FCC provides 211 Million for Gulf Coast telecommunications

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FCC To Provide $211 Million For Telecom In Gulf Coast

WASHINGTON -(Dow Jones)- The Federal Communications Commission will make available $211 million from the universal service subsidy fund to help restore communications in areas affected by Hurricane Katrina, FCC Chairman Kevin Martin said Thursday.

The agency will use the Universal Service Fund's low-income support, rural health care, schools and libraries and high-cost programs to provide the funds for telecom service.

The aim is "to provide support to those in need and to improve the ability of the public and emergency responders to communicate during a crisis," Martin said in a statement.

Martin said $96 million from the schools and libraries program known as E-Rate can be earmarked to the 600 schools and libraries in the Gulf Coast affected by the hurricane. Those serving evacuees will also be able to amend their 2005 funding applications, bringing total E-Rate support to $132 million.

The USF's low-income program will be used to provide evacuees and those without phone service with wireless handsets and 300 free cell-phone minutes and help pay reconnection costs at a total cost of around $51 million. The rural health-care program will provide around $28 million in grants, the FCC said.

The multibillion USF program is used to subsidize phone service in high-cost and low-income areas. It's funded through a fee on long-distance revenue. The fee, now over 10% of long-distance revenue, has climbed steadily in recent years as more consumers have switched to new technologies like wireless and Internet telephony, which pay less into the system.

USF reform is considered a high priority for lawmakers and regulators, especially among rural lawmakers who want to ensure the financial viability of the program.

Senate Commerce Committee Chairman Ted Stevens, R-Alaska, whose state is a major recipient of USF funds, said in a statement Thursday, "This is a very unique use of Universal Service funds and it took courage to do this."

The FCC's decision could make it easier for USF supporters to argue that the program's solvency is best met by ensuring a steady stream of revenue as opposed to narrowing the size of the program as critics would like. E-Rate in particular came under intense criticism in the past year amid charges of fraud and abuse in the $2.25 billion-a-year program, with House Commerce Committee Chairman Joe Barton, R-Texas, likening it to "putting money down a rat hole."

Thursday's move by the FCC "emboldens the supporters of maintaining both the E-Rate and high cost and all the other programs that fall in USF," said Jessica Zufolo, an analyst at Medley Global Advisors.

The FCC met Thursday at BellSouth Corp.'s (BLS) emergency control center in Atlanta to review the effect of Hurricane Katrina on communications systems and the response by regulators and industry.

Martin also announced creation of an independent panel to make recommendations to the FCC "regarding ways to improve disaster preparedness, network reliability, and communication among first responders such as police, fire fighters and emergency medical personnel."

Martin also plans to establish a new public safety and homeland security bureau within the FCC. "I believe the efforts I have outlined today are a good first step," he said.