Lawmakers Want Broadband Requirements on Phone Fund

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The U.S. Congress should require telecommunications carriers receiving subsidies from a huge government fund intended to deliver telephone service to rural areas to also provide broadband service, two U.S. lawmakers said Thursday.

The US$4.9 billion high-cost program in the Universal Service Fund (USF), intended to subsidize telephone service to rural and other hard-to-reach areas, should cover broadband service and needs to expand the services taxed to pay for the fund, said Representative Rick Boucher, a Virginia Democrat and chairman of the House Energy and Commerce Committee's Subcommittee on Communications, Technology, and the Internet.

Boucher and Representative Lee Terry, a Nebraska Republican, pushed unsuccessfully for USF reform legislation in the last Congress, and the two said they again will work for it this year. A proposal they've authored would require USF recipients to offer broadband service to all customers and would also cap the high-cost fund.

"Broadband is to communities today what electricity and basic telephone service were 100 years ago," Boucher said at a subcommittee hearing. "It is the new essential infrastructure for the commercial success of all communities."

Witnesses at the hearing from the telecom industry said broadband should be eligible for USF money, even though a huge economic stimulus packaged, passed by Congress in mid-February, includes $7.2 billion for broadband deployment grants and loans. It would cost Qwest Communications International, which provides voice and broadband services in 14 western states, about $3 billion to expand broadband from the current 86 percent of customers to 95 percent of customers, said Steve Davis, Qwest's senior vice president for public policy and government relations.

"In the absence of additional government assistance, the necessary upgrades to expand our footprint are not economically feasible in many rural areas," Davis said. "The grants for broadband deployment established in the stimulus [bill] are a start. They're not sufficient to result in ubiquitous deployment of high-speed broadband."

While many witnesses supported adding broadband as an optional service funded by USF, some questioned whether Congress should require carriers receiving USF money to provide broadband, saying in some rural areas, the cost of providing broadband may exceed any USF benefits.

It would take Embarq, a carrier based in Overland Park, Kansas, about $2 billion to provide broadband to all its customers, said Tom Gerke, the company's CEO. "What we're going to get from stimulus, depending on how that works ... and what we can continue under USF would not come close to fulfilling that," he said.

Some subcommittee Republicans suggested lawmakers should first see how much broadband the stimulus package buys before converting USF to broadband. Representative Cliff Stearns, a Florida Republican, suggested the program, which has tripled in cost in 10 years, should be cut instead of redirected.

"Now, nearly the entire country has access to phone service," he said. "There is a need to reform the program away from subsidies, in our opinion, that may no longer be necessary as technology and services improve and become more and more widespread. Without fundamental reform, now is not the time to expand the fund to include just broadband."

Lawmakers have been complaining for years that the high-cost portion of USF, overseen by the U.S. Federal Communications Commission, wastes money and needs to be overhauled. But Congress and the FCC have been unable to enact major reform of the program.

USF, with a total budget of about $7 billion a year, is funded with a tax of about 11 percent on long-distance and international phone service, but the tax base is drying up as U.S. phone customers are using less of those services through traditional phone lines and turning to mobile phones or VoIP service.

In addition, the program has little data to show the benefits gained from its spending, lawmakers complained.

Meanwhile, in some areas of the country, multiple telephone and mobile carriers receive USF subsidies, and some lawmakers on Thursday called for Congress to require that carriers bid on contracts to provide phone service to those areas. In areas of Hawaii, three carriers each get a subsidy of nearly $13,000 a line to provide voice service, said Representative Henry Waxman, a California Democrat and chairman of the full committee.

The three carriers could conceivably receive a total of $39,000 in subsidies for one house with a landline and two mobile lines, one from each carrier, Waxman said.

"Is this really the best use of public dollars?" Waxman said.

But other lawmakers and carrier representatives argued that USF is still needed, even if it is in need of major changes. "In this time, when electronic communications are at the very heart of the national economy, it is perhaps more essential than ever before that all Americans remain connected," Boucher said.

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