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USF Reform Gains Momentum, Generates Debate

3:05 PM -- The long-discussed reform of the Universal Service Fund (USF) and inter-carrier compensation (ICC) system, key funding mechanisms for rural telecom, is picking up considerable momentum. Last week, a consortium of telco heavyweights submitted a plan to the FCC to reform both.

AT&T Inc. (NYSE: T), CenturyLink Inc. (NYSE: CTL), FairPoint Communications Inc. , Frontier Communications Corp. (NYSE: FTR), Verizon Communications Inc. (NYSE: VZ) and Windstream Communications Inc. (Nasdaq: WIN) introduced America's Broadband Connectivity Plan, which details how the $4.5 billion USF high cost fund should be spent in a broadband world. In addition, the proposal suggests reducing terminating traffic access rates to a uniform .0007 cents per minute.

This proposal will certainly generate a raucous debate within the overall industry, with many interests including rural carriers, wireless carriers, cable companies and consumer groups all chiming in. The debate has already started regarding this proposal within rural telecom circles, with the key rural telecom trade associations, NTCA - The Rural Broadband Association , Organization for the Promotion and Advancement of Small Telecommunications Companies (Opastco) and Western Telecommunications Alliance (WTA) , writing a letter of support, but not formally joining the consortium of aforementioned carriers who submitted it. A splinter group of carriers, represented by the Rural Broadband Alliance, is opposing the plan and vigorously so.

It should make for an interesting rest of the summer and 2011. Everyone in the industry knows the circuit-switched-based USF and ICC systems need to be reformed to catch up to the packet world we now live in. But the effort will be kind of like making sausage -- you don’t want to see the process, you just want it delivered on your breakfast plate, nice and crisp.

— Bernardin Arnason, Managing Partner, Pivot Group , and Publisher, Telecompetitor

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