC has been struggling how to classify it, whether it is an information or phone service.”
From the 30,000 foot view, he explained, the issue is relatively simple: “This is reflective of the Obama administration’s initiative to provide broadband access to people who don’t have it. But like many things, the devil will be in the details as to who gets charged the fees for this, what regulations will apply, and how VoIP services are defined.”
From an even loftier perspective, the FCC does have a point, Carter said. “This is reflective of the struggle to shift from old communication technologies to new communication technologies with legislation that was written in the pre-broadband era.”
The last major piece of legislation was the Communications Act of 1996.
“That is the legal basis on which these regulations are being crafted,” said Carter. “To say we are in a different world now is a vast understatement.”
Protests Are Coming
Given the various viewpoints, Carter anticipates any number of actions to stymie this move. Carriers can challenge any FCC action, either directly or indirectly, by not collecting fees, as AT&T has suggested.
It would be up to the FCC to enforce the fees, which would invite another round of regulatory hearings and comment-making.
Finally, the carriers can fall on their last resort, Carter said — appealing to Congress. “It has been tried before and it will be tried again.”
*ECT News Network editor’s note – Nov. 3, 2011: The FCC will continue to support voice service even as it extends to broadband, spokesperson Mark Wigfield told the E-Commerce Times. “Providing voice and broadband are a condition of receiving support,” he said. “We are taking a number of steps to control costs and improve accountability, which enables us to set a budget at $4.5 billion,” Wigfield explained. “Among the ways we are controlling costs are eliminating the identical support rule, which provides subsidies for multiple providers in a single area, targeting funding to the areas where coverage wouldn’t be possible without support, reducing the amount of support for corporate operations expenses, limiting reimbursements for excessive capital and operating expenses [and] reducing subsidies for companies that charge artificially low rates (i.e., they are making up for rates that are below the national average with universal service).”