FCC establishes fund to extend high-speed Internet to rural areas

Josh Peterson Tech Editor
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Rural communications just got a boost from the Federal Communications Commission with a bipartisan vote by four commissioners setting into action the Connect America Fund — a modernization plan to help extend high-speed Internet to rural areas.

First created as the Universal Service Fund by the FCC in 1997 out of a congressional mandate in the Telecommunications Act of 1996, the plan was developed to provide federal support to telecommunications companies in rural areas. Thursday’s announcement outlined the commission’s plan to reform the high cost program.

Commissioner Robert McDowell, a Republican Bush-era appointee, expressed overall approval of the FCC’s actions. McDowell’s commitment to reform comes from his family’s deep roots in rural Texas: his father spent part of his boyhood during the Great Depression on a ranch on the Texas–Mexico border without electricity, running water or phone service. The Commissioner did, however, express some concern.

“The contribution factor, a type of tax paid by consumers, has risen each year from approximately 5.5 percent in 1998 to an estimated 15.3 percent in the fourth quarter of this year. This trend is unacceptable. We must abate this automatic tax increase without further delay.”

Members of Congress and telecom analysts, overall, are calling the move a laudible accomplishment for the regulatory agency lead by Chairman Julius Genachowski.

Texas Sen Kay Bailey Hutchison told TheDC that USF programs have needed to be updated for many years. Thursday’s announcement was a major step in efforts of what other sources have told TheDC is a decidedly complex but important need to modernize a program that was originally created for now outdated wireline phone technology.

“I am glad to hear that it keeps the USF focused on bringing critical communication services to unserved parts of the nation. I also appreciate the FCC’s emphasis on halting the USF’s unsustainable growth,” said Hutchison.

“To avoid any disruption to consumers, it is critical for the FCC to ensure that the transition to the new regime is predictable and gradual so providers have adequate time to plan for and adapt to the new system,” she said. “I hope the FCC will move quickly to provide the regulatory certainty that broadband providers need so they can invest in rural America.”

Larry Spiwak, president of the free-market policy research group Phoenix Center for Advanced Legal & Economic Public Policy Studies, told TheDC that the chairman should be given credit where credit is due.

“In the macro-sense, this is really huge,” said Spiwak. “We’re moving away from switch-line calls. The industry is changing and needed to adapt.”

“Inter-carrier compensation reform is long overdue, and I’m glad to see it happen,” Anna-Maria Kovacs, Visiting Senior Policy Scholar at the Georgetown Center for Business and Public Policy, told TheDC. Kovacs is also the president of Strategic Choices, a communications consultancy firm.

Not all parties engaged in the process were satisfied with what the commission set forth. Gigi B. Sohn, president and co-founder of Public Knowledge, expressed deep disappointment with the commission for what PK viewed as the central problem of plan: “that of resolving the Commission’s authority over interconnected Voice Over Internet Protocol (VOIP) and broadband services generally.”

“VoIP services are becoming an integral part of the telecommunications network, serving millions of consumers,” said Sohn in a response statement to the commission. “By declining to address this issue, the Commission is condemning the industry to more years of uncertainty, consumers and others will be powerless to complain about industry practices and the future of the network is left in limbo.”

All parties await the full details of the plan to be published, and that date is still unknown.

“The effort is a tremendous undertaking and required a lot of compromise,” said Spiwak. “Not everyone is going to like everything in it, but I think overall it will work for everyone.”

This article has been corrected. Anna-Maria Kovacs is the Visiting Senior Policy Scholar at the Georgetown Center for Business and Public Policy, and President of Strategic Choices.

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