Genachowski Tees Up USF Reform

Federal Communications Commission (FCC) Chairman Julius Genachowski is once again trying to find middle ground as he tackles two potential third-rail items on the telecom regulation agenda: the Universal Service Fund and Intercarrier Compensation.

In a speech today, Genachowski outlined proposed rules, to be voted on at tomorrow's FCC meeting, that he says would make the $4.3 billion USF high-cost fund more accountable and efficient while gradually shifting it to broadband funding. In addition, the plan would phase out the complex process of Intercarrier Comp, which forces larger carriers to help subsidize smaller and more rural operators by paying them to terminate calls.

Both Genachowski and the FCC staff, which participated in a background briefing for reporters, declined to provide many specifics ahead of Tuesday's meeting, but said the 250-page document would detail how he plans to end federal subsidies of telephone networks in favor of broadband support.

Genachowski, who also sought middle ground on net neutrality with mixed results, says he disagrees with both those who say the notoriously expensive USF should be abruptly eliminated and those who think it only needs tweaking.

Among the changes promised were:

  • Initially changing the Intercarrier Comp rules to make it harder for companies to "game the system." The two most common cheats are traffic pumping, in which conferencing or other calls are directed to rural areas to drive up termination traffic; and phantom traffic, where carriers disguise the origin of calls to avoid paying rightful termination fees. Genachowski also promised to address the handling of VoIP calls, which today aren't part of the intercarrier system.

  • Following that up with a multi-year transition to phase out all intercarrier payments, compensating rural carriers dependent on that money with aid from USF.

  • Driving known inefficiencies out of the USF and transferring the money recovered to the Connect America Fund to support broadband. Those inefficiencies include funding of multiple carriers to serve the same area, paying for very expensive landlines when other technology might suffice, and support of rural carriers that then turn high profits. Genachowski promised "specific proposals to control costs and limit the Fund's annual expenditures."

  • Setting specific goals and metrics for USF as well as more stringent reporting requirements. This is a major aspect of Genachowski's promised changes in the way $4.3 billion of the overall $8 billion pot of money is passed out.

The FCC chairman believes the agency has the power to enact these reforms, without additional approval from Congress, but it is likely Congress can and will get involved if the details that come out tomorrow prove more controversial than the outline presented today.

The Notice of Proposed Rulemaking (NPRM) arriving tomorrow will be followed by a long period of public comment. Given how every telecom provider will be impacted by these changes, expect a lot of comment.

— Carol Wilson, Chief Editor, Events, Light Reading

DCITDave 12/5/2012 | 5:13:36 PM
re: Genachowski Tees Up USF Reform

This struck me as odd: "Those inefficiencies include funding of multiple carriers to serve the same area... "


One man's competition and choice are another's inefficiencies.


paolo.franzoi 12/5/2012 | 5:13:35 PM
re: Genachowski Tees Up USF Reform


I like the VoIP thing...since the largest (last time I looked) VoIP service was Xbox online.

Heck if you guys think that is farfetched (which I think is what most will think) then okay Skype. Okay Vonage.  See the problem?  When is VoIP a carrier thing and when is it not.

Cuz it has a phone number?



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