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Comm. Clyburn Remarks at the Massachusetts Broadband Conference

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Released: November 8, 2011

Prepared Remarks of FCC Commissioner Mignon L. Clyburn

“Transition of Universal Service from Phone to Broadband”

Massachusetts Broadband Conference

Boston, Massachusetts

November 8, 2011

Thank you, Commissioner Why, for that gracious introduction and for the opportunity to
address you and the conference participants today. I also wish to thank you and your staff for
planning and executing such an informative and timely forum for exchange. The focus of our
discussions on the economic benefits of broadband, and how we can narrow the digital divide so
more Americans can participate in attaining those benefits, are very important. The current
Commission’s quest for universal service reform began about 18 months ago, just after the
National Broadband Plan was released. It has been a significant focus because we realize that we
should and could better address the broadband needs of our great nation, and help eliminate the
digital divide. I am quite pleased to be able to stand before you and report some good news on
that front.
On October 27, the FCC took a momentous step to reform the Universal Service Fund in
order to transform it from a fund that supports voice telephone service in high-cost areas, to one
that will also explicitly provide for the deployment of broadband networks. This vote was a long
time coming. It was a reflection of the fundamental fact that the communications needs of our
nation have evolved over time due to technological advancement, and that the Fund desperately
needed to be reformed to reflect those significant factors.
Since its inception, the Fund has been instrumental in providing affordable phone service
to most Americans, and that remarkable achievement in no way should be overlooked. But as
technology rapidly progresses, broadband access is the gateway by which most Americans obtain
critical information, services, and communicate with each other. Every American needs access to
broadband. And while the Commission permitted phone companies to invest Universal Service
proceeds in broadband-capable networks, the Fund’s mechanisms weren’t designed to directly
support areas where broadband isn’t being built.
So sadly, our nation remains digitally divided. The most recent National Broadband Map
shows that approximately 18 million Americans lack access to broadband-capable networks at
home. They are the “have nots” of the broadband world, and they are denied access to some of
the most basic features of modern life, that you or I take for granted: optimally navigating your
bank account in real time, accessing late breaking news, or quickly sending an email to a friend
from a terrestrial portal.
Citizens and communities are significantly disadvantaged without high-speed Internet.
Whether you are in urban or rural America, it’s hard to find a job, complete an application,
operate a small business, or finish your homework without broadband. In fact, we know that 80%
of Fortune 500 companies require that you apply online, and high school students with access to
broadband at home have higher graduation rates. So those Americans who lack broadband access
at home and on the go, were first and foremost in my mind as I considered the issues in the
reform proceeding.

The Chairman crafted a plan to reform the Fund, which will transform the way we spend
$4.5 billion of the high-cost portion of USF each year. The Commissioners unanimously
approved his plan because ultimately it will make the Fund more efficient and effective. First,
this plan provides for speedy broadband deployment to unserved consumers, with an injection of
capital in 2012, for both fixed and mobile technologies. While we begin to transition legacy
support from those areas that don’t need assistance, we can begin to make a difference in those
areas that are lacking broadband service. Second, this plan ensures that money will be shifted
from supporting multiple networks, in areas that don’t need support to operate, to areas where a
broadband network is still needed. Third, it requires that providers meet firm deadlines with
appropriate accountability for the money spent and oversight by the FCC and State Commissions.
Of great importance to me, is the beneficial impact this reform will have on consumers
and their communities. It’s a basic principle that we all benefit more when everyone is
connected. As such, our reform recognizes that broadband, both fixed and mobile, are the
services consumers are demanding. Accordingly, all recipients of USF must deploy broadband
networks, in addition to offering voice service to consumers. We expect that millions of
consumers will get fixed and mobile broadband coverage where they live, work, and travel.
500,000 new jobs in rural America are expected as a result of increased broadband deployment.
The annual economic benefits in rural areas from new deployment may reach $700 million, and
the overall economic growth for the country could reach $50 billion as a result of our reform.
None of this would have been possible without the contributions of many, including those
in this room, who participated in the reform proceeding. This was a massive undertaking for our
staff, industry, consumer groups, the State Members on our Joint Board, and State
Commissioners. I am extremely grateful for everyone’s hard work that helped us achieve what I
believe is a balanced framework that will ultimately benefit everyone in the U.S.
Early on, the Joint Board recognized the importance of broadband and mobile service,
and last year it recommended that the Commission adopt a new principle for universal service—
that “universal service support should be directed where possible to networks that provide
advanced services, as well as voice services.” I am very proud that we have heeded the advice of
our State Members, and have adopted that principle as part of our reform. We also followed their
advice and good counsel in other respects, including the elimination of the identical support rule,
the formation of a Mobility Fund to direct investment to unserved areas, the support of mobile
service in hard-to-serve areas, and increasing accountability and oversight of USF recipients,
including build out requirements and reporting obligations to both the FCC and the State
Commissions.

Most importantly, our reform of the Fund, builds upon our partnership with the states in
protecting consumers. Those states that designate eligible telecommunications carriers for USF
purposes will continue to do so, and of course, states will be able to protect consumers through
their carrier of last resort obligations. Preserving these traditional roles is essential for consumer
protection, but just as important, is our ability to evolve and modify our approaches to regulation
as technology advances.
Communications networks are transitioning to Internet Protocol, and consumers are using
multiple modes of communication. At the Commission, we cannot function without the states’
expertise and knowledge on the ground, to properly execute and operate our new universal
service funding mechanisms. For instance, it is essential that State Commissioners assist us, in
identifying those areas that currently are unserved by broadband. We want to target our limited
resources to those consumers, who do not have any broadband provider offering them service.
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Likewise, we will need the states’ help in ensuring that those providers who receive
funding, meet their public interest obligations to build and serve. I am confident that these
reforms are an opportunity for us to continue working hand-in-hand with our State colleagues, to
ensure that broadband and advanced services are available throughout the country, and I look
forward to our continued partnership with the States in this important endeavor.
In addition to our reform of the USF, we also took a significant step in modernizing the
intercarrier compensation regime. We adopted a uniform national bill-and-keep framework as the
ultimate end state for all telecommunications traffic exchanged with a carrier. Under bill-and-
keep, carriers will look first to their subscribers to cover the costs of the network, then to explicit
universal service support where necessary. The Commission found that bill-and-keep has worked
well in the wireless industry, and should be replicated in the wireline industry. We also found
that it will help eliminate competitive distortions between wireline and wireless services.
Currently wireless is paying wireline, but not vice versa. As such, price signals to consumers are
not transparent. Moreover, we determined that a bill-and-keep framework is consistent with and
will best promote our overall goals of encouraging and facilitating the transition to IP networks.
ICC is a topic that I spent a great deal of time discussing in meetings and workshops with
many of my State colleagues. After much discussion and consideration, some of which involved
people sitting in this very room, I accepted the Chairman’s proposal that a federal approach was
the right outcome. A multi-state process, for reforming intrastate access rates it is believed,
would be long, arduous, costly and demanding on the States, with unpredictable and maybe even
inconsistent results. That process would perhaps not only build pressure on the FCC to intervene,
but it had the potential to create the kind of uncertainty that could harm the deployment of
advanced communications services to the consumers who need it most.
Moreover, it’s important to remember that the proposed reforms do preserve and
recognize the work many States have already completed. The plan provides for replacement
funding as intrastate access rates decline, as a result of our reform, which actually relieves the
financial burden that would have been on the States in their attempts at reform. We also carefully
balanced ICC revenue replacement for providers, with the goal of not burdening consumers with
significant increases in their bills or overburdening USF, the latter of which is ultimately paid for
by consumer. Again, the Commission believes the overall benefits that will flow to consumers as
a result of this reform, will far outpace the minimal price increase they will see on their phone
bills as a result of ICC reform.
With each of the reforms, we carefully balanced the need for certainty, predictability and
sufficient time to transition for the providers, with the needs of consumers—those who are
unserved, as well as all of the consumers who help fund the USF. In addition, we recognize that
there may be instances when we will need to specifically review the impact of the total reforms
on a particular provider and the consumers it serves. I think that the waiver process we have set
out, will give the Commission an opportunity to use a safety net, should we need it, in order to
ensure consumers aren’t inadvertently harmed. However, I caution parties that a decision to file a
waiver should not be taken lightly because the demonstration for a waiver will not be easy. It is
focused on whether consumers are at risk of losing service. As such, it will entail a total earnings
review of the provider, including regulated and unregulated revenues.
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It is no secret that I have a deep connection to rural America, and I believe our reforms
will ensure that those citizens who live and work in rural America will be able to adequately
compete in our global economy. But I also recognize that these efforts to modernize the Fund
and ICC – a decade in the making – may not satisfy all of the concerns that were raised in the
proceeding. However, I believe that the Commission has drawn from many competing ideas, to
form a balanced framework that will promote significant broadband deployment, as quickly as
possible, to millions of unserved consumers in our nation. This will allow us to come even closer
to achieving Congress’ goal of providing all Americans access to affordable voice and advanced
communications services.
That is why I would like to finish where I started today – discussing the purpose behind
these reforms. Broadband is one of this generation’s most important challenges because it
presents one of our most monumental opportunities. Extending broadband will help us achieve a
more equal opportunity for Americans. For those participants who may be disappointed in one
aspect or the other of the reforms, I would ask something that you may seldom hear: that you
reconsider filing a lawsuit against the reforms. Instead, I ask that we work together to complete
and perfect these reform efforts. By doing so, we can ensure that the transition of the Fund from
voice to broadband, opens the door for every citizen to become a part of our digital economy.
When that occurs, the decade-long struggle to achieve these reforms will have been well worth
the effort.
While USF and ICC reforms are extremely important for ensuring that basic and
advanced communications services are physically available to all Americans, these services
cannot truly be available, if consumers cannot afford to purchase them, if they cannot acquire the
devices they need to access them, or if they cannot attain the skills they need to know how to use
these services. I appreciate those who have called for us to address these consumer needs, and I
agree that we need to do more in this area. Our broadband adoption task force is working
diligently to find solutions to these issues, and I fully expect that we will be addressing the
proposal in our Lifeline proceeding, to adopt pilot projects for broadband adoption to benefit low-
income Americans prior to the end of the year. I look forward to our continued work with our
task force, including the Lifeline proceeding, so that we can make more headway on this
significant issue for consumers. And I am pleased that we recognize in the USF reform, that any
savings from high-cost may be used to address the broadband adoption needs.
Thank you for the chance to speak with you today, and let me take this opportunity to say
that the dedication and hard work of the staff at the FCC in this proceeding was incredible.
Everyone made many personal sacrifices over the last few months, and the American people
should be really proud and will benefit for years to come. Thank you.
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