Universal Service: Reforming the High-Cost Fund

The House Subcommittee on Communications, Technology, and the Internet held a hearing on Thursday to examine aspects of the Universal Service Fund (USF), possible reforms to the High Cost program, and the growing demand for advanced services including broadband and mobility in high cost areas of the country.

Subcommittee Chairman Rick Boucher (D-VA) said the $4.9 billion high-cost program, intended to subsidize telephone service to rural and other hard-to-reach areas, should cover broadband service and needs to expand the services taxed to pay for the fund. "Broadband is to communities today what electricity and basic telephone service were 100 years ago," Chairman Boucher said. "It is the new essential infrastructure for the commercial success of all communities."

House Commerce Committee Chairman Henry Waxman (D-CA) called for Congress to require that carriers bid on contracts to provide phone service to areas where multiple carriers receive USF support.

Derek Turner, research director for Free Press, testified that the USF needs to be all about broadband deployment. "The principle goal of the High-Cost program should no longer be the maintenance of basic telephone service in rural America," he said, "it should be achieving universal deployment of affordable broadband infrastructure." He suggested that the USF be transitioned to funding upfront deployment costs rather than ongoing support, saying that fund recipients would be able to recoup the higher build-out costs via triple play offerings of phone, Internet and TV services. He also said that would prevent companies that got broadband stimulus funds to try to get ratepayers to subsidize ongoing costs for networks already paid for with stimulus grant money.

Witnesses at the hearing from the telecom industry said broadband should be eligible for USF money, even though a huge economic stimulus packaged, passed by Congress in mid-February, includes $7.2 billion for broadband deployment grants and loans.