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Genachowski lays out USF reforms, Connect America Fund details

FCC Chairman Julius Genachowski has circulated to his fellow commissioners comprehensive reforms aimed at modernizing the Universal Service Fund and the intercarrier compensation system and placed it on the agenda for a vote later this month.

According to Genachowski, the plan, if adopted, would reduce the number of Americans who today go unpassed by broadband Internet service by half within five years and put the nation on a trajectory for universal broadband service by the end of the decade.

During remarks delivered in the nation's capital Oct. 6, the chairman said adoption of the plan would drive economic growth in rural America and increase the size of the online marketplace in the United States, benefiting businesses and consumers throughout the country.

The Universal Service Fund (USF), which helped companies extend telephone service to areas that otherwise wouldn't have been served, worked in the 20th century. "But the program isn't working for the 21st," Genachowski said.

The program is outdated and focused on phone service "while high-speed Internet is rapidly becoming our essential communications platform," he said. To illustrate the waste and inefficiency, Genachowski pointed to instances in which it pays some companies about $2000 per month for a single home phone line — even when there are competitors offering phone and broadband without any government subsidy.

Aside from being wasteful, the fund also is unfair, Genachowski said. Today, $4.5 billion per year is spent, but that's being done in a way that's unfair for the consumers underwriting the fund through their phone bills, he added.

Nor did Genachowski have anything good to say about intercarrier compensation, which was a subsidy for local phone companies generated by consumers paying "artificially high" per-minute long-distance rates.

The FCC now is focused on the part of the USF program that funds the deployment of communications servers in rural America as well an intercarrier compensation, he said. Genachowski also laid out key parts of the FCC's proposed reform, including:

· Transition of USF to a Connect America Fund with the goals ensuring universal broadband service and the universal availability of mobile broadband through a new Mobility Fund.
· The introduction of competition in meeting the deployment goals to constrain the growth of the fund.
· Reform and modernization of the Intercarrier Compensation system.