Groups Push for Telephone Subsidy Overhaul

A proposal to overhaul U.S. subsidies and shift money to broadband deployment needs backing from lawmakers, supporters said in a letter to congressional leaders Thursday.

The proposal, released in late July, is an "unprecedented agreement" between large telecom carriers including AT&T and Verizon and trade groups representing small carriers, supporters said in a letter to eight members of Congress. The letter encouraged the lawmakers to offer their strong support for the proposal.

The "carefully balanced" compromise represents a "rare opportunity" to make needed changes to the Universal Service Fund (USF), the U.S. Federal Communications Commission program that provides subsidies for telephone services in rural areas and intercarrier compensation, the rules that establish rates that telecom carriers pay to sent traffic to another network.

"The parties to this consensus framework are representatives of large, mid-sized, and smaller providers who have overcome long-standing policy disagreements and deep-seated differences to reach this breakthrough compromise," the letter said. "This reform debate has been underway for at least a decade, and this consensus framework brings policymakers and the industry as close as they have ever been to enacting real reform, restoring regulatory certainty, and enabling providers to focus on the delivery of high-quality services to consumers."

Lawmakers have been working for years on USF reform, but no bill has passed through Congress. The new proposal, called America's Broadband Connectivity Plan, is before the FCC as the agency looks for ways to fund broadband deployment.

"Overall, this represents a new funding paradigm for rural telecommunications, redesigning support programs for the IP [Internet Protocol] era," the letter said. "Our complementary proposals would promote sustainable, affordable broadband throughout rural America and make those who receive funds accountable to invest in the delivery of such service. The plans are aimed at balancing the dual needs to deploy broadband in hard-to-serve rural markets and sustain existing broadband assets."

The proposal would bring broadband service to 4 million U.S residents who do not have it now, supporters said. The plan would phase out subsidies for rural telephone service under the USF, with the subsidies for traditional voice service ending in 2016. The plan would transition the USF's high-cost fund, which now pays telephone subsidies, to broadband and cap it at the current level of US$4.5 billion a year.

A tax on telephone bills pays for the USF.

Three trade groups representing small carriers, the National Telecommunications Cooperative Association (NTCA), the Organization for the Promotion and Advancement of Small Telecommunications Companies and the Western Telecommunications Alliance, have signed on to the proposal.

But the proposal doesn't enjoy universal support from small carriers. In late July, a group of more than 55 of them wrote a letter opposing the plan, and about 20 more small carriers have signed on since then.

The USF proposal would provide a "windfall" to AT&T and Verizon, said the letter, signed by small telecoms in Nebraska, Alaska, Louisiana and other states. The proposal "does not meet the needs of the millions of customers we serve in rural America," said the letter, sent to trade groups representing small carriers. "It is simply a bad deal for rural America!"

The proposal does not ensure fair rates for intercarrier compensation, does not allow small carriers to recover their existing investments, and does not call for "shared sacrifice" among large and small carriers, the letter said.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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