A host of telecom and cable companies today announced a new plan to reform the Universal Service Fund and extend broadband further into rural America. I’ve spent years only partially understanding how USF works. Or how it doesn’t work, as seems the case. I think even in the old days, when it may have made some kind of sense, USF probably retarded investment and new technology in the areas it aimed to support. Unsubsidized potential entrants sporting new technologies couldn’t hope to compete with heavily subsidized incumbents. Even incumbents effectively couldn’t deploy newer, more efficient unsubsidized technologies. The result was probably some extension of phone service in the early days but lots of stagnation for decades after that. In today’s communications market, however, where many companies and many technologies supply many wholesale, commercial, and consumer services — and where broadband, Internet cloud, and wireless complement, compete, and overlap — USF has really broken down. Reform is long overdue, and this consensus industry plan should finally help move USF into the Internet age.
The new proposal — called America’s Broadband Connectivity Plan — also reforms the antiquated and broken Inter Carrier Compensation system, which sets the terms for traffic exchange among communications companies. In a broadband-mobile-Internet world, ICC, like USF, no longer works and is often exploited with arbitrage schemes that add no value but shuffle money via clever manipulation of the rules.
For too long wrangling and indecision between industry and government — and among industry players themselves — has delayed action. We now have a good consensus leap on the road to modernization.
