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FCC to Create $4 Billion Connect America Fund

(October 27, 2011) - Every year, the FCC's Universal Service Fund provides over $4 billion for telephone companies to provide voice service in "high-cost" areas. A companion program compensates providers for completing telephone calls, with rates that vary based on technology used to make the call, be it a wireless phone, a traditional telephone, or an Internet service like Skype.

Forms of this program have been in place for over 95 years - a time when about 13 percent of U.S. households had a telephone, about 7 million dialtone lines - about the same number of iPhones that Apple expects to sell this month.

As consumers and businesses have adopted broadband, cracks in those creaky voice service subsidies are widening. The result is that while over $8 billion per year - funded by a 15 percent fee on everyone's phone bill - is spent on this program, immense gaps have emerged:

•18 million Americans do not have access to broadband networks. In places like Alaska and Tribal Lands, these access gaps are wide.

•Over 100 million Americans have not adopted broadband at home - one-third of the country. For low-income households, adoption is nearly half that rate, 38 percent. In Puerto Rico, the vast majority of schoolchildren do not have home broadband service.

•High-speed broadband by Community Anchor Institutions is not keeping pace. For example, according to the American Library Association, 45 percent of all public libraries say their broadband connection speed is insufficient for needs. Only one in five rural libraries have a fiber optic connection - and only two-thirds of urban libraries have such connectivity.

•Create a $150 million Tribal wireless fund, which will include Native Villages in Alaska, and propose to create a dedicated remote area fund.

Today, the FCC is attempting to start to close the access gap, particularly in high-cost, rural areas. The federal USF funnels approximately $4.7 billion per year in subsidies for carriers to provide voice service. Shifting that program to support broadband networks instead will be complicated, messy, and contentious. Essentially, the FCC's goal is to re-cut the pieces of that $4.7 billion-sized pie and redistribute it among broadband and voice segments.

We will be following the FCC's decision today and summarizing it here. We expect that the FCC will announce:

•A plan to use broadband mapping data to identify areas of the country without broadband and shift $4 billion away from voice subsidies to fund network construction in those areas in the next five years.

•Create a $300-400 million per year Mobility Fund that will fund wireless infrastructure projects in communities without adequate wireless data service, and

•Transition the current per-minute intercarrier regime to a uniform rate system.

Stay tuned here for more details as the FCC takes its vote and releases more information.

By Tom Koutsky, Chief Policy Counsel, Connected Nation