FCC's Genachowski Proposes USF, ICC Reform

Federal Communications Commission Chairman Julius Genachowski outlined a plan to reform and modernize the Universal Service Fund (USF) and Intercarrier Compensation system (ICC) in a speech delivered at FCC headquarters. The plan will, if adopted by the FCC later this month, reform USF/ICC to unleash enormous benefits including expanded broadband infrastructure for millions of Americans. In addition, the plan will deliver more value for the money for wireless consumers, increase private investment, and spur near-term and long-term job creation. In addition, the plan will provide dedicated support to extend mobile broadband to large areas of the country that are currently shut out from the benefits of advanced mobile services.

The Connect America Fund will have two core goals:

1. Ensuring universal availability of robust, scalable, affordable broadband to homes, businesses and anchor institutions in unserved areas. The Connect America Fund would begin near-term build-out to hundreds of thousands of consumers in 2012, and would ultimately help get broadband to the 18 million Americans who can't get it today.
2. Ensuring universal availability of affordable mobile broadband through a new Mobility Fund, which would be part of the Connect America Fund. Deployment of state-of-the-art mobile broadband would be extended to more than 100,000 road miles where Americans live, work, and travel. In addition to a one-time shot-in-the-arm effort to accelerate deployment of 4G networks in 2012, this Fund would provide significant ongoing support for rural mobile broadband.

The growth of the Connect America Fund would be constrained, keeping hundreds of millions of dollars in consumers’ pockets over the coming years. To help achieve this, Chairman Genachowski introduced a competitive bidding process among providers for obtaining universal service support, which would transition over time to a fully competitive system for distributing Connect America Fund dollars. This would be the first time competitive bidding has ever been used in the universal service fund.

The proposed ICC reforms include three main elements:

1. Immediately close loopholes like phantom traffic and traffic pumping, and other arbitrage schemes like CMRS-in-the-middle, where some carriers divert wireline traffic to wireless networks to avoid paying ICC. The plan would also provide greater certainty about compensation for VoIP calls that either begin or end on the public switched telephone network, ensuring symmetry in the treatment of such traffic.
2. Phase down ICC charges over a measured but certain multi-year transition path, starting by bringing intrastate access rates to parity with interstate rates.
3. Help companies transition by employing a tightly controlled recovery mechanism. The plan would permit some companies to receive transitional support from the Connect America Fund, but that support would be accompanied by obligations to serve the public as well as strong oversight and accountability.