USF Reforms Should Include Broadband, NCTA Tells FCC

WASHINGTON, November 6, 2009 – The National Cable and Telecommunications Association has asked the Federal Communications Commission to redirect up to $2 billion in “wasteful” spending from Universal Service programs towards broadband. The association did so in a filing submitted to the Commission on Thursday.

With telephone subscriber contributions to the program now exceeding 12 percent of total usage fees — and projected to pass 14 percent next year, it is “critically important” for the FCC to update the program, NCTA said in a press release.

“The USF program operates as if nothing has changed since 1996,” the association said in its filing. Americans continuous switch away from traditional copper-based phone service negates the need to subsidize it, and funds should be redirected towards the broadband infrastructure carrying Voice over IP traffic which Americans are increasingly choosing. “[A]s millions of Americans take service from facilities-based wireline competitors, the Commission continues to provide billions of dollars of support for [traditional] service.”

The NCTA suggests the FCC use a two-step process to reassess the level of USF support needed by measuring the availability of cable-based telephone service — and reducing USF support where it can be shown that competitive service is available from those providers. Subsidies should only be given in the face of a compelling, demonstrated need that “specific costs” associated with serving areas cannot be recovered from subscription fees alone, the filing suggests.

“The burden should be on the ILEC to demonstrate that the total cost of serving areas where it is the sole provider is greater than the total revenues it can potentially generate from services sold to customers,” the NCTA petition said.

A step further would be to expand USF subsidies to cover broadband services — an idea NCTA said “could address a major concern of policymakers.” While NCTA admitted expanding USF to cover all broadband services, a limited and measured program could help provide all Americans with access to broadband capabilities.

The FCC currently has proposals pending before it that would expand the USF “Life Line” and “Link Up” programs to include broadband service. The pilot proposals were endorsed by the National Association of Regulatory Utility Commissioners at its Winter 2009 meeting in Chicago, from November 16 – 18.