FCC Proposes Modernizing Universal Service

The Federal Communications Commission proposed to modernize and streamline its universal service and intercarrier compensation policies to bring affordable wired and wireless broadband - and the jobs and investment they spur - to all Americans while combating waste and inefficiency. A Notice of Proposed Rulemaking (NPRM) and Further Notice of Proposed Rulemaking adopted by the FCC outlines a path to transforming programs that are currently focused on 20th Century voice service into a streamlined, efficient Connect America Fund that would help make 21st Century broadband available and affordable to rural communities.

Specific proposals in the NPRM include:

Eliminate waste and inefficiency throughout the current program.

• Transition funding for duplicative phone service by multiple phone companies operating in the same area to provide support where it's most needed.
• Impose reasonable limits and guidelines for reimbursement to providers that have little incentive under our current subsidy system to operate efficiently.
• Review continued need for funding mechanisms that have not been reevaluated in many years.

Use savings to spur investment in high-speed Internet in unserved areas.

• Identify unserved areas using the forthcoming National Telecommunications and Information Administration (NTIA) national broadband map.
• Create the Connect America Fund to quickly and efficiently deliver support to unserved areas.
• Use market-based policies to support providers in a technology-neutral manner, targeting areas where broadband funding will have the biggest impact.
• Ultimately, streamline and consolidate the five separate Universal Service Fund programs that support rural phone networks into the Connect America Fund. This will constrain spending and bring fixed and mobile broadband to unserved areas while preserving voice service for all, creating jobs and fueling economic growth.

Stimulate investment in broadband by reforming the Intercarrier Compensation system.

• Eliminate wasteful billing disputes by closing loopholes and tightening rules to prevent "phantom traffic," which is traffic that has been disguised so it can't be identified for billing purposes.
• Amend rules to reduce "traffic pumping," a practice that drains revenues from the system by exploiting existing rules to earn more intercarrier compensation. Reclaimed revenues could be invested in networks or used to reduce prices for consumers.
• Gradually reduce per-minute Intercarrier Compensation charges. These charges create incentives for carriers to maintain legacy networks that maximize intercarrier revenues rather than investing in advanced, efficient IP-based infrastructure.
• Develop a system to offset reductions in intercarrier rates, including, where necessary, support from the Connect America Fund.

Increase accountability for recipients and for government, and more effectively measure program performance.

• Adopt clear performance goals and metrics for the Connect America Fund.
• Require increased disclosures about the operating performance and financial condition of companies that receive universal service support.
• Increase transparency, oversight, and accountability.