Telecoms eye U.S. shift in subsidy focus to Web

Fri Jul 29, 2011 6:14pm EDT

* Telecom companies submit FCC filing on USF, ICC reform

* Plan would shift fund focus to broadband deployment

* Critics support shift but wary of the plan's particulars

By Jasmin Melvin

WASHINGTON, July 29 (Reuters) - Six telecom providers told U.S. regulators they could begin to fund in 2012 a revamped government subsidy program that would help deploy high-speed Internet service to 4 million Americans living in rural and costly-to-serve areas.

The commitment was part of a proposal sent to the Federal Communications Commission as it shifts the focus of its $8 billion universal service fund to broadband service from phone lines.

AT&T (T.N), CenturyLink (CTL.N), FairPoint (FRP.O), Frontier Communications FTR.N, Verizon (VZ.N) and Windstream (WIN.O) said on Friday they backed the proposal that could help provide broadband to underserved areas.

The current patchwork of programs in the FCC's fund -- paid for by fees added to consumers' telephone bills -- would be fully replaced by two new universal service programs to support fixed and mobile broadband under the telecom companies' plan. The transition would be complete in 2016.

The industry proposal would also gradually lower the charges phone companies pay to each other for handling voice traffic, reforming the complex system of payments between carriers called intercarrier compensation.

The plan follows the FCC's request for industry input after it proposed new rules in February to modernize the universal service fund. More than 20 million Americans are without access to high-speed Internet.

"We're pleased that many have taken up that challenge, and we will consider those proposals as we finalize reforms," an FCC official said.

"We urge the FCC to use the momentum this proposal has created to complete the reform process this fall," Representatives Greg Walden and Lee Terry, chairman and vice chairman of the House communications subcommittee, said in a statement.

But elements of the industry plan were criticized by others.

Public interest group Free Press, while in support of shifting universal service to a broadband focus, said the proposal could raise the rates of urban customers.

Companies are expected to rely more on retail customer revenue as revenues from intercarrier compensation charges are lost. To ease this shift, the proposal from the six companies would loosen regulations on rates and pricing flexibility.

Free Press also said that federal subscriber line charge rates could go up by as much as $3.75 by July 2016.

"Raising this fee for everyone in the name of increasing the self-sufficiency of a small number of already highly profitable rural phone companies is unnecessary," Free Press Research Director Derek Turner said in a statement.

The proposal argues that monthly subscriber line charges would be kept in check by competition, and the rate increases are capped as an additional protection to consumers.

The National Cable and Telecommunications Association said it would work with the FCC and other groups to achieve reforms, while the American Cable Association, representing independent companies providing broadband service to 7.6 million subscribers, said it would send its own comments to the FCC regarding the agency's proposed rulemaking. (Reporting by Jasmin Melvin; Editing by Tim Dobbyn)

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