U.S. regulators approved converting a $4.3 billion telephone subsidy into a program to fund the extension of high-speed Internet services to an estimated 18 million Americans who lack broadband access.
The Federal Communications Commission voted 4 to 0 today to accept Chairman Julius Genachowski’s proposal to revamp the subsidy, which supports phone connections in regions where it’s expensive to supply service. The overhaul of the High Cost Program is part of an agency effort, led by Genachowski, to spur economic growth by increasing the availability of high-speed Internet.
“We are taking a system designed for the Alexander Graham Bell era of rotary telephones and modernizing it for the era of Steve Jobs and the Internet future he imagined,” Genachowski said before the vote at an agency meeting in Washington. The expanded broadband may result in “hundreds of thousands of jobs” in rural areas, he said.
In the same vote the FCC lowered the rates that companies charge to connect calls. Together the moves are designed to restructure support for rural companies and relieve pressure on the Universal Service Fund, a broader subsidy program that is financed through a charge on consumers’ long-distance calls.
Traditional landline companies led by No. 1 AT&T Inc. and second-largest Verizon Communications Inc. in July asked the FCC to give existing service providers the first crack at the new broadband subsidies. The plan also was signed by CenturyLink Inc., Fairpoint Communications Inc., Frontier Communications Corp. and Windstream Corp.
Wireless Industry Objections
U.S. Cellular Corp., a Chicago-based wireless carrier, and CTIA-The Wireless Association, in FCC filings before the vote said not enough of the new subsidy would go to mobile broadband. Members of the wireless association, a Washington-based trade group, include the four largest U.S. mobile carriers: AT&T, Verizon Wireless, Sprint Nextel Corp. and T-Mobile USA Inc.
The agency “rejected” the six-company approach, Mark Cooper, director of research for the Consumer Federation of America, said in an e-mail today.
“For the first time, public funds are being used to ensure that broadband is available at affordable rates,” Cooper said. “This change is long overdue.”
The FCC’s order lets companies levy a new charge on phone subscribers, according to Joel Kelsey, Washington-based political adviser for Free Press, a Florence, Massachusetts- based policy group.
“Asking consumers to pay more into a broken system and letting the industry divvy up the pot will not increase broadband adoption,” Kelsey said in an e-mail. “Prices should be going down, not up.”
The vote won’t raise bills, said FCC Commissioner Robert McDowell, a Republican.
“For the vast majority of consumers rates should decline or stay the same,” McDowell said. The commission has three Democrats and one Republican following a resignation.
FCC staff estimates that consumer benefits from the changes will amount to more than $2 billion annually, Genachowski said.
The changes “will help cut the number of Americans bypassed by broadband by up to one half over the following five years,” Genachowski said in an Oct. 6 speech. He said about 18 million Americans live in areas with no access to broadband.
Connect America Fund
Windstream is “anxious” to review the FCC’s order, which has “meaningful differences” from the six-company proposal, Mike Rhoda, senior vice president of government affairs for the carrier based in Little Rock, Arkansas, said in an e-mail.
At issue in today’s vote were the changes to the High Cost Program, which is part of the Universal Service Fund. The new program for supporting high-speed Internet service is to be called the Connect America Fund.
Disbursements from the High Cost Program rose to $4.3 billion in 2010 from $1.7 billion in 1998, according to the Universal Service Administrative Company, the Washington-based non-profit that administers the fund.
The Connect America Fund will be capped at $4.5 billion, about the level of current expenditure, the FCC said in a news release.
Since 2001, costs to consumers have also climbed, from 6.7 percent of long-distance and international calls to about 15 percent, according to the USAC.
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