FCC Unveils Rules for Rural Broadband Fund

WASHINGTON (AP) - Federal regulators have unveiled a plan for overhauling the $8 billion fund that subsidizes phone service in rural areas and for the poor. It redirects the money toward broadband expansion.

The Federal Communications Commission's plan, adopted Thursday, establishes a new "Connect America Fund" for mobile telephone and broadband in rural communities and needy areas.

The money will continue to come from a surcharge on consumers' and businesses' monthly phone bills. Rates should stay flat or decline for most consumers, FCC officials said. The size of the fund will be capped at $4.5 billion annually. To receive money for network expansions into designated areas, telecommunications companies will be required to enter a bidding competition.

The FCC also approved new rules for the complex system that governs how phone companies pay each other for phone calls.

The changes represent the Obama administration's most significant overhaul of telecommunications regulations.

The administration has identified universal broadband as critical to driving economic development, producing jobs and expanding the reach of cutting-edge medicine and educational opportunities.

Overhaul of the system has been held up for years by competing interests.

The new fund will underwrite the cost of building and operating high-speed Internet networks in places that are too sparsely populated to justify costly corporate investments. It will include a $500 million "mobility fund" earmarked to help build mobile broadband networks in areas where businesses won't invest.

FCC Chairman Julius Genachowski called the action "a momentous step in our efforts to harness the benefits of broadband for every American." It will enhance the U.S. position in a "fiercely competitive" global economy, he said before the 4-0 vote.

The agency estimates that the program will bring high-speed Internet access to about 7 million people living in rural areas over the next six years and will create some 500,000 jobs.

In addition, Genachowski said, changing the system governing how phone companies pay each other for calls will eliminate billions of dollars in "hidden subsidies" in phone bills and put millions back in consumers' pockets.

The current system, virtually everyone in the industry agrees, is outdated and leads to perverse schemes by carriers to stimulate certain kinds of phone traffic.

"I don't expect that overall consumer rates will go up as a result of this" action, Genachowski told reporters after the meeting.

The agency estimates that the curbs on fees the phone companies pay each other will save consumers $2.2 billion a year. That assumes that the companies will pass on a substantial portion of their savings to consumers, FCC staff said.

Some consumers may pay on average an additional 10 to 15 cents a month on their bills, the agency said. No additional charges will be imposed on low-income consumers or anyone whose phone bill is $30 a month or more.

The Universal Service Fund was created to ensure that all Americans have access to a basic telephone line. It assumed its current form in 1996, but the idea of it has been around since the early 20th century. The program subsidizes phone service for the poor and pays for Internet access in schools, libraries and rural health clinics. But more than half the money goes to pay phone companies that provide phone service in rural places where lines are supposedly unprofitable.

Charles McKee, a Sprint (S) vice president for regulatory affairs, said that by curbing the "wasteful traffic-pumping schemes" among carriers, the FCC plan will help foster a robust and efficient market for voice and broadband services.

Public Knowledge, a consumer advocacy group, said it was concerned that the new program "will lead to higher prices at a time when the average American is watching every penny."



Increase your money and finance knowledge from home

Goal Setting

Want to succeed? Then you need goals!

View Course »

How Financial Planners go Grocery Shopping

Learn to shop smart and save.

View Course »

Add a Comment

*0 / 3000 Character Maximum

14 Comments

Filter by:
Tom

PHONES for the POOR..isnt that 2 cans and a string...?

October 28 2011 at 11:12 AM Report abuse -1 rate up rate down Reply
luckee8s

JUST ANOTHER ILLEGAL FEDERAL TAX TO SCREW THE WORKING PEOPLE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

October 28 2011 at 10:23 AM Report abuse +1 rate up rate down Reply
Rick

More Federal B/S! Srew the Leeches, of our Society! If the want Internet like those of us who work/have worked for a livng, pay for it! then pay for it! I think, Constitution gives/ grants us the right to work for a BRIGHTER FUTURE, NOT SIT ON YOUR ARSE AND HAVE THE WORKIN, AND BUSINESS PAY FOR YOURS! Screw your wealth distribution B/S! It doesn't say, lay on your arse, do drugs, make babies AND THE REST OF US PAY!
Any subsidy should have manditory drug testing! Flunk! You arent entitled to SQUAT! Multiple Children with multiple fathers, your gone too!

October 28 2011 at 5:49 AM Report abuse +1 rate up rate down Reply
ccurt78

If the money they collect from me, is going to private companies to subsisize expanding their service capability. Why don't we through our goverment have any input over what thay charge for service.The monthly add on charges on my phone bill are more than my contracted service cost. I have no choice in these additional cost, and would very much like to have broadband internet service but can not afford it on a fixed income. Wait, why are they and the goverment taking my money again?

October 28 2011 at 5:16 AM Report abuse +1 rate up rate down Reply
dal

What I would like is multiple carriers in all areas to give each cable company competition and force them to drive down price and increase service in competing for costumers. Sorry satilite is not cutting it in that field.

October 28 2011 at 4:51 AM Report abuse rate up rate down Reply
punchy

if people want to live out in the sticks, that is their choice. if they want broadband, they should move.
i shouldn't have to pay for someone else's broadband service just because they chose to live somewhere far out.

October 27 2011 at 8:36 PM Report abuse -1 rate up rate down Reply
DRILLER

i can see it now,
the needy coyotes and snakes can now get internet and cell , ohh well maybe i'll be able to get cell in the gas patch now,
since we avoid civilisation . to prevent hazards , ohh yeah and the cows can get streaming video too

October 27 2011 at 8:31 PM Report abuse -2 rate up rate down Reply
straveler222

Well it was a half decent program, not sure what all that double talk really means, but one thing I do know is that if a politicians mouth is moving, he is lyeing. Guess I will have to wait and see, we live so far out in the boonies the sun sets between us and town, beamed in internet is here, but I have had dial up that was faster.

October 27 2011 at 8:04 PM Report abuse +4 rate up rate down Reply
eadygeorgem

I SEE THIS AS A HOLE LOT OF EMTY WORDS TO SAY THE GOV. IS GOING TO SCREW US A GAIN. AND IS WHERE OBOMA GETS HIS RETIREMENT. TO LIVE LIKE A KING FOR THE REST OF HIS DAYS
ONE DAY SOON I HOPE .WE THE PEOPLY WILL HAVE ENOFE .AND WHEN 10 MILLONS MARCH ON D.C.. THEN AND ONLY THEN WILL THEY KNOW IT.GREED AND CORRUPTION .DOES NOT STOP. IT ONLY GOES FORWARD AND GROWS.

October 27 2011 at 7:36 PM Report abuse -1 rate up rate down Reply
gem10s

This CRAP about Broadband access for outlying areas comes up every month...I repeat...EVERY month...when is it gonna happen????? I live 5 miles from the nearest town and cannot get broadband...because it is relagated to the local Cable provider by the FCC....I have verizon for my phone...but can't get their broadband...because of the FCC...We have sprint and AT&T also ....but cannot get their broadband...when is the FCC gonna do more than PROMISE????

October 27 2011 at 6:46 PM Report abuse +3 rate up rate down Reply
1 reply to gem10s's comment
warrenbent

No, the FCC does not relegate service to the local cable company. Those are local decisions.

Nor does the FCC prohibit Verizon or AT&T from offering you broadband.

Economics is what keeps you from getting braodband. You live 5 miles from town. That means the number of subscribers available to support the fixed costs assoicated with offering service in your specific geographical area are high on a per subscriber basis.

The FCC has plenty of weaknesses, but precluding you from receiving broadband is not among them.

October 27 2011 at 7:47 PM Report abuse -1 rate up rate down Reply