FCC approves rural broadband push

By Scott Martin, USA TODAY

Federal regulators on Thursday approved a sweeping overhaul of the nation's $8 billion fund that subsidizes phone service — instead targeting money to finance the spread of high-speed Internet to an estimated 18 million Americans who don't have it.

The FCC is hoping to bring broadband to 7 million rural customers.

The FCC voted 4-0 on the makeover of the Universal Service Fund, which helps provide phone service to rural America and to those with low incomes. Regulators approved the new Connect America Fund in a bid to boost U.S. broadband to rural America. The FCC also started a new Mobility Fund to build out mobile broadband.

"We are taking a system designed for the Alexander Graham Bell era of rotary telephones and modernizing it for the era of Steve Jobs and the Internet future he imagined," said FCC Chairman Julius Genachowski.

The changes mark the biggest transformation of telecommunications policy under the Obama administration.

Connect America, part of the larger $8 billion fund, has an annual $4.5 billion for the next six years. Money for the plan will continue to flow from a surcharge to consumers and businesses seen on monthly phone bills. Those subsidies will be redirected to build out and operate new high-speed Internet in places that carriers consider too underpopulated or financially unrewarding for corporate investments.

The funding switch is expected to bring high-speed Internet to the 6% of the population that has been saddled with slow or no Internet and is losing ground economically and academically as high-speed Internet have-nots. "This is definitely a step forward," IDC analyst Matt Davis says. "It will go a long way toward solving the digital divide in the United States."

The move updates federal policies on financing of wired and wireless phone service, which is now available to more than 99% of the U.S. population, according to the FCC. But the wireless association CTIA said that aiming only 11% of the fund at mobile does "not appear to fully take into account the significant consumer migration to mobile broadband services."

Under the new plan, phone companies will be allowed to raise prices to recoup lost revenue. FCC officials say they expect average consumer phone bills could increase 10 cents to 15 cents per month.

The FCC also reworked its policy on how phone carriers pay for carrying and connecting each other's phone traffic. Critics of the system say the way that carriers paid for connecting calls outside of their service areas no longer made sense and had become riddled with perverse incentives and schemes that cost consumers.

The FCC estimates that expanding high-speed Internet will create roughly 500,000 jobs in six years.