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Qwest asks FCC to shift $500 million to rural Web access

Jeff Smith, Rocky Mountain News

Published June 28, 2007 at midnight

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Qwest wants federal regulators to shift about $500 million from a wireless subsidy fund to support high-speed Internet projects in rural areas across the country.

The Denver telco made its pitch Wednesday to officials at the Federal Communications Commission as part of an effort to reform the $7 billion Universal Service Fund.

The federal universal service system initially was designed to bring affordable phone service to all. It has been criticized in recent years for funding questionable projects and carriers in areas that already have adequate phone services. The phone bill surcharge to support the fund, meanwhile, has climbed to 11.7 percent.

"It's a well-intentioned program that's gone astray," Gary Lytle, Qwest's senior vice president of federal relations, said in a media briefing.

Qwest has complained for several years that it hasn't gotten its fair share of the funds to cover high-cost phone service in rural areas in its 14-state territory. But its proposal is almost sure to rankle many wireless carriers.

Qwest wants to change the wireless subsidy, which totals about $1 billion annually, from a per-user to per-household basis. Qwest estimates that the formula change could save around $500 million.

The company then proposes that the FCC allocate the savings equitably among states. State regulators would identify rural areas in need of high-speed Internet access and award one- time grants to low bidders to build broadband facilities.

Steve Davis, Qwest senior vice president of policy and law, said he thinks such a program would be a wiser way to spend the funds and would support the government's goal to extend high-speed services in areas where it remains difficult to do so.

Davis acknowledged that the wireless industry isn't likely to agree with its subsidies being reduced. A spokesman for CTIA, the wireless industry association, didn't return a phone call seeking comment.

Scott Morris, a spokesman for Alltel, which serves rural markets, declined to comment, saying he hadn't yet seen Qwest's proposal. Alltel earlier proposed that it use money from the fund for broadband deployment.

The FCC, which has been seeking comments for reforming the system, was receptive to Qwest's proposal, Davis said. FCC Chairman Kevin Martin already has endorsed using fund money to subsidize high-speed Internet services in rural areas.

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