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FCC to create $4.6B broadband subsidy

The Federal Communications Commission will propose creating a $4.6 billion Connect America fund to support the deployment and adoption of high-speed Internet service in low-income and rural areas as part of a 10-year overhaul of an existing telecommunications subsidy program.

The initiative would replace a similarly sized program contained within the $8 billion federal Universal Service Fund, which reduces the costs of phone service for eligible Americans and subsidizes wiring of schools, libraries and rural hospitals with high-speed connectivity.

During a news briefing today, agency officials outlined a three-stage strategy over the next decade to migrate the USF away from traditional phone subsidies and toward exclusively supporting broadband. The proposal will be a centerpiece of the agency's national broadband plan, a sweeping blueprint designed to ensure the nation keeps pace with tech-savvy countries such as South Korea and Japan.

The plan, to be formally unveiled at the agency's March 16 meeting, has a March 17 deadline for submission to Congress. It will be the focus of oversight hearings before House and Senate Commerce committees and is expected to trigger a major lobbying battle in the years ahead.

Commission officials said the changes detailed today can be accomplished without expanding the fund's size and without congressional action. Nevertheless, the broadband plan will recommend that Congress consider approving a one-time, $9 billion appropriation -- to be doled out over three years -- that would enable the FCC to accelerate the fund's transition.

"It always turns out that there's more than one way to achieve an objective," said Blair Levin, executive director of the FCC's Omnibus Broadband Initiative. "We're not requiring [Congress] to act. We think there are benefits if they act."

Levin said the universal service program would help bring broadband to regions where it isn't available. Some carriers have balked at serving rural areas because of prohibitive costs. The fund also would provide eligible Americans with subsidies to lower monthly broadband bills.

In 2020, the FCC envisions that the USF would no longer support phone-related service. Since there may be pockets of the country that would need financial assistance with phone connections, agency officials vowed that the commission would find a way to help those affected citizens pay their phone bills.

In concert with the universal service overhaul, the FCC plans to tackle another long-standing challenge: revamping Byzantine rules governing intercarrier compensation, the fees phone companies charge to carry telecom traffic from other providers.

The regulatory proposals won key endorsements from two organizations: the National Association of Regulatory Utility Commissioners and the Benton Foundation, a nonprofit public interest group.

"Congress expected the FCC to make some hard choices and they did," NARUC President David Coen said in a statement. "It appears the FCC is setting out a solid framework for reform. The plan had to, and does, appropriately address universal service and intercarrier compensation reform simultaneously," he added.

The U.S. Telecom Association, whose members include the nation's two largest carriers, AT&T and Verizon, issued a statement calling the proposals "an important step forward" but stopped short of an endorsement.

"We must get the details right in such a critical matter, and we are committed to working with the commission and other stakeholders to resolve these issues as quickly as possible," the group said.

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