Connect America Fund I (NPRM)

Date: 10/27/2011

Summary

On October 27, 2011, the FCC adopted a Report and Order on Universal Service Fund reform. The FCC provided a lengthy Executive Summary of the decision.

As part of the Order, the FCC created the Connect America Fund, which will ultimately replace all existing high-cost support mechanisms. The CAF will help make broadband available to homes, businesses, and community anchor institutions in areas that do not, or would not otherwise, have broadband, including mobile voice and broadband networks in areas that do not, or would not otherwise, have mobile service, and broadband in the most remote areas of the nation. The CAF will also help facilitate our intercarrier compensation (ICC) reforms. The CAF will rely on incentive-based, market-driven policies, including competitive bidding, to distribute universal service funds as efficiently and effectively as possible.

Description

On April 21, 2010, the Federal Communications Commission launched a Notice of Inquiry (NOI) and Notice of Proposed Rulemaking (NPRM) to begin what it calls a once-in-a-generation transformation of the Universal Service Fund from supporting networks providing plain old telephone service into an effective and efficient tool for making affordable, high-quality broadband communications service available to all Americans.

The NPRM seeks comments on a number of proposals to cut legacy universal service spending in high-cost areas and to shift support to broadband communications. These proposals include capping the overall size of the high-cost program at 2010 levels; re-examining the current regulatory framework for smaller carriers in light of competition and growth in unregulated revenues; and phasing out support for multiple competitors in areas where the market cannot support even one provider.

Issues

1. Controlling the Size of the High-Cost Program

A. Capping legacy high-cost support provided to incumbent telephone companies at 2010 levels, which would have the effect of creating an overall ceiling for the legacy high-cost program. Such a cap would remain in place while the Commission determines how to distribute funds in a more efficient, targeted manner to those areas of the country where no firm can operate profitably without government support, while minimizing burdens on American consumers who ultimately pay for universal service through carrier pass-through charges.

B. The FCC invites other proposals that would ensure that the overall size of the high-cost fund stays at or below
current levels.

2. Specific Steps to Cut Legacy High-Cost Support

A. Shifting Rate-of-Return Carriers to Incentive Regulation

B. Elimination of Interstate Access Support

C. Sprint and Verizon Wireless Voluntary Commitments

D. Elimination of Competitive Eligible Telecommunications Carrier (ETC) High-Cost Support

E. Commenters are invited to submit other proposals to eliminate or reduce funding levels in the legacy high-cost support mechanisms to transition to efficient funding levels in the Connect America Fund.

Comment due date: 07/12/2010