FCC High-Speed Internet Fund Gets $4.5 Billion Budget

Dedicated support to expand mobile broadband nationwide will be provided through a new Mobility Fund.

The Federal Communications Commission voted unanimously to comprehensively reform its Universal Service Fund and intercarrier compensation systems. Efforts to expand the high-speed Internet to rural America over the next six years will increase economic growth by $50 billion over that period, the FCC estimates. These reforms will create a new Connect America Fund with an annual budget of $4.5 billion, with the aim to extend broadband infrastructure across the country and rural areas in particular.

The FCC estimates that approximately 500,000 jobs will be created over the next six years by expanding high-speed Internet access to over 7 million Americans living in rural areas. As part of this reform, the FCC recognized the growing importance of mobile broadband and made it an independent universal service objective. Dedicated support to expand mobile broadband nationwide will be provided through a new Mobility Fund.

As part of the reform, some consumers could pay, on average, an additional 10 to 15 cents a month on their bills, but for every dollar in cost, reform will provide $3 in benefits for consumers, the FCC said. No additional charges can be imposed on consumer phone bills that are at or above $30 a month (inclusive of most fees consumers pay on their bills), nor can such charges be imposed on low-income consumers served by the FCC's Lifeline program. The organization claimed any new charges would begin to decline after six years.

Programs that provide subsidies where they are not needed are eliminated, and compensation for corporate overhead expenses is reduced. Market-based mechanisms, including competitive bidding, will be used to distribute money more efficiently. By eliminating waste and targeting support where it is most needed, these reforms put universal service funding on a firm budget, and they will impose strict new accountability on fund recipients, the FCC said.

"With its reform of the intercarrier compensation system, today's order appears to take an important step toward the IP-based and mobile future of communications," the CTIA said in a company statement. "Reducing the inflated intercarrier compensation charges to more cost-based levels and moving to a negotiation-driven framework will help facilitate the development of modern communications networks and competitive choice for consumers. Intercarrier compensation reform has long proved elusive, so we commend the FCC for moving forward on this important goal."

However, the CTIA also voiced concerns over certain parts of the fund, warning that the Commission's efforts to reform the high-cost universal service program did not fully take into account the "significant" consumer migration to mobile broadband services and called the decision to set the long-term funding level for mobile services at only 11 percent of the high-cost fund troubling.

Verizon Wireless' senior vice president for federal regulatory affairs Kathleen Grillo called the reform order an "important step" to bringing high-speed wireless access to millions of American homes. "Today's action by the FCC to reform the antiquated universal service and intercarrier compensation programs is a milestone for consumers and the communications industry," she said. "Chairman Genachowski and the commissioners deserve credit for tackling this difficult challenge and making the tough choices necessary to bring these programs into the 21st century."