Why USF Reform Matters

The battle over Universal Service Fund reform isn't grabbing the kind of headlines that other regulatory squabbles are, but it is a significant issue for the U.S. telecom market for multiple reasons. Here's what you need to know about regulatory reform:

• Why you should care: First, the Federal Communications Commission's decision as to how USF will be changed essentially determines who has the best shot at providing broadband in unserved and underserved areas of the U.S. going forward. And by default, that means what the FCC decides will also likely determine whether those areas get broadband service and what the service looks like -– how fast it will be, how symmetrical, and whether it is wireless or wireline.
• Second, the impact of the FCC's choices could reverberate into other aspects of telecom, specifically wireless backhaul. Efforts to build ubiquitous 4G coverage could be impacted if the new rules send rural telecom providers into a tailspin, because someone has to build and maintain connections to wireless towers in rural areas.
• USF reform is being paired with intercarrier compensation (ICC), the regulatory formula that determines how telecom service providers compensate each other for completing voice calls. The pairing makes sense because ICC has been another means of funding networks in high-cost areas that have become archaic with the introduction of VoIP, among other things. ICC changes will impact any service provider offering voice services, potentially including VoIP companies and cable players.
• Some not-so-small companies, such as CenturyLink and even AT&T, would be financially impacted by changes in the USF rules that hurt incumbents. There's a reason the six largest U.S. incumbents have banded together and gotten some support from rural telecom associations for a plan that affords some protection to existing service providers in rural areas.
• And finally, the entire industry will be affected if a prolonged debate or court battle delays any decision on USF, because regulatory uncertainty slows purchasing on all fronts. The FCC had promised USF reform earlier this year but now has slipped on its plan to finish the process this summer and could be months away. Rep. John Dingell (D-MI) this week urged the agency to finish by October, saying the process has already gone on too long.