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In this edition of Views and News, ETI examines the FCC's plans to reform the Universal Service Fund, and the implications for the current intercarrier compensation regime. We also analyze the continuing need for USF subsidies in an era of increasing expenditures on telecommunications services.
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De-linking Intercarrier Compensation from explicit Universal Service support
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On February 8, the Federal Communications Commission (FCC) adopted a new Notice of Proposed Rulemaking (NPRM) proposing a comprehensive reform of its Universal Service Fund (USF) and Intercarrier Compensation (ICC) policies. That same day, the State member staff of the Federal-State Joint Board on Universal Service released three alternative USF plans. Both the NPRM and the Joint Board proposals are offered as a means for achieving nationwide broadband availability by providing financial support for infrastructure development in presently unserved and underserved areas. The FCC's March 2010 National Broadband Plan had estimated that 95% of all US households had access to at least one wireline (telco or cable) broadband provider, and that "rural areas are less likely to have access to more than one wireline broadband provider than other areas" and that "low-income areas are on average somewhat less likely to have more than one provider than higher-income areas." All of the proposed USF solutions contemplate expansion of existing high-cost and other support mechanisms to include wireline and wireless broadband both as contributors to the several funds and as potential recipients of USF-supported subsidies....
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What constitutes "affordable" telecom services – reconciling Americans' escalating telecom spending with any claimed need to "subsidize" network access
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A central focus of USF policy has long been to assure that essential telecom services offered to consumers were "affordable" irrespective of the costs involved in providing the service. But "affordability" was defined way back when the only telecom service that typical households would purchase was a basic wireline dialtone line, with average household spending on telephone and cable TV somewhere around $50 per month. Today consumers spend closer to $200 per month on wireline voice, wireless voice and data, cable TV, and high speed Internet access. As a result, the revenue-generating opportunities associated with new broadband infrastructure investment – including broadband Internet access, wireless backhaul, and video services – are considerably greater than they were in a voice-only wireline world. At the very least, the definition of "affordability" needs to be revisited, and with all of the additional revenue sources now available to support infrastructure in high-cost areas, the continuing need for ongoing USF-type support may well be on the wane....
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About ETI. Founded in 1972, Economics and Technology, Inc. is a leading research and consulting firm specializing in telecommunications regulation and policy, litigation support, taxation, service procurement, and negotiation. ETI serves a wide range of telecom industry stakeholders in the US and abroad, including telecommunications carriers, attorneys and their clients, consumer advocates, state and local governments, regulatory agencies, and large corporate, institutional and government purchasers of telecom services. |
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