USF Mobility Fund: Good Idea, Bad Choices

WASHINGTON, November 8, 2010 – A key policy goal of FCC Chairman Julius Genachowski’s is the reform of the Universal Service Fund, which is a program designed to help bring communications service throughout nation. The recent National Broadband Plan proposed the creation of a mobile broadband fund to help achieve universal service by providing access to users in the most remote areas of the nation. In early October, the FCC issued a notice of proposed rulemaking which would launch this new fund.

The purpose of this fund is to “significantly improve coverage of current-generation or better mobile voice and internet service for consumers in areas where such coverage is currently missing, and to do so by supporting private investment. The Mobility Fund would use market mechanisms – specifically, a reverse auction – to make one-time support available to service providers to cost-effectively extend mobile coverage in specified unserved areas.”

In theory this is a good idea. Mobile broadband is finally robust enough to be used as a primary method of connection, and reverse auctions seem to provide a simple way of cutting costs and engage the marketplace to further future investment. However, the FCC is missing a key opportunity. Instead of funding an old technology, it should instead help to expand 4G coverage.

The main reasoning as to why 3G is to be funded is that much of the nation is already covered and so only a limited amount of funding would be necessary to cover the rest of the nation. Additionally, the FCC believes that if a strong business case can be made from customer usage in these areas of previous non-coverage firms will more likely install 4G. Again this idea is on strong footing. However, there is a key difference in 4G vs 3G – speed. While customers can use 3G to connect computers to the internet the majority of customers use their smart phones to connect via 3G.

Currently, 3G offers users speeds of 1.4 megabits per second down which, while fast, is not even close to average wireline speeds which most customers receive. Verizon’s LTE and Clearwire’’s WiMax service offer users speeds of 5 to 12 mbps which is very much comparable to wireline. The broadband plan found that in most cases actual download speeds for wireline customers are between 5-6 mbps. [1]

The goal of the Mobility Fund is to expand broadband access and while access via a smartphone is important, truly robust applications require higher speeds and the use of a computer. Instead of funding 3G, the FCC should instead look to the future and provide funding to promote 4G as a primary connection method.

As companies begin to transition from 3G to 4G technologies, the number of peripherals which support these older technologies will diminish.

Verizon, which is the current leader in LTE expansion, has already stated that while it is not going to be able to cover the entire nation, it’s willing to work with smaller providers to share technology and spectrum.  In its official page on LTE, the company states:  “We are seeking companies that can assist in bringing the benefits of 4G LTE service to rural areas that currently lack Verizon Wireless coverage. Verizon Wireless may work with rural companies that have towers and backhaul capabilities, even if those companies are not currently wireless operators. Together, we will plan and coordinate a local LTE deployment schedule that makes sense for both Verizon Wireless and the rural company that we are collaborating with.”

In a legal filing, Verizon indicates that it also believes that the FCC should fund LTE rather than try to achieve universal 3G coverage. “We indicated that the commission should allow carriers that participate in the program to use mobility funding to deploy either 3G or 4G services because there are areas that do not have 3G coverage today that will likely move directly to 4G. We addressed Verizon Wireless’s rural LTE partnership program and said that, depending on how the anticipated mobility program is structured, those carriers that lease Verizon spectrum to offer 4G services in rural areas may be candidates to put this support to good use.”

Verizon is not the only firm to be offering LTE. MetroPCS has launched its network and AT&T also has plans to launch a network in the near future.

In regards to WiMax, the service received a major boost from the broadband imitative program. The technology netted 40 awards across 22 states with $504 million in funding. Additionally, the commercial WiMax provider is made up of a consortium of a number of telecos including Sprint, Comcast, Time Warner and Intel. This strong backing  of both community groups and commercial industry ensures that it will be a viable competitor to LTE and so should receive equal funding.

[1] Exhibit 3-G: Advertised Versus Actual U.S. Fixed Broadband Residential Download Speeds (Mbps) Broadband.gov