US Lawmakers Propose Changes in Telecom Subsidies

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Two U.S. lawmakers have proposed legislation that would allow money from a huge fund that subsidizes telephone and mobile service to parts of the U.S. to also go for broadband deployment.

The discussion draft of the Universal Service Reform Act, released Friday, also attempts to deal with a long-time complaint from some telecom carriers that rural providers are charging huge fees for other carriers to send traffic to their networks.

In some cases, the small rural carriers have partnered with free telephone conferencing and adult sex chat lines to drive traffic to their networks, and the issue has made news in recent weeks when AT&T accused Google Voice of blocking phone calls to some rural phone lines, including a convent.

The proposal to reform the Universal Service Fund (USF) would prohibit revenue sharing between small rural local phone companies and other services, such as the free conferencing service, in an effort to outlaw these so-called traffic-pumping schemes.

The proposal would also expand the number of telecom-related services paying into the USF, including VoIP (Voice over Internet Protocol) and broadband providers. In addition, the proposal would cap the fund, with an annual budget of about US$7 billion, based on several factors.

USF subsidizes telephone service to rural and other hard-to-reach areas in the U.S.

The proposal would also limit subsidies for mobile-phone providers. The draft would attempt to control costs at the USF by directing the U.S. Federal Communications Commission to adopt a competitive bidding process to determine which wireless carriers will receive universal service support.

"The Universal Service Fund helps provide essential communications services to millions of customers in rural areas, and the draft released today will assist with the deployment of broadband, especially in rural areas, by declaring broadband to be a universal service and requiring universal service fund recipients to offer high speed broadband services within five years of the date of enactment," Representative Rick Boucher, a Virginia Democrat, said in a statement.

Representative Lee Terry, a Nebraska Republican, and Boucher, chairman of the communications and Internet subcommittee of the House Energy and Commerce Committee, have introduced a similar bill in the two last sessions of Congress.

"This bill brings the fund into the 21st century by modernizing it and allowing it to play a roll in our country's plan for eventual ubiquitous broadband," Terry said in a statement.

Lawmakers have been complaining for years that portions of the USF, overseen by the FCC, wastes money and needs to be overhauled. Congress and the FCC have been unable to enact major reform of the program.

USF 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.

Qwest Communications International, a telecom carrier serving the northwestern U.S. praised Boucher and Terry for releasing the new discussion draft.

Reform of USF is "overdue," and Qwest agrees with the proposal's goal of using USF money to fund broadband deployment to rural areas, said Steve Davis, Qwest's senior vice president public policy and government relations. Davis also praised the lawmakers for addressing traffic pumping.

The Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO), a trade group, also applauded Boucher and Terry.

"Thanks to the dedication and knowledge of Congressmen Boucher and Terry the rural industry has the opportunity to work through the legislative process and implement significant universal service reform," OPASTCO President John Rose said in a statement. "The benefits of this legislation are real, and OPASTCO is ready to work with Congress and the Administration to reform the Universal Service Fund."

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