FCC Releases Proposals to Reform USF

On Tuesday, January 29, 2008, the Federal Communications Commission ("Commission") released three Notices of Proposed Rulemaking ("NPRM") to examine the deficiencies in the high-cost Universal Service Fund ("USF"). The Commission asks for comment in three areas: (1) changes to the identical support rule for wireless providers; (2) use of reverse auctions to distribute subsidies; and (3) recommendations of the Federal-State Joint Board on Universal Service including making broadband services eligible to receive subsidies.

These reform proposals are long overdue as the stability of the fund, in terms of both contribution base and distributions has waned in recent years. Whether the reform efforts announced will actually go through is yet to be determined. Commission Democrats have already expressed dissenting views on the use of reverse auctions, demonstrating a lack of unity on the proposals. And, industry backlash is highly likely.