FCC Begins March Toward Broadband Subsidies

The Federal Communications Commission voted on Wednesday morning to set in motion one of the cornerstones of its national broadband plan, initiating a proceeding to convert the federal subsidy for telecom service in rural and low-income areas into a fund supporting high-speed Internet service.

At the same time the commissioners were casting their votes, the broadband plan came under review at a House subcommittee hearing, where lawmakers sparred over the proper role for the government in achieving the plan’s goal of expanding broadband service to 90 percent of Americans by 2020.

The proposal for reform of the Universal Service Fund, a long-stalled issue on the FCC’s agenda, would phase out the funds for telephone service over the next 10 years, reallocating the money for broadband access without expanding the cost of the program.

“I am pleased that we’re out of the gate running,” FCC Chairman Julius Genachowski said at this morning’s meeting. “The comprehensive Universal Service Fund reform that the national broadband plan envisions … will take time, but can’t take too long.”

Genachowski declined to offer a timetable for implementing rules for the USF reform, saying only that the notices of inquiry and proposed rulemaking the FCC unanimously passed today mark an important first step in achieving the commission’s ambitious schedule for implementing portions of the broadband plan this year.

At the House hearing, several lawmakers and witnesses questioned the validity of the broadband adoption and deployment data the FCC presented in the plan, warning that the estimate that 95 percent of Americans have access to connection speeds of at least 4 Mbps understates the broadband shortfall.

But even if that figure is taken at face value, that still leaves more than 10 million Americans without high-speed service, a situation the FCC argues will not be remedied without government involvement.

“The private sector business case to reach them simply does not add up,” said Sharon Gillett, the chief of the FCC’s Wireline Competition Bureau, the division that is spearheading USF reform. “Market incentives will not be enough to reach the homes that are unserved today.”

Gillett told the lawmakers that in extremely remote and sparsely populated areas, the additional subscriber revenue ISPs stand to gain is not sufficient to offset the costs of new network deployments.

But some skeptical lawmakers, such as Florida’s Cliff Stearns, the ranking Republican on the Energy and Commerce Committee’s Internet subcommittee, called for the government to take a backseat to the private sector in broadband. In 2000, Stearns noted, roughly 8 million Americans subscribed to broadband service, while today that figure stands at around 200 million. Over the next 10 years, Stearns argued that satellite companies and other network providers would likely fill in the few remaining gaps in the broadband map.

At the same time, members of both parties agreed that the broadband debate remains hindered by a shortage of detailed, reliable data about the availability, pricing and speeds of Internet service.

While this morning’s dual proceedings saw the broadband plan inch forward, both on the implementation side at the commission and in the form of congressional oversight on the Hill, the FCC’s work remains clouded by a court ruling earlier this month that cast significant doubt over the agency’s regulatory authority in the broadband sector.

When a federal appeals court struck down a 2008 FCC order punishing Comcast (NASDAQ: CMCSA) for secretly blocking traffic on its network, it ruled against the legal theory of ancillary authority over broadband providers, referring to what commission attorneys had argued was an implicit mandate to regulate ISPs in the Communications Act.

Attorneys across Washington are still wading through and interpreting the court’s decision, and FCC officials have admitted that the ruling adds a layer of uncertainty to its authority to implement several recommendations of the broadband plan.

At this morning’s meeting, Genachowski brushed off those concerns, saying repeatedly that the FCC’s attorneys were reviewing the decision and working to ensure that the commission would proceed on a “solid legal footing” with each action it takes on the broadband plan.

Gillett echoed that position at the House hearing. “Our general counsel is assessing the impact of the Comcast decision on our authority to support broadband by USF,” she told the panel.

In addition to the USF reform proposal, the FCC also voted to initiate several other inquiries and rulemaking processes, including a proceeding that would extend the roaming agreements between wireless carriers for voice service to mobile data traffic, and a proposal to create a voluntary cybersecurity certification program for network providers.

Kenneth Corbin is an associate editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.

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