FCC chief wants some subsidies used for broadband

CHICAGO (Reuters) - The Federal Communications Commission should take steps so that some telephone subsidies can be used to encourage the roll-out of high-speed Internet service in rural areas, FCC Chairman Kevin Martin said on Tuesday.

The $7.3 billion Universal Service Fund administered by the FCC has traditionally subsidized voice telephone services in high-cost, rural areas of the nation. Martin said the fund should also help companies roll out broadband service in those areas.

“I think that we need to recognize that we have a limited amount of money, and we need to be spending it wisely and trying to facilitate broadband connectivity more fully,” Martin said in a speech at a telecommunications industry conference.

Martin also reiterated his support for proposals to use a new, “reverse auction” bidding system to determine which companies get universal service funds. Under the current system, money is given to several companies in a particular rural area in an effort to foster competition.

“I think we need to update our policies to find a technologically neutral and competitive manner to be distributing universal service funds,” Martin said.

The Universal Service Fund subsidizes phone service to rural and low-income households, as well as communications services and Internet access for schools, hospitals and libraries.

Consumers pay an additional 11.7 percent on their long-distance fees for the fund, up from about 5.8 percent in 2000. The total size of the fund has increased to about $7.3 billion at the end of 2006 from about $1.5 billion in 1998.

Some efforts to reform the subsidy program have been supported by Verizon Communications and Qwest Communications International Inc., whose customers have increasingly had to pay more to keep the fund afloat.