Policy

Bill Aims at Data Dollars

8/05/2005 8:00 PM Eastern

Washington— A new Senate bill could require cable to contribute some of its $10 billion in broadband-access revenue to launch and sustain a new subsidy program designed to deliver high-speed data to unserved areas.

Cable contribution of access revenue would be decided at the discretion of the Federal Communications Commission. The agency would be authorized to spend a maximum of $500 million annually on the rural-broadband program.

The bipartisan legislation (S. 1583) was introduced by Sens. Gordon Smith (R-Ore.), Byron Dorgan (D-N.D.) and Mark Pryor (D-Ark.) on July 29, just as Congress was heading into an August recess.

$1B COULD BE AT RISK

As much as 10% of cable data revenue — $1 billion — could be at risk. But a cable-industry source cautioned that a much smaller amount was likely, because cable MSOs would not be taxed on their “information service” revenue but on their telecommunications revenue. In the end, regulators would need to decide what percentage of modem revenue is attributable to telecommunications.

Under current FCC rules, cable companies do not contribute data revenue to subsidize voice communications in rural areas. Phone companies, in contrast, need to contribute a portion of their digital-subscriber-line (DSL) revenue.

The phone-subsidy program, called universal service, is popular with rural lawmakers. But expanding it to include broadband access could prove controversial because some on Capitol Hill think the current program is mismanaged and needs to be reformed before mission expansion is adopted.

Congress last expanded universal service in a major way in the Telecommunications Act of 1996, spending $2.25 billion each year to wire schools and libraries to the Internet. Some congressional Republicans called the program the “Gore tax,” because then-Vice President Al Gore championed the program. The partisan attacks on the E-rate program largely stopped when GOP governors welcomed new technology funding into their states.

At a hearing in March by the House Subcommittee on Oversight and Investigations, Energy and Commerce Committee chairman Joe Barton (R-Texas) complained the E-rate program was rife with mismanagement and the FCC could not quantify the extent to which the program had been helpful to funded recipients.

“After committing over $14 billion, and actually disbursing nearly $9 billion, the fact that nobody has any idea about how helpful this money has been in getting schools and libraries connected to the Internet is simply stunning,” Barton said in a statement.

Under the Senate bill, the FCC would decide whether an area is “unserved.” Satellite provision of broadband access in a rural area would not preclude the FCC from designating the area unserved if the satellite service has only a few subscribers.

Evidently, the bill would subsidize competition to WildBlue Communications Inc., a satellite broadband provider that launched in June and is expected to be available nationwide by the end of September. WildBlue spokeswoman Joanne Dant said the company was studying the bill.

CABLE VOLUNTEERED

The National Cable & Telecommunications Association is reviewing the bill. NCTA spokesman Brian Dietz said, “Cable operators took the lead by voluntarily paying into [universal service] with [voice-over-Internet protocol] services as part of the industry’s commitment to meet important social obligations.”

Under an FCC order from last November, state regulators are barred from forcing VoIP phone providers to contribute to their universal-service programs.

September