FCC requires higher speeds for broadband subsidies

The FCC on Thursday voted to update its rules for the Connect America Fund, the broadband subsidy program funded through fees on telephone service, with a major change being the increase in minimum download speeds from 4Mbps to 10Mbps from fixed broadband providers.

Broadband providers AT&T and Verizon had opposed the speed increase, and one of the FCC's Republican commissioners questioned whether the new speed requirement could limit deployment.

The new speed requirements could double the cost of deployment to rural areas, but the commission did not also double the time that broadband providers could complete their deployments, Commissioner Ajit Pai said.

Instead of increasing the funding window for deployments from five to 10 years, as dozens of members of Congress had requested, the commission increased funding term to six years in most cases. Adding new speed requirements without allowing much more time for broadband providers to receive funding may discourage broadband providers from participating, Pai said.

"I fear we are going to leave many communities without broadband for the foreseeable future," Pai said. "Incentivizing wireline broadband providers to deploy service deep into the unserved countryside requires a balance act. Today's order disrupts that balance."

But FCC Chairman Tom Wheeler said the agency doesn't want to pay for "second-class broadband service." If large broadband providers don't agree with the terms of the subsidy, the FCC will use an auction to bring service to rural areas, he said.

Separately, the FCC voted to revamp its E-Rate program, which subsidizes Internet service to schools and libraries. E-Rate, like the Connect America Fund part of the FCC's Universal Service Fund, will get a $1.5 billion-a-year increase in its cap, to $3.9 billion, with new funds focused on improving Wi-Fi services at schools and libraries.

U.S. telephone customers will pay for the increase with a monthly increase of 16 cents in USF taxes on their phone bills.

Pai and fellow Republican Commissioner Michael O'Rielly blasted the fee increase, saying it was evidence of out-of-control spending increases in the USF. With the commission refusing to cap the USF's budget, that suggests there are "more spending sprees to come," O'Rielly said.

But Wheeler defended the E-Rate increases, saying two-thirds of U.S. schools don't have the bandwidth they need to deliver modern e-learning services.

"I'm aghast at the hostility that is expressed to giving students the tools they need to get a 21st-century education," Wheeler said. "We are talking about a moral issue. The greatest responsibly ... that any generation has is the preparation of the next generation."

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's email address is grant_gross@idg.com.