FCC adds $9 billion to broadband subsidy fund

The 70 percent increase in the Connect America Fund would help bring broadband to 5 million U.S. residents, the agency says

The U.S. Federal Communications Commission voted Wednesday to shift US$9 billion over five years from traditional telephone subsidies to broadband subsidies, in an effort to bring high-speed Internet services to 5 million U.S. residents who don't have access.

The FCC, as expected, voted on a proposal to shift $1.8 billion a year from the rural telephone subsidies in its Universal Service Fund to its broadband-focused Connect America Fund, amounting to a 70 percent increase in broadband deployment subsidies.

"Thanks to the Connect America Fund, we've taken a serious bite out of the lack of broadband access in America [and] put ourselves on a path to remedying that," FCC Chairman Tom Wheeler said.

The FCC vote provides $1.8 billion a year, starting in 2015, to a broadband deployment fund where large carriers such as AT&T and Verizon Communications have the first shot at accepting the subsidies. If the large carriers turn down the subsidy, the FCC would conduct an auction to give the subsidy to other carriers.

The commission also voted to ask for public input on a series of questions about its broadband subsidies, including whether the agency should require that carriers getting subsidies deliver download speeds of 10Mbps, instead of the current 4Mbps requirement.

Broadband speeds are increasing in many areas, "but the last thing we want is for USF to result in some kind of second-class status for broadband in rural areas," Wheeler said.

The FCC voted in October 2011 to begin transitioning subsidies for traditional telephone service in its Universal Service Fund to broadband subsidies. To date, the new Connect America Fund has spent $438 million to expand broadband to about 1.6 million U.S. residents and $300 million to expand mobile broadband service.

The broadband fund subsidizes deployments in rural communities and other areas where it would be expensive to build networks.

The commission's two Republican members raised questions about the Connect America Fund plan, with Commissioner Ajit Pai protesting a provision that would allow carriers to raise the so-called rate floor, the minimum amount they can charge for basic phone service and still get the subsidy, from about $14 to $20.46 a month in some rural areas. The rate floor increase would be phased in through 2017.

"The rate floor targets our farmers, our ranchers, our small-town entrepreneurs and other rural Americans with a significant rate hike," he said. "It will harm access to service for some of the most vulnerable consumers in rural America."

Some rural lawmakers and consumer groups have also protested the rate hikes. The rate floor is congressionally mandated to keep telephone service rates in rural and urban areas relatively comparable, so that some parts of the country are not subsidizing service for other parts, Wheeler noted.

Also on Wednesday, the commission voted to seek pubic comments on a proposal to run spectrum sharing experiments in the 3.5 GHz band.

The proposal would largely implement recommendations from the President's Council of Advisors on Science and Technology (PCAST) in 2012. The PCAST report called on the U.S. government to share its spectrum in the 3.5GHz band now used by radar systems. Radar systems could share the spectrum with other wireless services using small cells, the report said.

The spectrum-sharing plan is the future of spectrum management, said Commissioner Jessica Rosenworcel. "What we are poised to do with this band is creative, innovative and will serve as the blueprint for making smarter use of our airwaves going forward," she said.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's email address is grant_gross@idg.com.

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