The Federal Communications Commission has voted to change the Universal Service Fund, which subsidizes phone service in rural America and to low-income Americans.  The agency will shift the fund's $8 billion from funding phone service to high-speed broadband service over the next few years. FCC changes USF

But there are several other important changes that will affect a wide swath of services and service providers as well, ranging from VoIP providers and “free conference calling” services to cable providers, satellite service providers, rural telcos and tier-one telcos.

The new rules require VoIP providers to pay intercarrier compensation, which will raise the cost of using VoIP services. While it is true that VoIP providers will pass those new charges on to their customers, the rules will reduce the price advantage many VoIP providers have had, compared with calling on public networks. VoIP prices will increase

As part of the effort, the agency also changed the always-contentious intercarrier compensation rules. Those changes will raise some consumers' local phone bills through a new fee.

Some consumers may pay, on average, an additional 10 to 15 cents a month on their bills. But no additional charges can be imposed on consumer phone bills that are at or above $30 a month, the FCC (News - Alert) said.

The rules are expected to initially cap interstate and intrastate access charges with the ultimate goal of moving toward a “bill and keep” approach. That might have some impact on “free conference call” services that traditionally have relied on high access rates to provide the “free” calling services.

The rules apparently will include cable operators more centrally in the intercarrier compensation scheme as well.

The FCC also makes mobile broadband a universal service objective for the first time in history, and will create a new “mobility fund” to support mobile broadband.

The new rules would phase out phone subsidies to phone companies over a period of years. It would give current recipients of funding first dibs on getting money to provide broadband service in rural areas. Also, the agency would cap the size of the fund so consumers don't face increasing fees every year to support it.

The new rules also are expected to include the ability for satellite providers to participate in the rural broadband program as well.

Legal challenges are expected, as some aspects of the plan will strike one or more stakeholders as “unfair.”

The FCC has defined “broadband” as a download speed of four megabits per second and upload speed of one Mbps. This definition artificially inflates the size of the rural broadband “problem” because it does not count 3G wireless, some small rural wireless Internet providers and basic satellite service as broadband.

Refusing to count these providers as broadband will inflate the cost of the subsidies by classifying more areas as “unserved” and necessitating higher subsidies to achieve the faster speeds. One suspects there will be further “clarification” of such matters. Unresolved issues

The plan also subsidizes at least two broadband competitors in rural areas through the Connect America Fund and a separate Mobility Fund.

If the goal is basic broadband connectivity in places that allegedly have no broadband at all, why not make all technologies compete for a single subsidy in these places before subsidizing two?

Some also will oppose the parts of the plan that “pick winners,” favoring some approaches over others. Wireless subsidies will be awarded based on competitive bidding from the outset.

Subsidies for fixed service to homes and businesses will transition from current payments to competitive bidding only over time. Satellite also is regarded as a special-purpose technology to serve the most remote areas, rather than a competitor that is almost universally available already.