FCC's plans take from Peter to pay Paul

The Federal Communications Commission is shaking up the communications market with bold initiatives to overhaul the $7 billion Universal Service Fund to help pay for universal broadband and reallocate wireless spectrum for new wireless broadband services.

FCC Chairman Julius Genachowski presented plans for revising the USF program and reallocating spectrum during a speech on Tuesday in Washington, D.C., at The Innovation Economy Conference.

The Universal Service Fund is a $7 billion federal subsidy program that is funded by fees added to consumer phone bills. The USF was originally designed to provide subsidies to pay for phone service in rural communities and to low-income residents. But the FCC believes that the fund should also be used to help pay for universal broadband, a policy priority for President Obama's administration.

Revamping the fund has been controversial, as some rural phone companies have resisted any attempts at expanding the scope of the program. Genachowski acknowledged that making changes wouldn't be easy, according to a transcript of his prepared speech.

"This is a thorny issue, with no shortage of practical and statutory challenges," he said. "(But) we need to wring savings out of the system, protect consumers, avoid flash cuts, while ultimately moving USF in the direction it needs to go to support our 21st century platform for innovation."

Genachowski emphasized that reallocating some of these funds to help build broadband infrastructure in rural areas is important for spurring innovation.

"USF is a multibillion-dollar annual fund that continues to support yesterday's communications infrastructure," he said. "The goal of universality is as important as ever--and to meet our country's innovation goals, we need to reorient the fund to support broadband communications."

Genachowski also reiterated the importance of auctioning off more wireless spectrum to be used for mobile broadband services. He called wireless spectrum the "lifeblood of our wireless networks." And he said they are a critical part of innovation and infrastructure.

The FCC has already increased the amount of spectrum available to wireless companies threefold in the past few years, Genachowski, noting that experts believe that there will be a 30-fold increase in traffic on these networks. And without more spectrum, these networks will be congested and will stifle innovation.

"Given that spectrum can take many years to reallocate and build out, if we don't start the process now, we'll pay a steep price in innovation down the road," he said.

As part of his proposal, he says the FCC will encourage more efficient use of spectrum and devices through innovative spectrum policies. He noted that the FCC will also look at increasing spectrum flexibility and opening secondary markets for licensed spectrum use. And he said the agency will look into allowing more use of unlicensed spectrum, such as the "white space" spectrum that sits between broadcast channels.

But the most controversial proposal he has put forth involves taking away spectrum from current spectrum license holders, such as TV broadcasters, and reallocating those licenses to broadband wireless providers through another auction process.

"In order to support the full flowering of innovation, and to keep the U.S. globally competitive, we will need to find ways to free up new spectrum to mobile broadband," he said, according to the transcript of his speech. "This will require examining old allocation decisions--often decades-old--and evaluating them against current technologies and consumer demand."

TV broadcasters have vehemently resisted this proposal.

Broadcast airwaves are considered very valuable because they can travel long distances and penetrate walls. The most recent 700MHz spectrum auction, which auctioned off analog TV spectrum, is being used by operators such as Verizon Wireless to build 4G wireless broadband services. And Genachowski believes that more spectrum should be freed up to allow for more 4G wireless broadband services.