Will Connect America Bring Capitalism and Accountability Back to Government Expansion?
While no one would argue that affordable universal telephone service is a crucial mandate, there was a time when we paid through the nose for such an expansive infrastructure. The Communications Act of 1934, which established the FCC, stated that all of "We the People" needed fair and affordable wire and radio communication access at reasonable charges. What this meant for decades is that while networks were all interconnected, this did not necessarily mean service to all individuals. That would cost a lot, and there simply wasn’t adequate financial incentive for the AT&T of yesteryear to ante up.
For years AT&T was the only player in America . When the Telecommunications Act of 1996 clarified that telephone service needed to be truly universal as well, they promptly raised long distance telephone rates of their current customers in order to pay for this huge undertaking. That meant that certain segments of AT&T's customer base had to pay steep rates in order to get cheap telephone service into the hands of the economically disenfranchised. While this seems like the "kind" thing to do, it was unfair, and it stifled growth.
The deregulation of Ma Bell in the 1980s ushered in increased competition, which meant a few things:
- Infrastructure would be built out by several key players in the telecommunications industry spurred on by a desire for profits, not be a government mandate.
- Increased competition would eventually eliminate the higher telephone charges, ushering in free long-distance calling plans nationwide that we currently enjoy.
One of the goals of the Telecommunications Act of 1996 was to ensure that all telecommunications providers contribute to a special fund called the Universal Service Fund, or USF. Simply put, this fund would ensure that future technological advances would be available for everyone in the United States, enabling infrastructures to be built out in areas that typically would be cost prohibitive based upon the potential profitability to the provider.
Of course, everyone likes the idea of having telecommunications companies pay for infrastructure. However, consumers ultimately pay for this fund by paying increased rates for their telco subscriptions. The FCC understands this. Also, like any good government plan, there tends to be a lot of waste.
Fast forward 15 years later. Just recently, the FCC chairman announced a plan to reform the USF in order to usher in competition, close loopholes, and spur on competition. Dubbed "Connect America", the plan is to ensure every American will have access to broadband by the end of this decade. Sounds like the same old, same old, right? Wrong - at least according to the FCC. What's unique about this particular plan is it is supposed to be pro-consumer. The chairman agreed that ultimately it is American consumers who are paying into this fund. In order to usher in accountability and spur on development of necessary infrastructures, a few things are being changed.
- Connect America is supposed to eliminate the built-in surcharges we see on our telephone and internet bills, keeping more money in our pockets to spend, thus fueling economic growth.
- Ancillary to that point, the growth of the Connect America fund would be slowed dramatically, which means that telco companies would not be required to pay into the fund (translation: they would not feel compelled to pass along that cost to American consumers),
- Internet providers who wish to receive support from this fund will have to participate in a competitive bidding process, and then be subjected to stricter oversight and accountability once awarded the project. In other words, there will be a reward for private investment.