February 7, 2011 / 5:20 PM / 7 years ago

US FCC looks to revamp rural phone service subsidy

* Genachowski outlines universal service fund changes

* Wants fund to help bring broadband to unserved areas

* FCC meets Tuesday on moving fund focus to Internet

By Jasmin Melvin

WASHINGTON, Feb 7 (Reuters) - The top U.S. communications regulator outlined a plan on Monday to shift government subsidies for landline telephone service to fund high-speed Internet in rural America.

Some 24 million Americans live in areas not served by broadband service, but a modernized, streamlined universal service program could begin to bridge these gaps in infrastructure, said Federal Communications Commission Chairman Julius Genachowski.

Genachowski laid out his plan for revamping the $8 billion universal service fund -- paid for through fees added to consumers’ telephone bills to subsidize landline phone service for low-income and rural families -- in a speech at the Information Technology and Innovation Foundation (ITIF).

An ITIF study found the United States ranked 6th in broadband adoption and last out of 40 industrial countries in its rate of improvement in innovation and competitiveness.

“When it comes to our broadband infrastructure, we are not where we need to be. Worse, we risk falling behind our global competitors if we don’t accelerate our rate of progress,” Genachowski said.

At an FCC open meeting on Tuesday, commissioners are expected to propose transitioning the universal service fund to directly support fixed and mobile broadband.

The shift in purpose of the universal service fund was part of the national broadband plan released by the FCC nearly a year ago.

Genachowski called the current universal service program unsustainable.

“It was designed for a world with separate local and long-distance telephone companies; a world of traditional, landline telephones before cell phones or Skype; a world without the Internet -- a world that no longer exists,” he said.

Genachowski’s proposal aims to reduce inefficiencies in the program by phasing out funding for duplicative services offered by several phone companies serving the same area.

The proposal would also consolidate all the universal service fund programs that support rural networks into a single Connect America Fund intended to bring high-speed Internet to unserved areas.

The new fund would also include spending constraints and increased transparency and oversight.

“At the end of this transition, we would no longer subsidize telephone networks; instead we would support broadband,” Genachowski said. Voice service would be one application that consumer could use over their fixed or mobile broadband connections.

(Reporting by Jasmin Melvin; Editing by Tim Dobbyn)

((jasmin.melvin@thomsonreuters.com; +1 202 354 5880; Reuters Messaging: jasmin.melvin.thomsonreuters.com@reuters.net)) Keywords: USA INTERNET/FUND

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