FCC to Propose Expanding Broadband Service to Underserved Areas

The Federal Communications Commission on Feb 8 will propose the first steps toward converting the $8 billion fund that subsidizes rural telephone service into one for helping pay to provide broadband Internet service to underserved areas.

Today, FCC Chairman Julius Genachowski will outline the proposal. Most of the money under discussion involves a longstanding subsidy known as the Universal Service Fund, which is paid for through fees tacked onto most consumers’ phone bills and distributed among telephone companies to subsidize the high costs of providing service to rural areas. Chairman Genachowski will propose phasing out the payments between phone companies, which he says create “inefficiencies and perverse incentives” that result in waste in the fund. The FCC will also propose consolidating existing methods of paying for rural phone service into a new pool to be called the Connect America Fund, to be used for helping pay for making broadband available to underserved areas. The current Universal Service Fund and its spending methods are “unsustainable,” Chairman Genachowski is expected to say. “It was designed for a world with separate local and long-distance telephone companies, a world of traditional landline telephones before cellphones or Skype, a world without the Internet — a world that no longer exists.”