updated 03:40 pm EDT, Thu October 6, 2011
FCC says USF becoming Connect America Fund
The FCC on Thursday formally proposed the Connect America Fund, its long-promised switch of the Universal Service Fund. A gradual plan would reduce the discounts given to landline phones in favor of Internet access, including a 4G-focused Mobility Fund meant to cover roughly 100,000 miles of roads. The changes would theoretically save $1 billion a year.
To keep the number of subsidies in check, the FCC is also suggesting an auction-based system for funding. Carriers will in theory have to prove they need the money instead of getting an automatic discount like they do with e USF. Hundreds of millions of dollars might be saved through this method, FCC chairman Julius Genachowski said.
The Intercarrier Compensation System will get expected loophole shutdowns like phantom traffic, that make it seem as though more calls are going through and that greater subsidies are needed, or cost-saving tricks that push landline calls through the cellular system to avoid paying another carrier for routing voice. Long-distance calls could get cheaper overall as costs go down over multiple years, first within states and later between them.
If approved by the FCC, the changes would start taking effect in 2012.
The aim is to bring broadband-grade Internet access to the roughly 18 million Americans who can't get Internet access outside of expensive satellites, if at all. Some of this would come through 4G traffic along with usual cable, DSL, and fiber.
While most agree that the USF is outdated and needs to focus on Internet access, early criticism has raised worries that the auction process might be used to abuse the system. Larger carriers might find ways to game the system and win more of the dollars where smaller providers get less. AT&T and Verizon are also expected to get to many of these overlooked users with or without takeovers, making Connect America more a promise to telecom giants that have been reluctant to expand without extra cash.