Reforms urged in federal funding for phone lines

Americans are turning away from home phone lines and toward mobile, but a federal program continues to pour $8 billion a year into phone service for rural homes and businesses. But as the nation looks to wireless and fiber broadband networks as its on-ramp to e-mail, tweets and Skype calls, lawmakers and regulators have called for sweeping changes to the Universal Service Fund.

AT&T and Verizon were the top recipients of Universal Service Fund grants last year. The companies point to the subsidy as symbol of backward regulation, among a string of policy moves by the federal government that the companies say could hurt the economy. They also have argued against a proposal to redefine broadband as a telecommunications service, saying the move could lead to rate regulation and force them to share their networks with competitors. The FCC has proposed redirecting the program to support broadband. The agency has also suggested that only one provider in a geographic area receive grants.

Public interest groups say there needs to be better oversight of whether firms getting the money truly qualify for it. The groups also say that wireless technology is cheaper to deploy than traditional phone lines or underground fiber networks, but that cellphone companies don't seem to be getting smaller awards. The groups also say the FCC should recalculate how much money it distributes for broadband connections because the return on investment is so much greater for Internet service. That should make companies better able to pay for their own operating costs without federal assistance, said Derek Turner, a policy director for the public interest group Free Press.