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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 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.

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