WASHINGTON, D.C. – With evidence that as much as $2 billion in government funding is being used to subsidize telephone companies in rural areas where ample competition already exists, the National Cable & Telecommunications Association (NCTA) today submitted a proposal to the Federal Communications Commission (FCC) that could reduce this unnecessary spending and potentially direct the funding to programs that would promote broadband deployment and adoption.
With contribution rates to the Universal Service Fund (USF) now exceeding 12 percent and expected to rise above 14 percent in 2010, NCTA said it is critically important for the FCC to quickly update the USF program. NCTA explained in its Petition for Rulemaking that the existing program no longer reflects today’s marketplace in which consumers have the choice of unsubsidized voice providers, including cable’s voice service, throughout much of the country. NCTA’s petition includes a study showing that the Commission is providing billions of dollars to incumbent phone companies (ILEC) that are serving areas where competitors have entered without any subsidy.
“The USF program operates as if nothing has changed since 1996. Even as millions of Americans take service from facilities-based wireline competitors, and millions more decide they no longer need wireline voice services at all, the Commission continues to provide billions of dollars of support for wireline voice services,” NCTA said. “The total size of the federal USF program, and the resulting burden on consumers, continues to escalate at a staggering rate.”
NCTA’s proposal suggests that that FCC establish a two-step process that would enable the Commission to reassess the level of Universal Service Fund support that is provided in specific geographic study areas where it can be demonstrated that there is extensive facilities-based wireline competition from providers that are not receiving subsidies. In geographic areas where adequate unsubsidized competition exists, providers only should be subsidized to the extent they can demonstrate that there are specific costs associated with serving the non-competitive portion of that study area that cannot be recovered from regulated and unregulated services.
“The burden should be on the ILEC to demonstrate that the total cost of serving areas where it is the sole provider is greater than the total revenues that it potentially can generate from services sold to customers in that area,” the petition says. “In cases where the ILEC’s rates have been deregulated, any claim that costs cannot be recovered should be subject to particular scrutiny.”
In addition to other benefits of reforming the high-cost USF program, NCTA’s proposal could address a major concern of policymakers – providing all Americans with access to broadband capability. Because of the excessive contribution rate, NCTA said that extending the existing USF program to cover broadband services and facilities is unlikely to be a viable option. Any effort to use the USF program to subsidize broadband must be preceded by actions to control the size of the existing mechanisms, such as those proposed in NCTA’s petition.
“As the record in the National Broadband Plan proceeding demonstrates, achieving the congressional goal of universal access to broadband capability will be difficult to achieve without government programs dedicated to deploying facilities in unserved areas and promoting adoption by underserved populations,” the petition says. “As the Commission considers NCTA’s proposal to reduce support where it no longer is needed, it separately should consider whether, and how, it could redirect any savings from NCTA’s proposal to provide targeted funding to programs that promote broadband deployment and adoption.”
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