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Opposition to FCC USF Reform Mounts: Several Measures Curb Reform Efforts

Federal Lawsuit, RESCUE, and Rural Telco Lobby Threaten New Rules

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For the first time ever, new FCC rules overhauling the Universal Service Fund directly support fixed and mobile broadband services, while giving telephone companies the first opportunity to receive money for broadband. Broadband infrastructure expansion under the plan has already begun, as President Obama's first term in office comes to a close. The USF overhaul created the Connect America Fund (CAF) with a fixed $4.5 billion budget. The Connect America Fund was announced by the Obama administration when it rolled out the National Broadband Plan in March, 2010.

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While there was no doubt that the old rules were antiquated and prone to abuse, critics of the new USF reform rules expressed concern about the work already done to expand broadband access in rural areas. In August 2012, the National Telecommunication Association sent a letter to President Obama expressing concern over USF reform on behalf of its 600 members.

"(Universal Service Fund) needed updating for an increasingly broadband focused world. Thus, NTCA and its members have consistently urged reasonable modifications to these vital programs that would build upon the historic success story. Recent FCC decisions to modify these mechanisms, however, are generating uncertainty among small rural network operators and threatening their ability to continue delivering high-quality, cutting-edge technologies to consumers and other businesses in the country’s hardest-to-serve areas. These changes also put the repayment of public and private loans, including stimulus awards, at risk."

"Indeed, in the face of these changes, it is NTCA’s understanding that some small rural providers are already “turning back in” stimulus awards and/or slowing deployment of projects that were intended as engines of job creation and retention."

Despite criticism from rural telecom providers, industry associations, a federal lawsuit with twenty nine petitioners, and a Congressional bill to weaken FCC rules, FCC Chairman touts USF reform as a cornerstone of his tenure at the FCC. In September, 2012 the FCC Chairman said the following at VOX Media Headquarters in Washington DC:

Through the FCC’s major universal service reform, we took an outdated inefficient program for delivering plain old telephone service and created the Connect America Fund, the largest U.S. broadband infrastructure program ever established, which will use $45 billion over 10 years to extend broadband deployment throughout the country, while for the first time putting universal service spending on a budget.

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We fundamentally modernized the intercarrier compensation system – an antiquated, byzantine set of rules governing billions of dollars in payments among carriers for carrying phone calls. Our overhaul is removing outdated regulations and accelerating the transition to IP technology by aligning incentives for the broadband world

The Presidential election will undoubtedly play a major role in the FCC's ability and authority to fully implement the new regulations. The Republican party platform and the Romney campaign have not taken a position specifically on USF reform. However, the Republican platform included criticism of the FCC under President Obama's watch.

In a section in the platform called "Protecting Internet Freedom," the platform makes the point that the Internet should retain its independence from regulatory barriers. According to the platform: "We will remove regulatory barriers that protect outdated technologies and business plans from innovation and competition, while preventing legacy regulation from interfering with new and disruptive technologies such as mobile delivery of voice video data as they become crucial components of the Internet ecosystem."

While not directly attacking FCC USF reform initiatives, Republicans took a swipe at Obama administration efforts to expand broadband access:

"[The FCC] inherited from the previous Republican Administration 95% coverage of the nation with broadband. It will leave office with no progress toward the goal of universal coverage -- after spending $7.2 billion more." The $7.2 billion dollar reference was about President Obama's broadband stimulus funding, appropriated in the American Recovery and Reinvestment Act (ARRA)."

Broadband and Internet Regulation Become Presidential Campaign Issues: Republican Campaign Platform Includes Protecting Internet Freedom

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