FCC Moves to Set USF Cost Model, Shift High-Cost to Broadband

The FCC issued a notice of inquiry and a notice of proposed rulemaking for a Universal Service Fund overhaul. The action at the commission meeting Wednesday jump starts the switch from the high-cost fund to the Connect America fund, said Wireline Bureau Deputy Chief Carol Mattey. The commission will seek comment on an analytical framework and cost model aimed at containing the cost of USF and identifying the places with the greatest need, said Amy Bender, a Wireline Bureau deputy division chief. “A model that identifies efficient levels of support could be an important tool even if the commission ultimately adopts market-based mechanisms to identify supported entities and support levels,” she said.

The notice of inquiry will seek suggestions such on technologies that should be considered in the model and whether to use an “interim competitive procurement process to provide funding on an accelerated basis to extend broadband networks in unserved areas” while the commission considers new rules, Bender said.

The rulemaking notice will seek comment on how the commission should control the current system’s growth and “cut inefficient funding of voice networks and introduce efficient targeted funding of networks that can provide broadband and voice service.” The notice proposes the possibility of capping the high-cost program at 2010 levels and making specified changes that will target all savings toward the new Connect America fund. The revamp recommended includes moving rate-of-return companies to incentive regulation and “capping the per line amounts of interstate common line support,” shifting interstate access support to the Connect America fund, and reducing funding for competitive eligible telecom carriers “to zero over a five-year period,” Bender said.

The commissioners agreed that the actions are a sufficient first step in overhauling USF. Commissioner Michael Copps said he was pleased to support both items. Many of the proposals in the rulemaking notice “require major actions that will be burdensome for some.” As universal service shifts to support broadband, “we must make sure that voice service is available nationwide."

Chairman Julius Genachowski called USF reform a complex Rubik’s cube project. The items passed mark an important milestone toward ensuring “that every American has access to affordable, high-quality broadband communications service,” he said.