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Note: The Telcos have found a solution for their rural build-out woes - government subsidies. But weren't they heavily subsidized throughout the '90's for this same task?

from: Info World

Verizon calls for new broadband incentives
Company says a mix of government assistance and vendor bidding is needed to extend broadband service to rural or remote areas

By Grant Gross, IDG News Service
February 12, 2007

The U.S. government should launch a new program that provides grants and loans for broadband providers to extend service to rural areas, a top executive at Verizon said Monday.
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The U.S. should use as a model a state program called ConnectKentucky, which has provided 94 percent of Kentucky residents with broadband options, said Tom Tauke, Verizon's executive vice president for public affairs, policy, and communications.

Kentucky, a state with large rural areas and chunks of hilly terrain, expects to provide about 99 percent of its residents with a broadband carrier by the end of the year, Tauke said.

The rest of the nation likely won't reach U.S. President George Bush's goal of universal broadband access by the end of 2007, Tauke said. The U.S. needs to look at broadband incentive programs "sooner rather than later," he said.

Broadband access can have a large impact on local economies and services such as health care, Tauke said.

The new program proposed by Verizon could use some existing funding, including redirecting some funds from the U.S. Department of Agriculture's Rural Utilities Service (RUS), which had a 2006 budget of $6.1 billion, he said. The RUS now subsidizes several types of utilities, including broadband, electricity, distance learning, and telemedicine.

New funds may also be needed, Tauke said, although he didn't provide specific numbers at a press briefing.

Part of the problem is there's no good measure of how many U.S. residents have access to broadband, Tauke said. The U.S. Federal Communications Commission released a report Jan. 31 saying 99 percent of all U.S. postal codes had at least one broadband provider, but critics have noted that the FCC would count a postal code if a provider offered service to just a handful of residents.

Tauke called for a comprehensive study of what broadband gaps exist. "We just don't know today who has broadband and who doesn't," he said.

Verizon has not yet pitched the idea to most lawmakers, Tauke said.

The telecom giant also called on the U.S. Congress to make changes the Universal Service Fund program, a $4 billion program that subsidizes telephone access in rural and poor areas. Instead of providing USF funds to multiple carriers, the U.S. government should cap USF at its current funding levels, and require carriers to bid to provide service in areas where subsidies are needed, Tauke said.

"Reverse auctions" forcing carriers to compete to provide service would end the current system in which multiple carriers, sometimes five or more wireless voice providers, receive USF money to provide service in the same territory, Tauke said. Verizon does not currently take USF money, he said.

"If you have multiple carriers offering service in a territory, that would seem to suggest you don't need Universal Service Fund support," he said. "[Carriers say] 'If somebody's going to hand out money, why not take it?'"

The tax on telephone service to pay for USF has risen from about 3.2 percent in 1998 to 9.7 percent currently, Verizon noted in a proposal to the Federal-Sate Joint Board on Universal Service, filed Friday. "The level of fees is becoming staggeringly high," he said. "The system is broken, it's not working, and it's unfair."

Several rural lawmakers have opposed changes to USF.

Tauke didn't address net neutrality, an issue that dominated telecom debates in Congress last year, until asked about it. Verizon expects efforts that would prohibit broadband carriers from blocking or slowing Web content from competitors to fail in Congress this year, partly because the FCC and the U.S. Federal Trade Commission are monitoring providers, he said.

The two agencies "are watching the issue like hawks," he said.