FCC Initiates Universal Service Fund Reform to Support Broadband

April 22, 2010

Yesterday, the FCC opened its proceedings to begin reforming the Universal Service Fund (“USF”) to provide greater support for broadband deployment consistent with the guidelines established in the National Broadband Plan (“NBP”). In releasing a combined Notice of Inquiry (“NOI”) and Notice of Proposed Rulemaking (“NPRM”), the FCC began the promised transition of the High Cost Fund from support of legacy voice networks to broadband deployment.

NOI Focuses on Modeling of Support

The NOI seeks comment on the modeling of future USF support, with an emphasis on areas currently unserved by broadband, although some areas that currently have broadband offered with existing high cost support will continue to be funded. The NOI seeks comment on whether support should be based on cost models, and if so, should the support be based on forward-looking costs, historical costs, or a hybrid. Further, the Commission seeks comment on whether it should consider total costs (which include legacy voice network costs) or merely incremental costs for  providing broadband. The Commission proposes to move toward the modeling techniques outlined in the NBP as opposed to the long-standing Hybrid Cost Proxy Model. The Commission believes the NBP model, which includes accurate mapping data and costs for so-called “middle mile” will be a more realistic representation of costs. In addition, the Commission seeks comment on whether the amount of revenue carriers can or do receive for broadband services should be factored into any support models. 

The Commission expressed interest in developing a model even if a market solution is ultimately employed, such as awarding support based on reverse auctions. 

NPRM To Implement NBP Changes

The NPRM will focus on the implementation of the three step, ten year plan outlined in the NBP. Specifically identified as items to be considered are several items contained in the NBP, such as capping the High Cost Fund at 2010 levels, transitioning recipients to price cap regulations, and the eventual phase out of several sub-funds within the High Costs Fund to be replaced with the new broadband infrastructure support mechanism, tentatively called the Connect America Fund. Competitive carriers may be limited from receiving support from the High Cost Fund. 

Comment Cycle to be Established

While much of the order was expected based on the NBP, some significant areas for debate remain. For instance, there seems to be some reticence towards eliminating all traditional voice support, especially in tribal areas. Limiting competitive carriers from taking under the new fund may face legal challenges. There also appears to be a partisan split possible over the use of reverse auctions to determine who gets USF support.  And, lastly, the extent of support that will be provided to areas that provide broadband now (and thus are not “unserved”) will also face significant inquiry. Due dates for comments will be announced shortly, and will likely generate substantial interest.

If you have questions regarding these proceedings,  the NPRM, or you would like to file comments, please contact the following lawyers in our Telecommunications, Media & Technology Group:

Tamar E. Finn, Partner, 202.373.6117

Douglas D. Orvis II, Partner, 202.373.6041

This article was originally published by Bingham McCutchen LLP.