Key lawmaker urges FCC to reform phone fund for broadband, not wait for Congress

Sen. Jay Rockefeller (D-W.Va) urged members of the Federal Communications Commission on Tuesday to reform the Universal Service Fund, a move that could expedite an overhaul of the $8 billion phone subsidy program.

In letters to all five commissioners of the FCC, Rockefeller, chairman of the Commerce Committee, stressed the need to use the fund to provide broadband services to unserved areas, such as parts of his district in the coal mining towns of West Virginia. Lawmakers have proposed legislation that would enable the the high-cost portion of the fund, which is about $5 billion, to be used for mobile and fixed-wire broadband services.

Analysts said Rockefeller was encouraging the agency to move forward on its own regulatory overhaul of the fund, despite legislative efforts. Rockefeller criticized the inefficiencies of the current program, which he said benefits smaller carriers.

AT&T and Verizon Communications have received the biggest subsidies from the federal USF program.

"I believe that these shortcomings have been magnified by a FCC system in which support is dependent on the size and regulatory classification of the carrier rather than the underlying characteristics of the area to which support is directed," Rockefeller said.

Rockefeller's comments could help mid-sized carriers if they face regulatory barriers to their ability to charge other carriers for interconnecting phone calls.

"They will argue they need revenue replacement to fund rural broadband," if their intercarrier compensation fees are slashed, said analyst Rebecca Arbogast of Stifel Nicholaus.

The FCC is looking to open major rule-makings on USF in the fourth quarter and adopt sweeping reforms in 2011, though it faces many difficulties, Nicholaus said. Congress could take up USF reform over the next couple of years, "which could complicate and slow down the FCC’s reform drive if the regulators need to show deference to the lead policy role of lawmakers."

