Shift USF funding from High-Cost program to broadband

Recommendation #69

FCC Chapter: 8.6

Status: In progress

The Federal Communications Commission should take action to shift up to $15.5 billion over the next decade from the current High-Cost program to broadband through commonsense reforms.

In Stage One, the FCC should identify near-term opportunities to shift funding from existing programs to advance the universalization of broadband.

To the extent the FCC does not realize the full amount of savings described in the National Broadband Plan, it will need to identify additional opportunities for savings in Stage Two in order to achieve the National Broadband Availability Target, unless Congress chooses to provide additional public funding for broadband to mitigate some of hese risks.

The FCC should issue an order to implement the voluntary commitments of Sprint and Verizon Wireless to reduce the High-Cost funding they receive as competitive eligible telecommunications carriers (ETCs) to zero over a five-year period as a condition of earlier merger decisions. Their recaptured competitive ETC funding should be used to implement the recommendations set forth in this plan. This represents up to $3.9 billion (present value in 2010 dollars) over a decade.

The FCC should require rate-of-return carriers to move to incentive regulation. Access replacement funding known as
Interstate Common Line Support (ICLS) would be frozen. This step could yield up to $1.8 billion in savings over a decade.

The FCC should redirect access replacement funding known as Interstate Access Support (IAS) toward broadband deployment. in order to advance the deployment of broadband platforms that can deliver high-quality voice service as well as other applications and services, the FCC should take immediate steps to eliminate this legacy program and re-target its dollars toward broadband. This could yield up to $4 billion (present value in 2010 dollars) in savings over a decade.

The FCC should take into account the impact of potential changes in free cash flows on providers' ability to continue to provide voice service and on future broadband network deployment strategies.

Fourth, the FCC should phase out the remaining legacy High-Cost support for competitive ETCs. As the FCC reforms USF to support broadband, it is time to eliminate ongoing competitive ETC support for voice service in the legacy High-Cost program.

The FCC should establish a schedule to reduce competitive ETC support to zero over five years, which will be completed in Stage Two.

In order to accelerate the phase-down of legacy support, the FCC could immediately adopt a rule that any wireless family plan should be treated as a single line for purposes of universal service funding.

As competitive ETC support levels are reduced, this funding should be redirected toward broadband. This could yield up to $5.8 billion (present value in 2010 dollars) in savings over a decade.

FCC Action Could Free Up $15.5 billion

The savings identified should be used to implement a number of USF and ICC recommendations in this plan.

• Approximately $4 billion will go to a combination of activities including the new Mobility Fund, potential revenue replacement resulting from intercarrier compensation reform, expanding USF support for health care institutions up to the existing cap, enabling E-rate funding to maintain its purchasing power over time, and conducting pilots for a broadband Lifeline program.
• The remaining amount, up to $11.5 billion (present value in 2010 dollars), can be expressly targeted to supporting broadband through the CAF so that no one is left behind.