FCC wants to overhaul rural phone service fund: ; to provide Internet access

WASHINGTON - Federal Communications Commission Chairman JuliusGenachowski on Monday unveiled a plan to overhaul a much-criticizedprogram that helps provide phone service to far-flung rural areas,proposing to focus it on expanding high-speed Internet access tothose same locations.

The $8 billion Universal Service Fund is paid for bytelecommunications companies, who must contribute a percentage oftheir long-distance revenue, often passing those fees on to theircustomers. The decades-old program has successfully spread phoneservice to residents in hard-to-reach areas that often areunprofitable for companies to serve, Genachowski said in a speech tothe Information Technology and Innovation Foundation.

But the fund has become highly inefficient, he said. In somecases, it pays more than $20,000 a year to provide a single homewith phone service.

"The program is still designed to support traditional telephoneservice. It's a 20th-century program poorly suited for thechallenges of a 21st-century world," Genachowski said. "In itscurrent state, the program is not getting the job done. It's leavingmillions on the outside looking in, and wasting taxpayer dollarsevery year."

Reforming the Universal Service Fund was a priority of the FCC'sNational Broadband Plan, which was released last year with a goal ofensuring that at least 100 million homes have access to affordablenetworks delivering Internet services at speeds much faster thantoday by 2015.

Genachowski said in an interview that his main goal is tomodernize and streamline the fund.

"We want to eliminate the waste and inefficiency from the programas it exists now and then use those savings to fund Internet servicein unserved America," he said.

Genachowski's plan calls for major changes, particularly to thecomplex payments known as Intercarrier Compensation thattelecommunications companies pay each other as they transmit callsover their networks. He wants to use the savings from that and otherchanges to help pay for a new Connect America Fund.

"At the end of this transition, we would no longer subsidizetelephone networks; instead we would support broadband," Genachowskisaid in his speech. "As we do this, we will make sure that allAmericans continue to have access to voice service and can makecalls from their homes. Voice will be ultimately one applicationthat consumers can use over their fixed or mobile broadbandconnections."

The FCC is set to take an initial vote on the plan today,starting the process of receiving public comments on the new rules.

Telecommunications companies have pressed for years for changesto the Universal Service Fund, and Genachowski said he has receivedpositive feedback from the industry to his ideas.

"There's certainly difference of opinion about the best way tofix it. Those are questions we have to resolve," he said in theinterview. "It's understood the program itself is unsustainable."

Verizon said it supported Genachowski's call for changing thefund and said he presented "a good road map."

But Genachowski is wading into controversial territory. Somerural lawmakers want the Universal Service Fund expanded to extendhigh-speed Internet access, while others have called for the fund tobe eliminated because they said it is no longer necessary.

Genachowski said he's trying to chart a middle course andrejected calls for killing the fund.

"While the world has changed, the importance of universal servicehas not," he said in his speech. "We simply shouldn't let millionsof Americans be bypassed by the broadband revolution."