FCC inches toward the broadband future with USF reform

Tom Cruise in Mission Impossible screengrab
The FCC tackles its Mission Impossible

Updated: The Federal Communications Commission’s $4.5 billion plan to upgrade for the 21st Century the funding program that provides telephone service to rural areas will soon become law, as universal service fund reform hits the Federal Register. As policy-making goes, this more-than-700-page regulation detailing the reform was much-needed and has taken years, but once the FCC decided to buckle down and address the problem in the last few months, the lobbying was over in a relative flash. This compared with the two-year saga that was getting network neutrality from a proposed rule to final rule with legal teeth.

Savvy politicos see the USF reform’s speed as a case of necessity, because the issue was complicated and created uncertainty for many telcos and communications providers. The FCC did kickstart the issue two years ago, but only over the summer did it start focusing deeply on it. So the industry and the FCC got together to push the process through in record time with attention for the issue coming mostly from political and industry insiders fighting over their slice of the pie.

Most portions of the reform, which swaps the FCC’s rural funding model from old-school copper and voice to backing broadband and IP, will go into effect on Dec. 29 after the Commission voted to approve the order back in October. While this is a necessary step in moving the nation from the analog infrastructure to something equipped to meet the digital age, there are aspects of the rules where political compromise has cost the tech world and rural consumers while still sending payment to the big telcos.

The plan calls for $4.5 billion to be spent on delivering broadband access to rural America over the next six years. Prior to this, money from the program was allocated to telcos in rural areas who were paid for each line they operated. In some cases, those payments were a critical component of revenue for rural operators, and a source of shenanigans relating to overcharging the government. This is why many rural carriers and even larger wireless players were nervous about the reform efforts and pushed hard to make sure their interests were protected, even offering a model that showed exorbitantly high costs associated with providing broadband to certain areas. The telcos declined to disclose the model they used to reach those costs, although in the USF regulation, the FCC says it wants to make any such models public.

As for the broadband itself, which is what the tech world should care most about, the FCC is attempting stop spending billions on voice access, which is a plus, and start moving money to broadband. Still, the program is full of concessions to the telcos, and somewhat dubious attempts to expand broadband access. For example, carriers that elect to compete for part of a $300 million pot to deploy rural broadband via wireless “must provide broadband with actual speeds of at least 4 Mbps downstream and 1 Mbps upstream, with latency suitable for real-time applications and services such as VoIP, and with monthly usage capacity reasonably comparable to that of residential terrestrial fixed broadband offerings in urban areas.” Presumably, this means Verizon can’t offer wireless service with caps of 5GB a month if otherwise folks could get DSL capped at 150GB per month.

Update: The FCC took issue with my calling its attempts dubious. I was referring to speeds but the FCC pointed out the 4/1 speed for the first phase of the CAF is based on standard current usage and it also requires sufficiently low latency to enable real-time VoIP and other applications. Then, in the second phase of the CAF, the speed requirement goes up to 6/1.5 in some areas served by the larger carriers and starting in 2014, the FCC review these requirements to make sure the standards are keeping pace.

And while the speeds on offer are pretty low when one considers that the FCC expects 100 million homes to have 100 Mbps connections by 2020 (a laughably attainable goal), the money spent to deploy rural broadband still could end up perpetuating a digital divide. Only this time it won’t be dial-up versus broadband, but DSL and LTE versus fiber to the home and cable’s DOCSIS 3.0.

To fund the program, consumers will still see a tax on their wireline and , now, their wireless phone bills, but the goal is to keep those taxes from rising over time. That charge has risen from 5.5 percent to 15.3 percent since USF’s introduction, according to Republican Commissioner Robert McDowell. It’s unclear what the end cost to consumers will be.

The big elements of the whole USF reform effort involve debates and timing over esoteric federal funding formulas. The implications of these will vary with the big telcos continuing to see rewards as they pay into the system. However, it also starts to address issues such as peering disputes like what Comcast and Level 3 are fighting over (it doesn’t exactly make rules but seeks comments for potential rulemaking) and what cable companies and others can collect when connecting VoIP calls. As reform efforts go, this may not thrill consumers or the tech industry, but it is a start to move policy and billions of dollars in subsidies into the present era, and maybe even into the future.