Until now, the Universal Service Fund has been collected to pay for free landlines and free cell phones and minutes for the needy. But that may change if the government approves reforms suggested by the Federal Communications Commission.
The bottom line: Free landlines could be phased out and free internet service added to the Lifeline Assistance program.
According to TMTLAwatch.com, “The new rules would transition nearly $4.5 billion in annual USF support to a “Connect American Fund,” which would subsidize wireless Internet access to homes, businesses, and public service organizations. The Connect America Fund would also dedicate resources intended to ensure the universal availability of affordable mobile broadband and provide a “shot-in-the-arm” to accelerate deployment of 4G networks in 2012.”
It appears that those who qualify for Lifeline Assistance, the government’s free cell phone program, would benefit greatly from these changes. Subsidies on traditional landline services would be gradually eliminated. Free cell phone providers would have to win the right to participate in the program by engaging in a competitive bidding process. This should reduce costs and help extend the program to more deserving people. (We say “should” because one is never quite sure if a government program will work as it was intended to work.)
Fraud will theoretically be reduced because the changes would eliminate “loopholes” that have allowed carriers to charge the government extra fees. In the future, they will have to prove they warrant the extra fees instead of getting automatic discount. FCC Chairman Julian Genachowski estimates that this could save hundreds of millions of dollars.
Details about the reforms are still a bit vague, but the National Association of Regulatory Commissions is worried that the changes may harm consumers by increasing the price of landlines.
We’ll keep an eye on future development and keep you informed.