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In what might be considered an important first step toward implementing its national broadband plan, the FCC (News - Alert)has voted to transition the Universal Service Fund, used to subsidize traditional landline phone service in rural areas, into a broadband deployment fund.

The FCC introduced its national broadband plan in March. The ambitious plan aims to achieve universal availability of broadband across the U.S. and 100Mbps (bits per second) service to 100 million U.S. homes by 2020. Included in the plan is a proposal to spend $15.5 billion over the next 10 years to subsidize broadband in rural and hard-to-reach areas.

The USF is dedicated for subsidizing traditional phone service - which is gradually being phased-out across the US as consumers and businesses alike adopt broadband-based voice services and technologies. The FCC knows it no longer makes sense to maintain a fund that it used to subsidize a dying technology. Therefore it only makes sense to use the funds to subsidize broadband.

In general the telecommunications industry is in favor of phasing out the USF - some view it as nothing more than a 4.6-billion-dollar-a-year government slush fund - and it's up to the major carriers to keep the fund going, the cost of which they pass onto customers. The fees on some services that telecom carriers pay to support the USF have grown from 5.5 percent in 1998 to 15 percent today.

Nevertheless, the transition is going to be tricky because there are other interest groups that would like to see the USF maintained (and which are weary of pulling the plug on it).

In a statement, FCC Commissioner Michael Copps (News - Alert)said USF reform will require many compromises.

'Comprehensive reform is never painless and when it comes to building a new Universal Service system, shared sacrifice will be required from just about every stakeholder,' Copps said. 'Maybe, probably, this is why the commission has never successfully tackled comprehensive Universal Service reform before.'

FCC Commissioner Robert McDowell (News - Alert)said the five-member commission is in agreement that the USF is an 'antiquated, arcane, inefficient and just downright broken.'

'Positive and constructive change must happen as soon as possible,' McDowell said.

Media reform advocacy group Media Access Project praised the FCC for moving toward USF reform.

'Proposed reforms to the universal service fund have the potential to make the greatest impact of all, if and when federal support can be rationalized and redirected to provide a meaningful choice of affordable broadband service for people throughout the United States,' the group said in a statement.

In all likelihood the FCC will have to make the transition gradually, in stages, so as to not pull the plug on funding that is needed in order to maintain traditional phone service in the rural areas where it is subsidized.

The FCC's action includes approval of a Notice of Inquiry (NOI) and Notice of Proposed Rulemaking (NPRM) to begin the hard work of implementing the national broadband plan's recommendations, which include cutting inefficiencies in existing support of voice services and creating the new broadband fund, to be called the Connect America Fund (CAF).

The NOI asks for public comment to determine exactly which geographic areas are to be served by the new fund. Typically these are areas where there is no private-sector business case to provide broadband and voice services. In addition the NOI asks for comment on how to set up the economic model on which the fund will operate. The goal of the fund is to fill the gap between the cost of deploying broadband services in rural areas and the potential additional revenue generated from the broadband investment.

The NOI also seeks comment on how to quickly provide consumers in unserved areas with broadband access while the Commission is considering final rules to implement fully the new CAF funding mechanism.

The NPRM seeks comments on a number of proposals to cut legacy universal service spending in high-cost areas and to shift support to broadband communications. These proposals include capping the overall size of the high-cost program at 2010 levels; re-examining the current regulatory framework for smaller carriers in light of competition and growth in unregulated revenues; and phasing out support for multiple competitors in areas where the market cannot support even one provider.

'Today's Notices suggest commonsense reforms to cap growth and cut inefficient funding of voice networks,' said FCC Chairman Julius Genachowski (News - Alert), in a statement. 'And they seek comment on the use of a model to assist with determining levels of universal service support for broadband communications, so that rural and other carriers, which have done so much to provide basic telephone service to Americans who otherwise would not have it, can provide 21st Century communications services to those Americans. That support must be sufficient to ensure that providers can offer quality broadband service to high cost areas, without unfairly burdening those who ultimately bear the costs of universal service.'

'The comprehensive universal service reform that the National Broadband Plan envisions will take time, but cannot take too long,' Genachowski added. 'We do not want flash cuts. We want a reasonably paced and certain approach to converting universal service to broadband communications. That is why the Plan sets out a step-by-step approach, suggesting that the Commission begin with action, and act steadily and consistently as we work with all stakeholders to get the job done. This item begins that process by seeking the best way to create an accelerated process to fund deployment of broadband networks in unserved areas, while the Commission works on fully implementing the new Connect America Fund.'

Patrick Barnard is a senior Web editor for TMCnet, covering call and contact center technologies. He also compiles and regularly contributes to TMCnet e-Newsletters in the areas of robotics, IT, M2M, OCS and customer interaction solutions. To read more of Patrick's articles, please visit his columnist page.

Edited by Patrick Barnard