As expected, the Federal Communications Commission (FCC (News - Alert)) unanimously adopted the Connect America Fund/Intercarrier Compensation Reform Report and Order and Further Notice of Proposed Rulemaking (Docket Nos.: 10-90, 09-51, 07-135, 05-337, 01-92, 96-45, 03-109, 10-208 for those of you who need the citation). The action is intended to reform and modernize the universal service and intercarrier compensation systems with the goal of making wired and wireless broadband communications access universally available to all Americans.

 Putting hubris aside for a moment, I wrote an extensive piece on the proposal when FCC Chairman Julius Genachowski (News - Alert) first announced it was being circulated in early October.  And things are clearly on track, once the details of the proposal are published, for protracted legal wrangling.  

What they voted to do

It is instructive to read the FCC’s press release on the vote. The meat of the matter was the statement that: “The Connect America Fund will put America on the path to universal broadband and advanced mobile coverage without increasing costs to consumers. By eliminating waste and targeting support where it is most needed, these reforms put universal service funding on a firm budget, and they will impose strict new accountability on fund recipients.”

The executive summary of what is to come hits the following areas:

Increased consumer benefits:

• The FCC estimates that, over the next six years, the Connect America Fund will expand broadband access to over 7 million residents of rural areas who are currently unserved and will put the country on the path to universal broadband within a decade.
• The Mobility Fund will expand advanced mobile broadband access to tens of thousands of road miles where millions of people work, live, and travel, and will include dedicated support for Tribal areas.
• Intercarrier compensation reform will eliminate hidden costs in consumer bills, providing economic benefits of $2.2 billion annually in the form of lower prices, better value for the money, or both to long distance and wireless consumers across the nation.
• Expanded broadband access will generate approximately 500,000 jobs over the next six years. As part of this reform, some consumers may pay, on average, an additional 10 to 15 cents a month on their bills; but for every dollar in cost, reform will provide $3 in benefits for consumers.

And no additional charges can be imposed on consumer phone bills that are at or above $30 a month (inclusive of most fees consumers pay on their bills), nor can such charges be imposed on low-income consumers served by the FCC's Lifeline program. Any new charges will begin to decline after six years.

Commit to fiscal responsibility

A firm annual budget set at current levels -- $4.5 billion -- will prevent growth in the Fund and help protect consumers from increased contribution fees. Programs that provide subsidies where they are not needed are eliminated, and compensation for corporate overhead expenses is reduced. Market-based mechanisms, including competitive bidding, will be used to distribute money more efficiently.

Demand accountability

In order to receive Connect America Fund support, carriers must demonstrate they are deploying broadband to their customers. These networks must meet performance criteria that enable the use of common applications such as distance learning, remote health monitoring, VoIP, two-way high quality video conferencing, Web browsing, and email.

Encourage deployment of modern networks

Reform will ensure fairness to consumers, promote competition and foster innovation in communications services. In addition, the Order takes immediate action to end wasteful and costly gaming of the intercarrier system, including schemes such as phantom traffic and traffic pumping.

However, the Chairman, in his statement introducing the item for the vote, was very careful to say that the devil will be in the details. A look at all of the things that need to be defined such as “performance criteria” for example, shows just how much more work needs to be done and represents potential landmines in the process toward possible implementation.

The fun begins

This is a story with legs, and TMCnet will be covering all of its twists and turns as it unfolds. That said — and this is exemplary of points I have made previously about praising the Commission’s efforts and then adding a “BUT!” that goes to the heart of some interest’s core interests — it seems appropriate on this day to share what Consumer Federation of America’s (CFA) Mark Cooper, Director of Research, had to say in a written statement prior to the vote.

“Way to go!” FCC

“The Federal Communications Commission deserves kudos for keeping the public interest in mind in tackling the complex problem of intercarrier compensation and the high cost fund. It rejected the totally self-service industry proposal (the ABC Plan) and handled four of the five major challenges it confronted well. It took the public interest into account in the fifth issue. Given the horrendously anti-consumer history of intercarrier compensation and interstate cost recovery, four-and-a half out of five is way above the curve…For the first time, public funds are being used to ensure that broadband is available at affordable rates. This change is long overdue.”

But

We believe that the FCC could have accomplished the reform of intercarrier compensation and interstate cost recovery without any increase in the fixed charges on the consumer bill, if it had tackled reform of Subscriber Line Charges (SLC)… The Commission should move ahead with the order, but must be vigilant to ensure that consumers receive the benefits that have been promised to offset the costs. While we acknowledge that transition periods are necessary, we also remind the Commission that past promises have been broken…Until the excessive recovery of interstate costs is removed from consumer bills, the Commission cannot close the book on rate reform and the best way to protect consumers is to eliminate the excessive costs recovered through the SLC.”

CFA’s assessment of the five major challenges is worth a read, setting aside the heat of the rhetoric. It does provide a nice view of the issues at hand and context for the coming blowback on these points from impacted parties.

The various blogs on these issues are already packed with commentary and nitpicking. While we all are going to have to wait for the published order, the entertainment value alone of watching who thinks their ox has been gored and proposed remedies is going to be immense. Stay tuned.

Peter Bernstein is a technology industry veteran, having worked in multiple capacities with several of the industry's biggest brands, including Avaya (News - Alert), Alcatel-Lucent, Telcordia, HP, Siemens, Nortel, France Telecom, and others, and having served on the Advisory Boards of 15 technology startups. To read more of Peter's work, please visit his columnist page.