It looks like the state of Georgia doesn’t need universal funding for telephone service anymore. The Georgia House Committee on Energy, Utilities, and Telecommunications passed HB 855, the Telecommunications Fair Competition and Consumer Protection Act. The Act would reduce the amount of universal service funding received to the equivalent of 110% of the average state-wide weighted rate of a residential line provided by rate of return carrier.

The bill also caps payments received from the fund for the next three years. In 2012, distributions would be capped at $9 million; in 2013 at $6 million; and in 2014 at $3 million. There would be no more distributions after 2014.

Tracfone Wireless today in a letter addressed to the Federal Communications Commission took issue with wireless resellers being able to waddle up to the universal service fund trough and drink the sweet nectar of subsidies.  Tracfone argued that pure resellers are not authorized under FCC rules or federal statutes to collect subsidies from the universal service fund.  Nor is there such a thing as a facilities-based reseller.

In addition, Tracfone also expressed its displeasure with a proposal by wireless resellers that telecommunications eligible to collect from the universal service fund receive reduced subsidies of the costs incurred from serving low income subscribers.

I agree, based on my reading of the rules, that pure resellers should not get a penny of universal service funding. If you are a private equity type that owns one of these reseller types, dump ‘em.  The rules don’t support your continued investment in them.

Also, resellers, need to stop using the term facilities-based reseller.  Either you are a facilities-based carrier or you are not.  The rules recognize carriers that provide services via a combination of facilities they own and resold services, but the rules, as Tracfone properly points out, do not define a facilities-based reseller.

Also, this proposal by the Link Up for America Coalition, the group of resellers currently giving Tracfone a major cow, that eligible telecommunications carriers be given a reduced subsidy for the costs related to connecting low income consumers to the telephone network appears to be just a play on the part of resellers to have bit more of the pie by reducing subsidies for true facilities-based carriers.

In addition, should the FCC even entertain this anti-investor piece of poor policy, it would set a bad precedence for broadband adoption.  First, do we really want resellers providing broadband service, especially in minority and low income communities.  It wreaks of carpet bagging.  Resellers tend to shirk their customer service duities by blaming the true underlying carrier.  I saw a lot of this nonsense in the 1990s in Florida with long distance resellers and wouldn’t wish that poor customer service on an enemy (unless they are a worse enemy).

Second, the universal service subsidies, if allowed to be shared with resellers, would force incumbent true facilities-based carriers to charge a rate for broadband services it otherwise would not have had to if more funds were made available to facilities-based carriers.  This is the logic the FCC should be following if they want a broadband USF policy to work.

If the FCC really cares about making USF policy effective for broadband adoption among underserved groups, it would avoid this slippery slope and ignore this coalition of resellers.

According to the World Bank, one of the four pillars of a knowledge economy is information infrastructure. “A dynamic information infrastructure-ranging from radio to the Internet-is required to facilitate the effective communication, dissemination, and processing of information.”

The Federal Communications Commission’s announcement on 27 October 2011 that it would be transitioning proceeds of the universal service fund from subsidizing rural telephones to subsidizing broadband access is supposed to help deploy that dynamic information infrastructure the World Bank proscribes.

Here the mayor of Angel Fire, New Mexico is quoted about Broadband’s importance to his community: “That’s exciting that we can open up the white-collar businesses to our area with broadband,” said Stuart Hamilton, mayor of the village of Angel Fire. “It’s critical because we’re not going to do manufacturing here. That’s not going to be our base of industry or economic development in Angel Fire because we can’t ship in or ship out,”

The knowledge economy requires a different kind of roadway that broadband helps to create. The question is, given the alleged problems of inefficiency and fraud, is the universal service fund the way to leverage broadband facility deployment?

It’s too bad investment bankers have been taking a beating from the administration and Occupy Wall Street to the point that here, in the 21st century, we have to use an early 20th century universal service model to subsidize a service that is not a telecommunications service or a utility.

A post in The Hillicon Valley blog drew my attention to the Federal Communications Commission’s 27 October meeting where they are expected to review a proposed universal service fund policy that will start transitioning subsidies from telecommunications companies to broadband access providers.

Wireless companies are chomping at the bit for a piece of the action. Can’t say I blame them, especially based on the argument that increased demand for mobile devices means stress on their transmitting capacity.

The best way to ensure an investment in broadband stays technology neutral is to form a broadband infrastructure bank seeded initially by the federal government and investment banks.

Debt issue, and fees and interest collected from mobile and fixed broadband providers receiving loans from the infrastructure bank would go to fund day to day operations and profit.

Valentine’s Day is right around the corner and even an old grouch like me can appreciate a good laugh; just like the chuckle I got out of listening to Federal Communications Commission chairman Julius Genachowski’s February 7^th speech before the Information Technology and Innovation Foundation.

As a precursor to today’s notice of proposed rulemaking on converting the universal service fund from a telephone subsidy mechanism to a broadband subsidy mechanism, Mr. Genachowski noted that a big problem with the universal service fund is that it’s inefficient. As an example, he described universal service subsidies of $2,000 a month for telephone service in rural areas.

You heard me. Two thousand dollars a month. What sticks out in this example is a decades long problem with universal service that will only be exacerbated by using the funding for broadband. The problem that sticks out is that regulators, whether federal, state, or even local, are so ivory tower in their approach to universal service that they have no concept of the term, marketing.

You see, Mr. Genachowski, low-income consumers don’t know about these programs. The FCC, state PUCs, and local consumer affairs offices never made it a point to hit the pavement and stick a brochure describing Lifeline or Linkup to a single parent working two jobs while trying to feed and school two kids. My impression has always been that it’s too beneath these regulators to learn about and sell these programs.

In other words, if you want the costs per household of subsidization to come down, shouldn’t you increase the number of households participating in universal service programs? Just imagine what these costs are going to be when you try to subsidize broadband service to households who don’t believe they need the Internet?