FCC Should Be Careful Steward of Scarce USF Funds

With all of this week's attention focused on the net neutrality issue, and especially President Obama's rather extraordinary video telling the FCC what he thinks the supposedly independent agency should do, I want to make sure that this noteworthy blog posted by my colleague, Seth Cooper, also receives attention.

Seth's commentary is entitled, "FCC Should Not Use Scarce Universal Service Funds to Subsidize Unproven Start-Ups."

I won't repeat Seth's blog here. I'll just note that it addresses a concern that the FCC, in the name of "experimentation," may be considering making available scarce funds allocated for advancing rural broadband deployment to rural electric co-ops with little or no experience in providing communications  services on a commercial basis. I am not against some forms of "experimentation" at the FCC, especially if it are in the direction of allowing more freedom to private sector communications service providers to experiment with innovative means of delivering services consumers demands. But it is another matter to "experiment" by giving away USF funds collected from consumers in the form of surcharges on their telephones bills.  

Here is a key part of Seth piece:

"Now it appears the FCC may want to grant to rural electric co-ops several million dollars in funds collected from consumers through universal service surcharges. The money would fund entry by rural electric co-ops into the broadband business. But in important respects, this constitutes another role-distorting proposal by the FCC. It is not the proper function of the FCC to create new competitors through subsidies or other artificial means. Capitalizing entities lacking any established operations or experience in the broadband market also risks wasting finite dollars collected from consumers."

More competition in providing broadband services is a good thing, and, of course, achieving more ubiquitous broadband deployment is a worthy goal. But the means to an end matter in striving to achieve worthy goals. Regarding proper means, I am not in favor of the FCC preempting state restrictions on municipal broadband systems. And I am not in favor of the Commission conducting experiments with funds from a Universal Service program that already extracts from consumers surcharges that are too high (16.1%) on the theory that the agency wants to experiment with new unproven broadband provider ventures like rural electric co-ops or similar organizations.