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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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They dont understand
By KOOLTIME on 10/28/2011 6:35:51 PM , Rating: 2
What in today's USA does someone consider RURAL ??

Every place has phone lines, and DSL runs on phone lines so dont know what they are talking about some rural place doesn't have broadband ???

Unless you live on a mountain, wireless signals dont go around those very easy. Cant just install them anyplace and ruin some of our natural forests for it.

Seriously what place doesn't have telephones in the USA consider Rural ?? broadband carries on phone lines so they can easily have it. If their phones are old, then said mayor of said city should put pressure on him, to get the phone poles replaced.

RE: They dont understand
By Expunged on 10/28/2011 8:46:41 PM , Rating: 4
It's not the lack of land line phones, it's the quality of the land lines. First DSL can only deliver a given speed at a given distance from the central office. In my area I'm 51 miles by copper from the telco central office. There will never be acceptable DSL speeds on these lines. There is a multitude of multiplexing equipment and repeaters between here and the central office not to mention the fact that when it rains I can't even get dial tone, much less broadband. In 1995 when I first had dial-up access I could connect at 14.4 and 19.2 on a really good day. I think I once remember seeing 21.6 after the ISP and I both had upgraded modems around 1997. Meanwhile, the copper and repair degraded even more and by the end of the dial-up era I routinely connected at 9600.

This is in no way the fault of the several hundred million people who don't live in rural areas and will be paying for this broadband plan. This is the fault of the FCC, the local telco and myself for living in such a remote location. I don't expect anyone to step in and pay for me to have better internet service. There are even more rural areas around here, I know several people who use "radio telephone" where they don't even have a land line. Most of those people have done away with the systems today and are using cell phones but some living in the bottom of canyons still can only use their UHF and VHF radio telephones.

Wireless doesn't work everywhere, the current bands don't penetrate dense vegetation or canyon walls very well. Satellite doesn't even work everywhere, but it comes as close as basically anything. There are just some places that won't ever have the highest standard of living, that's a trade off they make. They won't have pavement to their house, street lights, FOIS, or whatever other luxury they'd like to have but most of them are happy with the trade off and those that aren't should spend their hard earned money to get what they need instead of spending everyone else's money.

RE: They dont understand
By rrburton on 10/29/2011 8:05:50 AM , Rating: 2
Nice to hear a reply from someone with actual experience in the topic. Sad that the government thinks you need to be rescued from yourself.

RE: They dont understand
By The Raven on 10/31/2011 4:57:27 PM , Rating: 2
Yeah and finally someone with some sense gets rated up too. It seems that there is plenty of push back on gov't intervention in the automotive market here at DT, but suggest the gov't get out of broadband adoption and they turn into close-minded morons. Yes people, we all love broadband, but does this make sense? No.

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