FCC set to unveil rules for rural broadband fund

October 26, 2011 By PETER SVENSSON , AP Technology Writer

Federal regulators are set to reveal their plan Thursday for an overhaul of the $8 billion fund that subsidizes phone service in rural areas and for the poor, with the goal of redirecting the money toward broadband expansion.

The is also preparing to disclose new rules for the byzantine system that governs how companies pay each other for phone calls. It's a system that, virtually everyone in the industry agrees, is outdated and leads to perverse schemes by carriers to stimulate certain kinds of phone traffic.

However, reform of the system has been held up for years by competing interests.

Together, the new rules are set to be the Obama administration's most significant overhaul of regulations. The five-member commission will vote on the rules at a meeting Thursday morning.

The Universal Service Fund was created to ensure that all Americans have access to a basic telephone line. It is supported by a surcharge on long-distance . The program subsidizes phone service for the poor and pays for in schools, libraries and rural health clinics. But more than half the money goes to pay phone companies that provide phone service in rural places where lines are supposedly unprofitable.

John Stephens, of the country's biggest phone company, AT&T Inc., told investors and analysts last week that "in general, we're very positive to the idea of getting a refresh of those rules."

AT&T and the other big phone companies have put forward their own reform proposal. The FCC's plan is expected to borrow at least some features from it. That plan suggested capping the size of the new fund at $4.5 billion annually, giving subsidies to only one provider in an area and directing funds toward places where there is no business case for companies to provide service on their own. In addition, it would fund wireless broadband access in remote or rugged areas where wired line construction costs the most.

Policy director Matt Wood at consumer advocacy group Free Press said the phone-company plan had "very little to do with increasing broadband adoption, and everything to do with allowing monopoly local phone providers to reach further into the pockets of consumers."

Meanwhile, small rural phone companies have their own plan, and are apprehensive that the FCC will place limits on how they use their funding and divert money to wireless broadband.

The FCC estimated last year that 9.2 million U.S. households, or about 26 million people, don't have access to wired broadband. Excluding those who can get broadband wirelessly, the number shrinks to 5 million households or 14 million people. That's 4.5 percent of the population.

Telecom consultant Rory Altman at Altman Vilandrie & Co. notes that broadband coverage has spread much faster than once did, and further funding might not accomplish much.

"What are we trying to solve by funneling more money into this?" he asked.

Explore further: Phone companies present rural broadband plan


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1.3 / 5 (12) Oct 26, 2011
Why the hell are we subsidizing high speed internet to poor people? Jesus Christ what is wrong with people? So STUPID
not rated yet Oct 26, 2011
Honestly, this is getting ridiculous. If they really want to provide phone/broadband connections to the backwoods, they can invest 4B a year in satellite internet.

For example - Hughesnet is profitible, provides up to 5mb downloads, and is available anywhere in the country. adding 4B to subsidize service in the boondocks would do far more than building out infrastructure from every tom, dick, and redneck.

But, I digress, If you want to live that far out in the woods, you're probably pretty antisocial anyways. These services are already available in most of small town america.

While I consider myself progressive, we should largely abandon this ridiculousness. The fee should be basic and just used for the most necessary situations. And the phone companies shouldn't be able to set the price or profit from the fee like they do now...
1 / 5 (1) Oct 27, 2011
Such narrowness of mind. Oviously a city person who believes food comes from the grocery store or some restaurant or other. We should consider there are people in this country who still do not have a cell phone, much less a land line--as the article notes, this is partially because of economics, i.e. "My company's bottom line is more important that people." In China, everyone has a cell phone, even people in the boonies, farmers and street vendors. More people own or have access to computers in China than in the US; that is, a considerably higher percentage of people.
NOW...isn't it interesting that this FCC decision is announced right after NASA sent up a satellite to provide broadband service for North America? Surely not because certain companies want to make sure they get first chance at such a money maker? Surely not because surveillance by Internet is easier than by telephone (landline)? No, no, no! Most certainly not.
1 / 5 (1) Nov 03, 2011
This is ripe for abuse by the special interests, kiss your billions goodbye!
not rated yet Nov 03, 2011
@Jim - Many people in rural china do not have any phone or share a cellphone.

Also, With a population density 5 times higher in china, it is more profitable for chinese companies to build out their networks.

Third, we're talking about broadband, not cellphone coverage.

Lastly, you are making stupid assumptions. I'm basing my opinion on the fact that my dad lives on the side of a mountain in a rural area and has high speed internet, home phone, and cell phone service.

I don't think you understand the infrastructure. You have to be REALLY REALLY far out for it to be unprofitable to provide service. There are less than thousand people in my dad's community, and all they do is drop a microwave tower in the middle of it. You don't even need to run a physical line to a new community...

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