Free State Foundation Panel Calls for USF, Intercarrier Compensation Reform

WASHINGTON, July 14, 2011 – The Free State Foundation, a free-market think thank, assembled key industry experts Wednesday and pressed for the immediate need for reforms to the Universal Service Fund and Intercarrier Compensation systems.

For the past year, the Federal Communications Commission has worked on updating the Universal Service Fund to handle the demands of broadband expansion rather than voice service.

“While the USF was updated in 1996 to deal with modern communications the inclusion of broadband was never envisioned,” said James Assey, Executive Vice President, National Cable & Telecommunications Association (NCTA).  “The National Broadband Plan clearly shows that the FCC is trying to figure how to properly update the USF to deal with broadband.”

Assey suggested that the FCC refocus the USF from supporting voice service to supporting broadband.

“Holding down the price of voice service is no longer a national priority, if consumers are given access to broadband they can get cheap or free voice service using Magic Jack or Skype,” said Tom Tauke, Executive Vice President, Verizon.

According to Tauke now is the perfect time to deal with the issue since the major telecommunications providers have already transitioned their businesses away from relying on voice service to data and television services.  Tauke went onto say that unfortunately the firms that rely most heavily on voice service for revenue are also located in the most rural areas where telecommunications costs are high.

Mike Romano, Senior Vice President at the National Telecommunications Cooperative Association advised the group that any transition away from supporting telephone to broadband services should be done in a slow and methodical manner.

“We don’t want to leave consumers in a position where they face a dramatically high bill,” Romano said.

While all of the panelists agreed that the USF needs to transition to broadband they differed what the role of the USF should be in supporting broadband.

Assey said that funding should be limited to deployment in both unserved areas and places where there is only a single broadband provider; Tauke also supported the idea of using USF funds for deployment. Romano however recommended that funding should be split between deployment and sustainable adoption programs.

Deborah Taylor Tate, former FCC Commissioner suggested that in addition to funding existing programs for sustainable adoption, the Commission should be funding pilot programs to reach the final one percent without access.

“We need to learn what the most efficient method is to reach these people and that requires experimentation,” Tate said.