The US Federal Communications Commission has approved major changes in the country's Universal Service Fund aimed at focusing more on broadband expansion. The move will set aside USD 4.5 billion of the annual USF budget for the Connect America Fund, to award funding for broadband expansion in underserved areas. Carriers will start receiving the new funding by early 2012 and will be required to provide at least 4Mbps download and 1Mbps upload, with latency low-enough to support streaming and VoIP. Starting from 2013, the FCC will also change its cost model for determining the level of funding, adopt a competitive bidding system for awarding the funds, and tighten controls to ensure subsidised operators meet the coverage promised.
The FCC will also start a Mobility Fund to support mobile voice and broadband coverage in outlying areas. This will award an initial USD 350 million via a reverse auction planned for Q3 2012 and is expected to have a further annual budget of around USD 500 million. At the same time the FCC announced plans to move the industry away from interconnection fees and towards a bill-and-keep system. In the near term, it plans new rules to prevent traffic-pumping, a technique used by operators to increase terminatation revenue.
Over the next ten years, operators will be forced to gradually reduce terminate rates to zero, a move the FCC also expects to encourage the move to IP networks. The FCC expects the USF reforms will bring broadband to another 7 million Americans over the next six years. While consumers may see a small increase in their phone bills as a result of the changes, the FCC expects for every USD 1 extra charged, there will be USD 3 in benefits. The plans were largely welcomed by the telecoms industry, although mobile payers called for a bigger role for the Mobility Fund, and the cable industry saw too big a focus on copper networks.