NEW YORK—Federal regulators will meet Thursday to discuss new rules that promise to be the Obama administration's most significant overhaul of telecommunications regulations.
The Federal Communications Commission is set to reveal plans for an overhaul of an $8 billion fund that subsidizes phone service in rural areas and for the poor.
The agency is also preparing to disclose new rules for the byzantine system that governs how phone companies pay each other for phone calls. Virtually everyone in the industry agrees that the system is outdated and leads to perverse schemes by carriers to stimulate certain kinds of phone traffic. However, reform of the system has been held up for years by competing interests.
The five-member commission will vote on the rules at a meeting Thursday morning.
The FCC wants to revamp the phone-subsidy program to redirect the money toward broadband expansion.
The Universal Service Fund was created to ensure that all Americans have access to a basic telephone line. Supported by a surcharge on long-distance phone bills, the program subsidizes phone service for the poor and pays for Internet access in schools, libraries and rural health clinics. More than half the money goes to pay phone companies that provide phone service in rural places where lines are supposedly unprofitable.
AT&T Inc. and the other big phone companies have put forward their own reform proposal. The FCC's plan is expected to borrow at least some features from it. That plan suggested capping the size of the new fund at $4.5 billion annually, giving subsidies to only one provider in an area and directing funds toward places where there is no business case for companies to provide service on their own. In addition, it would fund wireless broadband access in remote or rugged areas where construction costs for wired access are highest.
Policy director Matt Wood at consumer advocacy group Free Press said the phone-company plan had "very little to do with increasing broadband adoption, and everything to do with allowing monopoly local phone providers to reach further into the pockets of consumers."
Meanwhile, small rural phone companies have their own plan. They are apprehensive that the FCC will place limits on how they use their funding and divert money to wireless broadband.
The FCC estimated last year that 9.2 million U.S. households, or about 26 million people, don't have access to wired broadband. Excluding those who can get broadband wirelessly, the number shrinks to 5 million households or 14 million people. That's 4.5 percent of the population.