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Almost every domestic telecommunications carrier (Wireline and Wireless) are actively engaged in an FCC proceeding reassessing the Universal Service Fund (“USF”) program and the current intercarrier compensation (“ICC”) framework (“the NPRM”).  The breadth of issues and range of opinions approximate those being expressed in the contentious debate in Washington on the Federal debt.

In the NPRM, the FCC proposes to shift USF payments from certain recipients and current USF programs to fund the initial phase of the Connect America Fund (“CAF”) that would support broadband service, as opposed to voice services, as initially proposed in the National Broadband Plan.  Under the interim CAF program, the reallocated USF funds would be targeted for broadband deployment in unserved areas.  Long-term, CAF would become the principal, if not exclusive, USF program.

USF Reform.  The FCC has proposed a series of changes in existing USF programs for the purpose of shifting some monies historically paid to the RBOCs, major Wireless carriers, other mid-size incumbent local exchange carriers such as Frontier, and small, privately-owned or cooperatively-owned rural local exchange carriers (“RLECs”).  Some proposals such as those intended to limit “traffic pumping” and “phantom traffic” and certain investments by RLECs have received broad support.  Another proposal to limit subsidies paid to “competitive eligible telecommunications carriers,” principally wireless carriers serving rural areas, is also widely supported.

The “saved” monies would then be made available through a “reverse auction” under which entities would “bid” for CAF payments to construct qualified broadband networks in unserved areas. The low bidder would receive the CAF payment.  The definition of “unserved areas” and the nature of qualifying broadband networks, i.e., minimum uplink and downlink speeds, are also being debated.

Other proposals that would impact the RLECs are more challenging or draconian, depending on one’s perspective, such as a national cap on per line support.  Coming out of “left field,” House Republicans suggested this past week that USF funds could be used for deficit reduction.Continue Reading FCC and Industry Take A Hard Look at Universal Service and Intercarrier Compensation