With Stimulus Fight Complete, Advocates Shift Focus to Universal Service

WASHINGTON, February 16, 2009 – With $7.2 billion in fiscal stimulus grants and loans marked to expand broadband infrastructure, industry groups, consumer advocates and some state regulators are supporting a proposal to fund broadband for low income households by tapping into the Universal Service Fund.

Thus far, the USF established by the Federal Communications Commission principally funds universal telephone service (and internet connections for schools and libraries), although there are numerous concerted efforts to extend USF monies to broadband.

The USF is funded by assessments on voice telephone service and administered by a Federal-State board of regulatory commissioners.

Last November, the FCC sought comment on a proposal supported by then-Chairman Kevin Martin for a pilot program that would subsidize broadband internet to low-income households.

Martin’s proposal would make broadband Internet providers meet eligibility criteria for the USF’s Lifeline and Link Up funds. The programs are used to offset the cost of both monthly telephone service and connection charges for households that fall under a certain income threshold.

The Martin plan was put forward after TracFone, a reseller of prepaid wireless service, became the first wireless company eligible to receive Lifeline subsidies. Rick Brecker, a Greenberg Traurig attorney who represents TracFone before the FCC, told the audience at the National Association of Regulatory Utility Commissioners conference here that the company’s success at providing subsidized voice service made it natural to look at doing something similar with wireless broadband.

Several consumer groups filed comments in support of TracFone’s petition. And NARUC’s telecommunications committee is considering a resolution sponsored by D.C. Public Service Commissioner Betty Ann Kane supporting a modified version of the two year, $30 million program suggested by Martin.

Free Press research director Derek Turner said his organization supports both the FCC pilot and the NARUC resolution, but called the both proposed $300 million cost of the pilot and 40 percent target adoption rate “a fantasy.” Turner suggested the true cost of a program on the scale Martin envisioned would require spending $1 billion over two years.

But a more modest proposal for using the $300 million could provide service for 812,000 homes that don’t currently subscribe to broadband services, Turner said. Because “broadband is no longer a luxury,” Turner said Free Press believes any increase in the use of broadband – “a technology that is vital for any individual to effectively participate in today’s world” – is worth pursuing,

Computer and Communications Industry Association Vice President Cathy Sloan called increased broadband service — whether via digital subscriber line (DSL), cable, or wireless, would be “a component of a more enlightened public policy.” But any FCC program should be “harmonized” with the grants funded under the stimulus package.

Sloan cautioned the state commissioners at the NARUC meeting that broadband providers need not currently be eligible to receive funds under USF programs. And start-up companies that use new technologies should not have to pay into the fund to receive funds, she said. “New and more efficient business models should not be walled off [from the program].”

But Sloan warned against adopting too broad a definition of “Internet access devices” — a category that could conceivably include smart phones. “We don’t need to be subsidizing iPhones and Blackberries,” she said.

The current FCC definitions for Lifeline service are obsolete, said AT&T regulatory counsel Beth Fujimoto. “Existing programs are very POTS-centric,” she said, using industry slang for Plain Old Telephone Service.

Regulators shouldn’t make broadband service follow rules designed for the voice era, Fujimoto said, calling for an FCC rulemaking to establish a new “Lifeline service provider” category.

Asking if any in the audience feared a return to rotary phones in the absence of rules mandating touch tones, Fujimoto called for a broad overhaul of the Lifeline program. “We really need to take a fresh look at what services should be offered.”