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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 woody1 on 10/29/2011 12:02:40 PM , Rating: 3
For those of you who dislike government, think it provides no benefit, etc:

Visit a "small government" undeveloped country. For instance, most of Central America. You'll find low taxes and low government involvement. Also, bad roads, disease, poverty, unsafe foods, unsafe pharmaceuticals, crappy and unreliable infrastructure, crime, bad air, etc. etc.

Live in one of those countries for a while, then come back to the US and complain about what you have here.


RE: Really?
By Dorkyman on 10/30/2011 12:14:51 AM , Rating: 3
So you think the US has all these wonderful things because of big government?

I suddenly feel very sad that our country is in irreversible decline. In 50 years we've gone from being the envy of the world to an environment where everyone just wants to suck from the teat of government.


RE: Really?
By woody1 on 10/30/2011 10:06:05 AM , Rating: 2
Yes, the United States definitely has these things because of government. The term "big government" is meaningless. We can have a debate about the proper size and roll of government. The problem is that it's currently fashionable to blame government for all evils and to pretend that the country would be better if the government were dismantled.

The US didn't become a great and prosperous nation without the benefits of government. Once again, if you don't think government is important, go to a country where the government doesn't deliver all of the things that we take for granted.


RE: Really?
By The Raven on 10/31/2011 2:28:59 AM , Rating: 2
This article is about the actions of the federal gov't.
I'd suggest you visit Europe and tell us how great the EU is and how they should have a centralized gov't like our federal gov't telling us all what to do.


"What would I do? I'd shut it down and give the money back to the shareholders." -- Michael Dell, after being asked what to do with Apple Computer in 1997














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