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FCC Announces Changes to USF Phone Company Subsidies
Meaningful Reform or AT&T/Verizon-Friendly Broadband Tax?
by Karl Bode 12:46PM Thursday Oct 06 2011
Over the years consumers have poured more than $25 billion into the Universal Service Fund, a program intended to bring phone connectivity to rural markets, and broadband connectivity to schools and libraries. While some of these goals have been accomplished, the program has also been a playground of waste, fraud and abuse -- in large part because the FCC didn't try very hard to verify project spending until recently. Over the years billions have been dumped into the pockets of small and large phone companies alike with only fleeting accountability, with very mixed results when it comes to getting communities wired.

The FCC today announced their "Connect America Fund" USF reform plan. Citing the fact that 18 million U.S. citizens still don't have broadband, FCC boss Julius Genachowski today stated that the agency will be changing the program so that it covers deployment of broadband to rural residential users. The FCC claims that reform of the ICC program alone will net consumers $1 billion in annual cost savings, though unmentioned is the fact many consumer broadband bills will likely increase.

“Our plan would deliver tremendous benefits for consumers," Genachowksi said in a statement. "Accelerated broadband build-out and upgrades to networks mean that millions more consumers of all ages will be able to enjoy the economic and social benefits of broadband," he said. "And consumers overall will be treated more fairly, thanks to the elimination of deep inequalities ingrained in the current system, cuts in wasteful spending, and constraints on the growth of a fund that is paid for by consumers."

Maybe and maybe not. For half a decade, AT&T and Verizon lobbyists have been pushing very hard to have the program "reformed" -- which by their definition involves less unaccountable slush money being dumped in the laps of small telcos, and more unaccountable slush money being dumped into the laps of AT&T and Verizon. Both AT&T and Verizon have frozen their next-gen FiOS and U-Verse deployments, in part, in the hopes of getting a larger slice of USF money.

Both companies recently proposed a reform plan to the FCC dubbed the "America's Broadband Connectivity" plan, or ABC plan.

The telco ABC plan makes a lot of consumer promises, but as you might expect the plan's focus is shifting more cash in the direction of the largest phone companies with as little actual added expansion as possible. Most of the plan's promised "new" broadband expansion appears to be delivered by already scheduled deployments (including LTE). Other primary focuses include putting an end to traffic pumping. The FCC plan is expected to be based largely on ABC, despite some protest from cable ops, WISPs, and rural telcos.

The FCC's press release outlines intention and goals, but not substantive plan specifics. As it stands, some argue that the FCC's plan will likely raise the $6.50 per month USF cap on consumer bills, resulting in what's essentially a "broadband tax" increase on already-expensive broadband. While the reform could do a good thing by purging unneeded voice service subsidies, that's not going to be worth much if it's replaced by poorly monitored broadband deployment subsidies and higher prices.

AT&T and Verizon have gotten enough state and federal subsidies over the last generation to deliver fiber to the home to every U.S. citizen several times over. That's not really debatable, and it's something that the government, press and industry fails to acknowledge during these discussions. The reality is that giants like AT&T and Verizon shouldn't be getting another cent, and they certainly shouldn't be getting any more money from a program with a history of serious accountability problems.

The FCC is effectively telling everyone not to worry -- but based on recent telco policy influence and extensive closed door meetings between lobbyists and the FCC, consumers and the fiscally conservative may want to. Nobody has really fact checked the telco claim that their ABC plan will connect 2 million unserved users, and given recent truth stretching when it comes to broadband expansion, the press should have calculators and skepticism on hand when details emerge ahead of a scheduled October 27 FCC vote.

topics flat nest 

Tavistock NJ

Will my USF tax on telephone bill drop?If not plan worthless

This reform plan is worthless in my opinion if the amount of taxes paid on landline and cellphone bills don't drop. If USF fees go up I don't care how the FCC reshuffles the funds. They all go to pay off political cronies anyway to keep state pols flush with gov't cash.

vzw emp


Re: Will my USF tax on telephone bill drop?If not plan worthless

Looking back at the promises the telco's have made in the past and how they have failed to live up to those promises I'd say this plan is doomed to failure. The government should get all of the funds, then disperse it as necessary to private contractors who will be charged with building the infrastructure necessary. Once it's built it can be turned over to the local telco to provide service. That's just a suggestion though.

Re: Will my USF tax on telephone bill drop?If not plan worthless

said by vzw emp :

The government should get all of the funds, then disperse it as necessary to private contractors who will be charged with building the infrastructure necessary.

That basically happens now. How's it working?



Re: Will my USF tax on telephone bill drop?If not plan worthless

said by openbox9 See ProfileThat basically happens now. How's it working?

Does it? I am not familiar with this arrangement. Can you give us more info?


Re: Will my USF tax on telephone bill drop?If not plan worthless

The gov taxes collects a fee and distributes the monies to private organizations to augment building and support of telecommunications infrastructure.

Snohomish, WA
That's what it says (without enough detail to be sure of anything) but it appears that he is pledging to do A LOT of expensive things NOW, in order to phase out excessive subsidies later.
Unless there is some magic source of funding, the only savings is removing
"Immediately close loopholes like phantom traffic and traffic pumping, and other
arbitrage schemes like CMRS-in-the-middle, where some carriers divert wireline
traffic to wireless networks to avoid paying ICC. The plan would also provide greater
certainty about compensation for VoIP calls that either begin or end on the public
switched telephone network, ensuring symmetry in the treatment of such traffic.
(which is an awesome idea, even if the rest of the plan goes nowhere)
However expecting anything out of the FCC to "IMMEDIATELY" do anything, seems unlikely.
killing old subsidy A to pay for NEW AND IMPROVED (bigger and with extra fiber flavor i.e. more expensive "just to get it going" ) subidy B, seems a little suspect to me.

Does the FCC really ever do anything?

Rockland, ME

FCC Announces Changes to USF Phone Company Subsidies

Isn't this about 15 years late?

Serious intercarrier compensation reform was supposed to happen in the 96 telecom act but lobbyists made it something to milk instead.

Santa Monica, CA

1 recommendation

Just End It

USF was just another fleecing of the American taxpayer.

Lets not take 102 years to kill it off like we did with the Spanish American War tax.

Port Hueneme, CA

Re: Just End It

said by elray:

USF was just another fleecing of the American taxpayer.

Lets not take 102 years to kill it off like we did with the Spanish American War tax.

Holy S*it, I DID NOT KNOW THIS. Had to look it up. That sux Bigtime.

Amen, I was pissed when I read about what USF was and how ling we've all been ripped off by it Two things that get me the large percentage of ones bill it encompasses and the 2nd is finding out the money is being frittered away. Mad as hell



Stop giving money to AT&T

Stop wasting my tax money on the damn company that over charge and not deliver but crap services.

1 recommendation

Re: Stop giving money to AT&T

The same thing can be said for the Fed and state governments


Jersey City, NJ

Re: Stop giving money to AT&T

Haha! Taxes, They will be used against you.

Braves Fan
Pelham, AL

Bend over

(That's all)



Spanish War tax...

..USF fund...E911 fund....US Rapacious Fee...Telco-protological Fund...We-Missed-The-SearchEngine-Boat tax...

FCC, just state, "No tax nor fund nor service fee, reciprocal or otherwise,.."

You know (rant) in a business class, the model I was shown was to come up with a price that covers expenses, and pads price enough to have a profit.

Where the (model used by) Phone companies make their profits and then add the tariffs on top (only to claim a loss and the FCC sees half of what it needs).

Underwear gnomes...


Yeah, I am in an area that is severely underserved.

I live in a county that is "officially" considered a part of the Metro Atlanta-area, but we only have DSL offered only around the three small towns in this county. That serves, at best, 25% of the population here. AT&T has shown no interest in rolling out "broadband" to the rest of this county, and neither is Comcast. That leaves no one else.

Yeah, we can use Verizon Wireless "broadband", but it is anything but "broadband", and it is too cost prohibitive, as well as severely limited. I mean, $80 for 10GB, then $10 per GB? On top of the fact that coverage is not that great, and it is rather slow. This is not meant to be a home broadband connection.

There is one small community, which is close to I-20, that has either a VRAD, for U-Verse access, or a Remote Terminal, for DSL-only access. AT&T even has a pretty little banner on the side of it, advertising internet access. I am not sure how those people got AT&T to install that hardware, but it is not an exceeding "rich" area.

I have attempted to talk to the county commissioners, but they refuse to give me any time. Of course, I will see to it that they pay for that, during their next re-election, but that does not get the rest of us "broadband" access. AT&T and Comcast refuse to do anything, but put us on some "waiting list".

There are a lot of potential customers, just on my road alone. I highly doubt these changes will do anything to actually push for the roll out of "broadband" to the rest of us. AT&T, Comcast, and others will just take the money, and roll out upgrades around Atlanta(which sucks money from the rest of the State), and tell the rest of us to "f*** off".

My only option, as of now, is to pay $357 a month for a DS1. If companies refuse to roll out consumer-level "broadband" options for those of us in more rural areas, then they should provide us with DS1 lines at a far more reasonable rate. Perhaps that would sufficiently motivate AT&T, and others, to roll out DSL and/or other "broadband" options.

Chesterfield, MO

Re: Yeah, I am in an area that is severely underserved.

What about Clear or a local WISP? Clear offers "4G" (if their brand of WiMax qualifies to be called 4G) unlimited for less than $50/month. Clear offers services in Atlanta. It might not cover your area but it's worth a look.

Also -- there are generally lots of local WISP providers. They don't offer the best speeds/price but it's a heckuva lot better then $357 for a DS1! I'd be surprised if one doesn't serve your area.


Re: Yeah, I am in an area that is severely underserved.

I live west of Douglasville, GA, in Haralson County. So, no, unfortunately, I am not in the coverage area. AT&T has finally turned on UMTS coverage on my road, but where my home is, I constantly switch from EDGE to UMTS, though more EDGE than UMTS. Also, this is only when I can actually obtain a connection in my home.

My hope is that Comcast will roll out internet in my county, though I doubt it will. Comcast seemed to roll out "broadband", to more areas, more quickly, when compared to AT&T. Outside of that, my only other hope is that Clear offers coverage in my area, or that another WISP provider rolls out more reasonable price packages.

If I could move, I would. Unfortunately, I can't. Since I can't, my only hope is that some provider will start expanding to my area, or I will continue with $100+ bills, and still having extremely limited access to the internet.

Brooklyn, NY
·Optimum Online
·Verizon FiOS

new purposes

the usf funds are largely going to wireless carrier's MVNO's setup to provide service for low income (poor) people. you don't see wireless carriers putting much of that USF money to work for building rural wireless networks. that money goes into the pockets of large corporations who have the partnership with the MVNO's... namely AT&T and Verizon with a smaller portion going to Sprint.

with many promises broken by wasteful & fraudulent use of the funds.. a FCC internet broadband tax/usf charge is DOA. time to get the system working properly first and ask some difficult to asnwer question on where this money wnet on rural infrastucture... these funds largely padded the pockets of the largest telcos and all but Verizon have sat on that cash for quite some time.

the usf funds will have to choose their purpose.. if the purpose is to provide poor and/or rural people a phone service subsidy then that's what it should be for... if the goal on the other hand is a HAND-OUT or FEEBIE to telecom to build universal access networks you need massive oversight to make sure telcos are being honest with their network builds.. everything AT&T and Verizon have done in the past 10+ years is to shun, or sell off rural customers and NOT upgrade those parts of their netowrks (that they still have). for this reason alone, the FCC can reconsider the opportunity to revisit a DUOPOLY/MONOPOLY last mile franchise in much of these underserved areas.

** There is not enough money to go around to do both.. the FCC will have to choose.