* Genachowski offers plan for modernizing USF
* Cable group says gives phone companies unfair advantage
* Proposal set for agency vote on Oct. 27
(Adds comments from industry and analyst)
By Jasmin Melvin
WASHINGTON, Oct 6 The U.S. communications
regulator unveiled on Thursday a proposal for achieving
universal broadband coverage by the end of the decade.
Some 18 million Americans do not have access to broadband
where they live and work despite some $4.5 billion in public
money spent each year to subsidize telephone service for rural
Federal Communications Commission Chairman Julius
Genachowski proposed a strategy for revamping that government
subsidy program to help deploy high-speed Internet service to
millions of Americans living in rural and costly-to-serve
"The costs of this broadband gap are measured in jobs not
created, existing job openings not filled and our nation's
competitiveness not advanced," Genachowski said in a speech on
Thursday, acknowledging that the current program is broken.
The FCC earlier in the year proposed modernizing the $8
billion universal service fund -- paid for through fees added
to consumers' telephone bills -- to spur infrastructure
investment while removing inefficiencies in the program.
Genachowski's proposal would gradually move the largest
program within the universal service fund, the program that
subsidizes telephone service, to directly support fixed and
His plan would also phase out funding for duplicating
services offered by several phone companies serving the same
Broadband buildout to unserved areas could begin in early
2012 under the plan, bringing high-speed Internet to hundreds
of thousands of homes in the near-term.
"It will help cut the number of Americans bypassed by
broadband by up to one half over the following five years, and
it will put us on the path to universal broadband by the end of
the decade," Genachowski added.
The comprehensive set of reforms will be circulated to the
other commissioners on Thursday, and are set for a vote at the
FCC's Oct. 27 meeting.
CABLE INDUSTRY NOT HAPPY
Genachowski outlined a new competitive bidding process for
securing funds from the program, but the American Cable
Association said it bent heavily to incumbent phone companies.
The proposal would quickly move to this bidding process in
some areas, but others would not shift until later years.
ACA said this would give incumbent phone carriers first
dibs at monies from the fund while other broadband providers,
like cable, wait years for the option to competitively bid to
receive support in those areas.
"The chairman's plan locks in a sole-source contract worth
billions of dollars for over ten years to a handful of
incumbent large telecom companies," ACA Chief Executive Matthew
Polka said in a statement.
ACA represents independent companies providing broadband
service to 7.6 million subscribers.
But Genachowski argued in his speech that "a flash-cut to
competitive bidding in some parts of the decades-old program
risks consumer disruption, build-out delays, and other
In order to push reform through, certain policy and
political trade-offs must be made, and that may limit cable
companies' prospects for receiving federal broadband support,
said Medley Global Advisors analyst Jeffrey Silva.
"The political sensitivities almost demand that in order to
get any sort of consensus that's politically viable, you have
to get buy-in by rural telephone companies," Silva said.
"That may be the best this chairman or any chairman is
going to be able to do because it's not just about policy, it's
about politics," he added.
(Reporting by Jasmin Melvin, editing by Bernard Orr)