Regulator proposes USF changes

31 Jan 2008

The US telecoms regulator, the Federal Communications Commission (FCC), has opened a consultation process into proposed amendments to the country’s Universal Service Fund (USF). The fund collects a percentage of the income from telecoms services and is used to subsidise costly rural phone networks. Around USD7.3 billion was paid into the USF in 2006, Associated Press reports, with USD4.1 billion of that going to the ‘high cost fund’ which pays subsidies to carriers in rural areas, encouraging them to maintain a decent standard of phone services even in areas where the low population means a rollout is not cost effective. The remainder goes to a fund which supports schools, libraries, low-income subscribers and rural health care facilities.

The FCC has issued three separate proposed changes to the USF. One would see cellular operators receive subsidies based on their costs rather than getting payments equal to those offered to fixed line telcos since the cellcos often have lower overheads than their wireline counterparts. The second change would see the implementation of a ‘reverse auction’ system, under which subsidies would be paid to the firm which offers to run rural networks at the lowest cost. The third proposal would see separate funds set up to support wireless operators, broadband internet providers and ‘providers of last resort’.