DENVER — Qwest Communications International Inc. is proposing changing a subsidy that helps underserved customers get affordable phone service so they also can get high-speed Internet access.
The proposal also would shrink the amount of money wireless competitors would get from the federal program. Qwest doesn't get wireless subsidies from the fund, said Steve Davis, Qwest senior vice president of public policy.
The Universal Service Fund, or USF, is paid for with a nearly 12 percent surcharge on phone bills. It subsidizes phone service in rural areas, mountain communities and other places where installing equipment and making a profit would be difficult.
Qwest is the primary telephone-service provider in Arizona and 13 other states, mainly in the West.
Denver-based Qwest and others say the fund, which has grown to about $4 billion, hasn't kept up with the times and is subsidizing phone service to areas that no longer are unserved or unprofitable to serve.
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"It's a well-intentioned program that's gone astray," said Gary Lytle, Qwest senior vice president of federal relations.
Federal lawmakers have proposed using some of the funds to provide hard-to-reach customers with broadband service, an idea Qwest supports.
Qwest, for example, said it offers high-speed Internet services to about 83 percent of its service area but has not found an economical way to serve the rest.
Qwest proposes changing the formula for doling out USF subsidies to wireless companies so it is distributed on a per-household basis, rather than per phone.
Currently, a wireless company serving a home where all four family members have mobile phones can get subsidies for four customers, even though it is serving one home.
"Wireless subsidies have grown beyond all recognition of the original intent," Davis said.
Qwest estimates the change could trim subsidies paid to wireless companies from $1 billion to $500 million annually, leaving $500 million to subsidize rural broadband services.
Qwest proposes having companies bid on providing high-speed Internet access in unserved areas for the lowest possible cost.
The winner would get a one-time subsidy for providing the service, rather than ongoing support provided by the current fund.
States would implement the program while the Federal Communications Commission would manage it. Qwest has submitted its plan to the FCC.
Davis said Qwest discussed its proposal with federal and state regulators and a few competitors whom he declined to name. He described the reaction overall as favorable.
An FCC spokesman said the commission had not yet seen Qwest's filing.
CTIA-The Wireless Association has said it opposes reform proposals that discriminate against certain types of technology. Sprint Nextel Corp. has urged the FCC to enact USF reform that treats all providers and technologies equally.
Jim Greenwood, director of the Colorado Office of Consumer Counsel, said he had not discussed the proposal with Qwest but liked the idea of changing the distribution formula of the subsidy.
"It's a transfer of wealth from urban to rural customers that goes well beyond what it was intended to do, in my opinion, which is provide affordable universal service in rural areas," Greenwood said.
"It's making phones on some level less affordable, simply because the surcharges are getting so large to provide money for the funds."