Federal Communications Commission

Funding the National Broadband Plan Through Federal Universal Service Reform of the High Cost Fund

July 15th, 2010 by Admin User

[Wireline Competition Bureau Deputy Chief Carol Mattey prepared this speech July 20, 2010 for delivery at the NARUC Telecommunications Committee in Sacramento, CA]

Thank you for inviting me to join this panel – I appreciate the opportunity to talk to our state colleagues about how to move from a voice world to a broadband plus voice world. We want to have an honest and respectful dialogue about what we should do to make sure that everyone has access to broadband and voice service in this country.

In March, the full Commission unanimously adopted a “Joint Statement on Broadband” which stated:  “The nearly $9 billion Universal Service Fund (USF) and the intercarrier compensation (ICC) system should be comprehensively reformed to increase accountability and efficiency, encourage targeted investment in broadband infrastructure, and emphasize the importance of broadband to the future of these programs.”

The National Broadband Plan presented a vision for how to achieve these goals, but what’s important to remember is that was not a rulemaking document, and there will be plenty of opportunity to discuss and refine that vision as we move forward during the rulemaking process.  

Before getting into the specifics, I’d like to highlight the goals that we are trying to accomplish.

Goal #1 - Bring broadband to those that do not have access to it today in a manner that can evolve as next generation technology evolves.  Private investment, supplemented with public investment in certain areas, has brought broadband to most Americans – but 14-24 million Americans still do not have access to broadband, many of whom live in areas that simply are not profitable to serve today.

We can’t leave these Americans behind.  For some, public investment is needed to unleash private investment.

Goal #2 - Sustain broadband where it is provided today.  We want to provide a certain foundation for continued investment in broadband and a pathway for broadband to grow and evolve in the future. We understand that there is a need to provide ongoing public investment to sustain broadband that already exists in certain areas. Funding broadband where it doesn’t exist and sustaining broadband where it does shouldn’t be seen as mutually exclusive goals.

Goal # 3 – Make sure that we use this finite public resource called USF wisely and effectively.  It is imperative that we do this in a way that is fiscally responsible and sensible.

Big picture, the National Broadband Plan made several USF recommendations:

  • Create a new Connect America Fund to support broadband networks in areas that are uneconomic to serve.
  • Create a targeted Mobility Fund to address areas that are significantly lagging in 3G coverage.
  • Refocus existing USF to expressly support broadband.
  • Transition gradually.

The FCC began the process of seeking comment on USF reforms in the April NOI/NPRM – but that’s just the first step.  Staff is working full steam ahead on more comprehensive USF, ICC and USF Contributions Reform NPRMs proposed for 4th Quarter seeking comment on the many issues that will need to be resolved to move forward on these ambitious goals.
The comments on the April NOI/NPRM were just filed.  We are encouraged by the broad participation in our USF reform proceeding.  We are pleased that commenters have offered constructive feedback and particularly want to thank those commenters that provided data.  We need good data to make good decisions.

We see some common themes emerging from the initial record.  

  • USF reform is long overdue but we shouldn’t make any flash cuts.
  • In reforming USF, we must focus on the needs of consumers in rural areas.
  • Consumers should have access to high quality broadband and voice service
  • Broadband services should be reasonably comparable and affordable
  • But USF support cannot be excessive.
  • Deployment and adoption programs must work hand in hand.
  • Coordination with states will be critical.

So, let me highlight several of the key questions that we need to explore in the rulemaking we are preparing for consideration in the 4th Quarter of this year.

First, we need to define what we’re trying to accomplish.  Here, let’s acknowledge that one challenge we face as a country is that although most households have access to broadband, there is a digital divide today for the millions that do not have access.  But, it is not an urban-rural divide, it is largely a rural-rural divide where some households have access to broadband, but the farms or ranches in a neighboring area down the road don’t.  

Today, as a result of the FCC’s “no barriers” policy, some small carriers serving rural areas can include the costs of upgrading their loops to provide broadband and receive USF based on these costs.  For these carriers, the government is subsidizing broadband deployment.

But, for other carriers serving these same rural areas, they receive support only for providing voice service and aren’t reimbursed for upgrading their networks to provide broadband.  The result is predictable – carriers that receive support to upgrade have done so, while carriers facing an unprofitable business case – but ineligible to receive support to upgrade – have not.   

If we do nothing to address this growing rural to rural divide, millions of consumers in rural areas will be left behind.  We can’t ignore this problem. We are looking for solutions to this problem.

Second, we need to have a conversation about what it means to ensure affordable and reasonably comparable services, and the respective roles of the federal government and the states in working toward that goal.  

Third, we need to flesh out the details of the replacement USF program, the new Connect America Fund.
There’s some misunderstanding that the National Broadband Plan recommended cutting or eliminating USF, with nothing in its place.  That’s not the case.  

As I said in the beginning, one of the key goals is to sustain broadband where is provided today.  In fact, the Plan specifically recommended that the Connect America Fund provide ongoing support to areas that continue to need it for broadband, those areas where it’s not profitable to provide broadband.  

Everyone needs to understand – the recommendation to cut legacy USF was intended to occur in conjunction with the implementation of a new program to support investment in rural America  – the Connect America Fund.  We need data so we get the scope and need for ongoing support right.

Fourth, we need to be thinking about what it means to be a carrier of last resort in a broadband world.   As we move forward, the FCC and states need to partner in looking at how to move away from voice-centric regulations to focus on broadband and voice networks.  

The National Broadband Plan suggested that recipients of funding should be required to meet certain public interest obligations, such as being required to report on service availability and pricing, and also meet specific service quality and build-out requirements.  We understand that different policy choices could have significant impacts on existing carriers of last resort, and we need to think about how this all fits together.  We are very interested in talking to our state colleagues about what those public interest obligations should be for subsidized broadband providers.  For instance:

  • How should we define a requirement to stand ready to serve any requesting customer?   What should be a reaonsable charge for extending lines beyond a certain distance?  
  • Should there be definitions for service quality?
  • Should there be a definition of “affordable” service?
  • Should there be an obligation to provide voice service on a stand-alone basis, so that customer is not obligated to purchase broadband?  And what about an obligation to provide broadband to a consumer that doesn’t want voice?
  • What about the obligation to provide access to Telecommunications Relay Service?
  • And the obligation to offer lifeline service to low income consumers?
  • And compliance with requirements regarding emergency preparedness and network outages and the provision of 911 services?  
  • And finally, what about oversight over exit from the marketplace to ensure that there is a provider willing to serve in this role?

To conclude, the National Broadband Plan started the dialogue for change, and we look forward to working with the states and other stakeholders to implement a reformed system that will bring broadband to everyone, while maintaining voice service.  Change often is not easy, but change is necessary for the country to realize its goal of achieving universal access to broadband and leaving no consumer behind. 

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