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Land line subsidies to die completely in 2020, broadband fee and subsidy system kicks in next year

The federal government's effort to expand communications to impoverished and rural Americans is shifting gears from phone lines to broadband.  The U.S. Federal Communications Commission have approved a new plan and a new set of rules that will revamp the way taxes are used to improve communications in the U.S.

I. "Bye Bye" Land Line, "Hello" Broadband

The new rules revamp the Universal Service Fund (USF), a government fund financed by a 10 percent government fee (tax) on phone lines (cell phones, land lines) in the U.S.  The USF was first created as part of a broad package of telephone and internet reforms passed in the Telecommunications Act of 1996, which was signed into law by President Bill Clinton (D).

Under the Obama adminstration's plan, the estimated $8B USD the USF pulls in annually from U.S. taxpayers is being redirected.  The plan, approved by the FCC this week will eventually throw out the old subsidies on poor, rural Americans' phone service.

In its place will be two plans, aimed at bringing more modern communications technologies to these folks.  The first is the "Connect America Fund", which will direct $4.5B USD annually to funding mobile phone and broadband service to rural areas.  The services will only cover areas that private businesses refuse to cover.

American coverage
Much of America [orange] is not covered by what the FCC defines as high-speed internet (3 Mbps down; 768 kbps up). [Source: FCC]

A second fund, "The Mobility Fund", will get $500M USD.  This fund will focus its efforts on spreading wireless internet.

The plan was approved by a unanimous 4-0 vote, with FCC Chairman Julius Genachowski calling the plan "a momentous step in our efforts to harness the benefits of broadband for every American."

The plan is expected to provide service 7 million Americans over the next six years, and create 500,000 high-tech jobs, keeping America viable in a "fiercely competitive" global economy.

II. Some Warn Broadband Bills Will Go Up, FCC Says They Won't

The fly in the ointment may be higher bills.  Until 2017, the fees supporting USF will still be in effect, and the government will be funding the CAF and Mobility Fund from additional fees on broadband.

Public Knowledge, an advocacy group, warns, "[W]e share the concerns of other consumer organizations that the Commission's actions will lead to higher prices at a time when the average American is watching every penny."

Generally, while mobile service providers are pleased with the plan (which may give them funding for network expansion), broadband providers are irrate.

But the FCC's three Democratic comissioners, and the loan Republican commissioner were unilateral in insisting consumer bills will not, on average, increase.  They say that their plan counteracts the extra broadband fee by eliminate some of the network of confusing subsidies and kickbacks on broadband and phone service.  As  a result, these cuts will create enough of a price cut to absorb the new fee, they say.

Comments Republican Commissioner Robert McDowell, who endorsed the plan, "For the vast majority of consumers, rates should decline or stay the same."

Robert McDowell
Robert McDowell, the FCC's sole Republican commissioner spoke for some in his party in supporting the plan. [Source: C-Span]

Democratic FCC Chairman Genachowski adds, "I don't expect that overall consumer rates will go up as a result of this."

The plan will go into effect this year, with funds being put to use between 2012 and 2016.  Between 2017 and 2020, the USF will be discontinued and rural areas will stop receiving subsidies to keep their phone land lines alive.

The government playing utility is a role that troubles some, but it's an issue complicated by the fact that there's almost 10 million Americans living in regions that the private sector refuses to cover.  Thus, there should be plenty of lively debate on this topic.

Sources: FCC, Public Knowledge

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RE: Really?
By cjohnson2136 on 10/28/2011 3:51:17 PM , Rating: 5
True but there are some that always assume it will be horrible if gov't steps in. That argument can go both ways.

RE: Really?
By semiconshawn on 10/28/11, Rating: -1
RE: Really?
By cjohnson2136 on 10/28/2011 4:09:40 PM , Rating: 5
Well for starters efficent and horrible are different. I will agree that the gov't has inefficiency but to say everything they do is horrible says that you think we would be better off with no gov't. To hell with the gov't that paid for paved roads or the police and fire departments. Hell even schools suck all of those should be private. Yeah I am sure that would go over real well.

RE: Really?
By The Raven on 10/28/11, Rating: -1
RE: Really?
By cjohnson2136 on 10/28/2011 4:21:27 PM , Rating: 2
Actually not once was federal mentioned. blanket statements of gov't were made. Again I will say that blanket statements typically never work.

Since we are turning this to federal gov't I will say they are inefficient but to say that everything they do is horrible and they should just do nothing makes no sense.

RE: Really?
By semiconshawn on 10/28/2011 4:42:52 PM , Rating: 1
Nobody said they should do nothing. They should not be adding to the list of crap they dont do well.

RE: Really?
By cjohnson2136 on 10/28/2011 4:44:41 PM , Rating: 3
That is because it is ALWAYS horrible when the gov't steps in. Name one efficient gov't program just one.

You said everything that gov't does is HORRIBLE which means you think they shouldn't do anything. If they do anything then you think it is horrible. Your own words.

RE: Really?
By semiconshawn on 10/28/2011 4:50:34 PM , Rating: 2
Not all actions are new and "stepping in". Does the government have to step in to provide national defense? No. The government needs to be trimmed back not expand. They need to stop "stepping in" everytime a group of citizens want something.

RE: Really?
By cjohnson2136 on 10/28/2011 4:52:35 PM , Rating: 2
I agree if you looked at some of post with The Raven you would see I don't like some of gov't stuff. But to say it is all horrible with a blanket statement is wrong. The broadband thing they talk about here I think that is wrong. My point to you was that not everything within the gov't is horrible as you so stated.

RE: Really?
By cjohnson2136 on 10/28/2011 4:53:34 PM , Rating: 2
If you had said this instead of everything the gov't does is horrible I would have agreed 100% right from the start.

RE: Really?
By The Raven on 10/31/2011 2:24:25 AM , Rating: 2
I'm sorry, I thought he was President Obama. Governor Obama has a better ring to it IMHO.

RE: Really?
By semiconshawn on 10/28/11, Rating: -1
RE: Really?
By cjohnson2136 on 10/28/2011 4:45:36 PM , Rating: 4
Would you had paid for them if the gov't did not collect the taxes and pay someone to pave the roads? No you wouldn't

RE: Really?
By semiconshawn on 10/28/11, Rating: 0
RE: Really?
By ClownPuncher on 10/28/2011 6:13:30 PM , Rating: 3
If private citizens and corporations could and would provide the needed services, we wouldn't have government infrastructure in the first place.

Keep in mind, much of what the government builds is farmed out on contracts to private business, creating waste, but serving as a catalyst.

The list of things the governmeent provides should not be very long, but needed infrastructure (roads, water, electricity) weren't being implemented by private organizations at the pace needed to sustain our population. Supply side economics shouldn't be applied to that kind of infrastructure, even though it already is in many respects.

That said...

Get rid of the local, state, and federal restrictions on broadband proliferation and we might see actual headway. I remember 10 years ago, or so, working with a company trying to get contracts for huge stretches of fiber installations, but eventually got bogged down and tanked due to multiple layers of government bureaucracy.

RE: Really?
By The Raven on 10/31/2011 5:59:13 PM , Rating: 2
I'm tracking with you but the gov't is too quick to jump on whatever fad is popular. People are too gd impatient. Yes heaven forbid it takes 10 years for broadband to reach all the way out to BFE or our cars to gain an extra 10mpg. Who knows where we will be in 5 years regarding this conversation. But the gov't steps in and Bush, Obama or whoever is hailed as a saint for getting something done that only needed 5 more years for the private sector to do on "their own" (meaning: with the influence of public pressure by way of demand (at the register or otherwise)).

RE: Really?
By ClownPuncher on 11/1/2011 12:27:21 PM , Rating: 2
Exactly, more laws are not needed, clearly defined laws are. What is the role of the government, and how much has it changed even int he last 50 years?

RE: Really?
By cjohnson2136 on 10/28/2011 6:29:36 PM , Rating: 3
I'm talking about paving roads and your talking about sending kids to school. Totally different. Would you pay to build roads for other people. No you would pay for the stuff that benefits only you and your family.

Donating time and money to a charity is a lot different then donating money for infrastructure.

RE: Really?
By The Raven on 10/31/2011 6:14:53 PM , Rating: 2
Would you pay to build roads for other people.
No he wouldn't directly, but he would buy goods from someone who needs the roads and THEY would pay for it. Where do they get their money? From him, when he buys something from them. (Or from the bank when they are just getting started.)

I mean are you going to build a warehouse for Walmart whether you know it or not. Applied to Walmart, you are asking him if he is going to build a distribution infrastructure for Walmart. Well Walmart and all their suppliers already did that without the gov't. And we as the "People of Walmart" paid for it all.

And I don't mean to sound completely down on gov't but it shocks me to see how dependent everyone here seems to be with regards to this issue. Its as if they just got here and have no concept of how things have been operating in this world since the dawn of time.

RE: Really?
By room200 on 10/28/2011 8:53:44 PM , Rating: 3
You pay for public schools because that's what AMERICA has said is needed in order to keep America as educated as possible. When I was living in an apartment, my taxes were being used to subsidize those who owned homes when they claimed their deductions; I didn't ask why.

I don't believe anyone who's asking why they should be paying for public schools is as generous as you claim to be.

RE: Really?
By The Raven on 10/31/2011 6:41:35 PM , Rating: 2
I didn't ask why.
You should. Tax money fuels a lot of things and you just may be against some of those things (abortion rights, bailing out bad real estate investments, war in Iraq, etc.)
I'm not saying you should be anti-tax, but you sound like a product of US public schools when you say that. Think it over.

And with regards to calling him out on not being generous, I'm guessing you don't do much donating yourself. You must assume that this guy is Mr. Moneybags and just throws his money everywhere. No, I'm sure that he does so after some research. And if you research the performance of public schools v. private schools you probably wouldn't want to invest your donations there either.
that's what AMERICA has said is needed

Well around 1979 only <half of America said that there should be a federal DOE. Namely Carter and the Democrats. If I think formal education should be mandatory for every child, I certainly wouldn't want my $$ going to the current federally controlled system. It is an abomination and mobbed up beyond recognition. All the good that comes out of the public education system (in my experience in CA and MO) is from the states themselves.

RE: Really?
By FITCamaro on 10/28/11, Rating: -1
RE: Really?
By ClownPuncher on 10/28/2011 6:38:30 PM , Rating: 2
I'd prefer a charter school system

RE: Really?
By room200 on 10/28/2011 8:49:07 PM , Rating: 1

RE: Really?
By blankslate on 10/28/11, Rating: 0
RE: Really?
By apotheosis_fenix on 10/28/2011 10:09:11 PM , Rating: 3
I would rather go to a school where a teacher can get fired for doing a terrible job. I had too many awful teacher in high school that all the other teachers knew were bad but the administration couldn't fire them for being a bad teacher.

RE: Really?
By tecdes2010 on 10/29/11, Rating: 0
RE: Really?
By Dradien on 10/29/11, Rating: -1
RE: Really?
By FITCamaro on 10/30/11, Rating: -1
RE: Really?
By sorry dog on 10/31/2011 12:26:08 PM , Rating: 1
STATE and local governments pay for all roads except interstates as well as police and fire departments. They also pay for schools.

Actually, the feds chip in on a whole lot more than interstate projects...and as for public vs. private schools, I went to public school where 98% of the students go to's mainly that most of the parents there give a crap about their kids and the education there.

RE: Really?
By Yaos on 10/28/2011 4:14:34 PM , Rating: 3
United States Postal Service
Welfare/Food Stamps
Unemployment Insurance
Social Security

RE: Really?
By cjohnson2136 on 10/28/2011 4:17:49 PM , Rating: 1
Well USPS is losing money
NASA is losing funding
DARPA - nothing to say don't know to much
Welfare- crap
Unemployment Insurance i agree with
SS don't even start there with all the money it loses there. Social Security was good when it was first implemented but if you don't change with times it will slowly start to fail such as that.

RE: Really?
By The Raven on 10/28/2011 4:25:52 PM , Rating: 2
DARPA - introduced cyberbullying and the "leave Brittany alone" guy. Let's count that as a negative ;-)

I also like how most of this guy's list is basically take money from Person A and give it to Person B. Really takes a wizard to figure that out. The gov't is real good at that. And ROFL @ SS!!

Here is a rebuttal list:
Unneeded (and comparably inefficient) at the federal level
Unemployment insurance

RE: Really?
By blankslate on 10/28/2011 6:37:11 PM , Rating: 5
About the USPS in 2006 a law was passed that required the to pay about 5.5 to 5.6 billion dollars a year until 2016 into into future pension benefits for postal employees.

Basically they overpaid about 7 billion dollars into the pension fund for their employees from 2006 (or perhaps 2007 depending on when the law went into effect) to the middle of this year.

If the law wasn't passed that required overpayments into the pension fund the USPS would not be in the hole, in fact they would be running a slight surplus.

RE: Really?
By FITCamaro on 10/28/11, Rating: -1
RE: Really?
By kitonne on 10/28/2011 4:32:34 PM , Rating: 5
1/ FAA - have seen any planes colliding lately? US government at work.
2/ US Army - can kick the butt of the next couple of countries combined; I would say it works pretty well, and Army/Navy/AirForce/Marines are all government institutions.
3/ Social Security - have any parents or grandparents depending on it? So far it works for may millions of people; not perfect, but a lot better then the alternative (watch some movies from the thirties if you want to see how it was for older folks without it).
4/ Garbage collection - it is the work of your local government and works fairly well throughout the US.
5/ Local Police and Emergency Services - in US the response to a 911 call is extremely fast and competent compared to most foreign countries - again, it is your government at work.
6/ Drinking Water purification and control - have not heard of any water-borne vrii killing people in droves as it happens in Asia and Africa - again, your government at work.
7/ Your government at work is the reason USA still exists as an independent nation, 200+ years after it was created.

You asked for ONE - you have SEVEN listed above, and the list is not complete, not by any measure. It is also likely I did not even hit the best items to make my point, but it is a start :)

RE: Really?
By cjohnson2136 on 10/28/2011 4:37:04 PM , Rating: 1
mmmmm Take out the Social Security like I said before it was great when first started when people only lived up on average 5 more years after retiring but now that people are living on average 20-30 years it is not great. If they had made changes to accommodate this age shift then I would agree but until then Social Security is not good as of now.

RE: Really?
By kitonne on 10/28/2011 4:46:45 PM , Rating: 3
I would rather pay more for SS and retire before I am half dead. How about an option to pay 5% more in taxes and retire 10 years earlier then the current 67 years? Looks like you are OK to work until 90 years old, just to keep your takes low - I am not. I want to retire as early as possible and LIVE WELL for as many years as possible after wards, and I am OK paying a little more to keep the retirement age where it is now (if there is no option to pay even more to get out of the hamster wheel even sooner).

Are you aware that the so called "crisis" for SS can be fixed with a 2% payroll tax increase and keep everybody's benefits as they are, including the retirement age? Is it worth to you to work for a couple years more and save 2% per year?

RE: Really?
By cjohnson2136 on 10/28/2011 4:48:33 PM , Rating: 2
I said if changes were made I would be fine with it. Increase the tax on it is a change. As it stands right now I am not ok with it because the money will dry up. So stop acting like I don't like Social Security I like the IDEA behind it but the policy and how it is working right now is not working.

RE: Really?
By rcc on 10/28/2011 6:24:41 PM , Rating: 4
I'd lots rather have all the money I paid into SS to fund my own retirement. Seriously.

RE: Really?
By FITCamaro on 10/28/11, Rating: 0
RE: Really?
By room200 on 10/28/2011 8:47:49 PM , Rating: 3
Tell that to all the poor 70 year old slobs still working who lost half of their retirement in the past 3 years.

RE: Really?
By FITCamaro on 10/31/2011 2:27:00 PM , Rating: 2
It's called risk and life is full of it. You think they're going to live how they want on a Social Security check? HA!

And most people at 70 should be mainly invested in bonds which haven't lost much value.

RE: Really?
By Spuke on 10/28/2011 11:43:18 PM , Rating: 2
But hey that means being responsible and actually having to manage your own money instead of rely on the government for your entire life.
So Social Security, the money that's taken out of MY paycheck, is now a government entitlement program? WTF? Are you serious?

RE: Really?
By FITCamaro on 10/31/2011 2:25:36 PM , Rating: 2
When has it not been? Are you getting every dollar you put in plus interest back from it? Not if you've been working for 40 years or more. And you could have made FAR more money on your own with the money you put in. If that was the case they could afford to make it so that its optional.

Now Bush actually tried to allow people to set up private accounts where some of your money could go instead of all of it going to Social Security. That way it was YOURS not EVERYONES.

If you're under 40 and think you'll ever see a single dime from Social Security though you're an idiot. There's no money now, what makes you think it'll be there in 2050 or so?

RE: Really?
By cjohnson2136 on 10/31/2011 3:10:47 PM , Rating: 2
Which is the exact reason I do not like SS or believe it right now. I am 22 and regrettably pay into because I have to but I am also saving money on my own to help pay for my retirement.

RE: Really?
By TSS on 10/29/2011 6:52:01 AM , Rating: 3
Considering the current social security fund is a $2,6 trillion black hole i doubt that 2% increase will fix the problem.

Social security isn't a bad thing. US presidents raiding the SS fund because they have to spend too much is a bad thing.

RE: Really?
By semiconshawn on 10/28/2011 4:47:32 PM , Rating: 1
The federal gov't picks up your trash? FAA and Military/Border protection are surely federal and needed. Social security is an unfunded mess. Garbage collection hahaha local govt. Drinking water local/state. Local police and fire umm you said it local. Please make a better list you obviosly dont get the diff between federal and local govenments.

RE: Really?
By cjohnson2136 on 10/28/2011 4:49:32 PM , Rating: 3
You never mentioned anything about federal versus local. Shall I pull your comment again. It says GOVERNMENT. Which means all types of government.

RE: Really?
By semiconshawn on 10/28/2011 5:07:20 PM , Rating: 1
article is clearly about federal government read it again

RE: Really?
By cjohnson2136 on 10/28/2011 6:04:15 PM , Rating: 2
On that one issue. You also say that gov't is horrible at everything, which again implies that all gov't is horrible at everything regardless of local or federal. You made the blanket statement.

RE: Really?
By FITCamaro on 10/28/11, Rating: -1
RE: Really?
By Spuke on 10/28/2011 11:46:53 PM , Rating: 2
So your argument will be nothing more than semantics. You lose.
What? LOL! It's called English!

Read this:

I even threw in a thesaurus. Crap! I meant potatoes. Semantics, whatever.

RE: Really?
By espaghetti on 10/28/2011 7:16:08 PM , Rating: 2
We don't want or money forcefully taken from us. We earned it. Notice the word earned.
Why is it so hard for a liberal / socialist to understand that there are A LOT of independent minded people in this country?

I'll tell you why : What you've got is a disease. Seeing successful people creates envy and jealousy in your mind.
You need to get right with yourself and strive to become successful instead of being a parasite.
Work harder, be creative, be teachable and you may one day cure your disease.

RE: Really?
By theArchMichael on 10/28/2011 7:10:24 PM , Rating: 1
You sound like such an uneducated douche. You obviously don't 'get' where a lot of state and local governments obtain a large chunk of that money used to provide all those services to you.

Also, in your grand fantasy of anarchy you haven't mentioned how to protect the commons. So I nominate our cruddy and beleaguered judicial system and our regulation legislation in light of that.

RE: Really?
By room200 on 10/28/2011 8:45:00 PM , Rating: 1
And this is where you lose your argument; you throw around the word socialist because it's popular to do so. Nobody is talking about anyone "forcefully" taking anything. We fund the global war machine, but I don't hear people like you complaining about that. We subsidize oil companies who make many BILLIONS in profit when they clearly don't need our money, but you don't complain about THAT. The top 2%'s income has increased 275% over the past 30 years, while those below have seen an increase of between 18-40%. People like you want to talk about "working hard to achieve the American Dream". The American dream is possible in an environment not corrupted by big money politicians who stack the deck against the small guy in favor of large comapnies. If you can't afford to pay lobbyists, essentially, you have no voice. If you're not filthy rich, there's almost ZERO chance of you running for any major public office. We're then forced to choose between these filthy rich a-holes who will never, ever represent the average guy. People like YOU then become their mouthpiece. It's pathetic.

RE: Really?
By The Raven on 10/28/2011 4:12:16 PM , Rating: 2
Yeah that is true, but in that case at least the gov't didn't do anything. A definite plus since you aren't "hiring" anyone to monkey with the market.

Look at the tobacco market. Gov't got into giving cigs to GIs and now we have the gov't getting into "taking" cigs from people. It would've been nice to never have had that problem in the first place. And think of all the legislating and lobbying and debating that have been done on the issue (multiplied by the plethora of issues that the fed-gov is into). It would've been better if the gov't never got into the tobacco business. (Same with what goes on in our bedrooms and deciding what things are and aren't good for our bodies... ...)

I'm certainly not saying that there should be NO regulation on society at the federal level, but people have no clue on how to keep it to a minimum and why that is good for us in the long run to do so.

RE: Really?
By cjohnson2136 on 10/28/2011 4:16:06 PM , Rating: 2
Yes I completely agree. I think some measures are good and some are bad. I think this is in the latter. But blanket statements typically never work :)

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