Thursday, October 27, 2011

FCC votes to shift billions of subsidy dollars to rural broadband from telephone companies

The Federal Communications Commission voted unanimously today to take $4.3 billion from an $8 billion subsidy for telephone connections in hard-to-reach rural areas and put it into a new initiative to expand broadband Internet service to an estimated 18 million people. The long-discussed initiative is part of an effort to increase economic growth through increased access to broadband. Chairman Julius Genachowski said this program could create hundreds of thousands of jobs in rural areas.

Todd Shields of Bloomberg Businessweek reports that in the same vote, the FCC also lowered long-distance call rates. "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," Shields writes. Large land-line companies, including AT&T and Verizon, asked the FCC to allow existing carriers to receive broadband subsidies first, but the FCC said no and instead decided to let companies "levy a new charge on phone subscribers," Shieleds reports. Free Press political adviser Joel Kelsey told Shields that asking customers to pay more would not expand broadband adoption.

The deal appears based largely on a "brokered reform proposal made by large carriers and small telco associations," Joan Engebretson reports for Connected Planet. Many small companies have been raising warning flags about the deal; the Rural Telecom Associations NTCA, Opastco and the Western Telecommunications Alliance said in a press release that the wide-ranging order had "positive aspects" but they "remain concerned that parts of the current reform package will have substantial adverse impacts on rural consumers and the small, community-based carriers of last resort committed to serve them." For more, and other reactions, via Broadcasting & Cable's John Eggerton, click here.

Genachowski said the shift in subsidy money will help cut the number of people without broadband in half over the next five years. The new program will be called the "Connect America Fund" and will be capped at $4.5 billion. (Read more) It will replace the Universal Service Fund, which "is so complex that some telecom execs have likened it to trying to reform Social Security or health care," Kim Hart of Politico writes.

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