Yesterday the FCC vote unanimously to approve its proposal to reform the Universal Service Fund (USF). While not making the national news this is a big deal. The proposal changes the way we will fund broadband expansion into rural or underserved areas, addresses the issues of traffic pumping, arbitrage and carrier disputes. The proposal includes the creation of a new fund, the Connect America Fund, that will be have an annual budget capped at $4.5 billion to support “wired” broadband expansion. During the meeting comments were also made that the new reforms and expansion of broadband would positively impact 7 million people and generate a half million jobs over the next six years.

In addition to creating a new process for the distribution of the funds, the FCC also changed the rules associated with InterCarrier Compensation (ICC). Although, this was expected, Broadvox and other ISPs and ITSPs will have to conduct further analysis to determine how these changes will impact our carrier/wholesale business.

Most industry analysts like the reforms but all have expressed concern with regard to the implied favoritism or tilt towards the large ILECs, AT&T and Verizon. The Connect America Fund is to give the ILECs preferred or exclusive access to nearly all of the funding.  Cable operators will receive support only where an ILEC chooses not to exercise its right of first refusal.  

The proposal also provides for:

• Preferential access to $1.8 billion annually in high-cost support in 100 percent of their territory through a right of first refusal
• Recovery of as much as 100 percent of their access charge losses from an Access Replacement Mechanism that will increase phone bills
• Exclusive access to $300 million in new high-cost support, in addition to 100 percent of their legacy support before the new Connect America Fund begins to allocate money

Until I receive an analysis of how the reform will affect Broadvox, I plan to withhold judgment. However, I do appreciate the need for the reforms. Like many, I would hope that any of the pending court challenges would be made on the basis of improving the proposal, not gutting it. Further delays in revising the USF and ICC, will only cause uncertainty that will hinder network/infrastructure investments and revenue planning for carriers.

See you on Monday.