Later this week the FCC will issue a report to Congress on the options for the troubled Universal Service Fund (USF). When it issued a Notice of Inquiry in December 2021, the FCC asked for input because the cost to consumers who support the USF has been increasing. The FCC also noted that the new Infrastructure Investment & Jobs Act (IIJA) is about to start dispensing billions of federal dollars to fund fiber deployments to many of the same rural areas that are supported by USF.
Since December, there have been hundreds of comments filed with the FCC regarding the matter. They mainly relate to the “high-cost” aspect of USF, which helps service providers to deploy telecommunications infrastructure in high-cost areas — such as rural locales.
Of all the comments, three solutions seem to rise to the top: make “Big Tech” contribute to USF; make broadband providers contribute to USF; or pause the program entirely while the effects of IIJA play out.
The first solution was proposed by FCC Commissioner Brendan Carr on the same day the FCC issued its Notice of Inquiry. Carr said the USF program was “stuck in a death spiral.” He said generally speaking, the FCC funds USF through a line-item charge that carriers add to consumers’ monthly bills for telephone service. But the traditional phone subscriber base has been shrinking. So, the contribution factor that remaining consumers pay has been on the rise, and this is unsustainable for those consumers.
Carr recommends that Big Tech start contributing into the USF. “After all, large technology companies are reaping trillions of dollars of revenues off of the networks that are supported, and in many cases only exist, because of USF expenditures,” he said. “Indeed, one study shows that the online streaming services provided by just five companies — Netflix, YouTube, Amazon Prime, Disney+ and Microsoft — account for a whopping 75% of all traffic on rural broadband networks.”
A second idea is to make companies that provide broadband services collect USF fees. Currently, companies that provide VoIP services assess USF fees, but they do not make assessments on their broadband-only customers.
Telecom operator Windstream recommends expanding the ecosystem of companies that pay into the USF to include Broadband Internet Access Service (BIAS) providers. “Including BIAS in the contribution base is a near-term, actionable solution that will lower the overall contribution rate while enhancing competition,” wrote Windstream.
Many recommend pausing USF
Meanwhile, a number of companies point out that the IIJA promises to deliver plenty of federal funds for the deployment of fiber internet to unserved areas. They say the IIJA targets will largely overlap with the USF high-cost deployments. Therefore, they suggest the FCC should pause funding for any new USF high-cost deployments at this time.
T-Mobile said, “There is broad support in the record for pausing new USF support for high-cost deployments to evaluate the impact of IIJA and other new federal funding and to determine which locations, if any, may still need USF support once this funding has been distributed.”
Verizon said the FCC should defer any new high-cost support until funds from the Broadband Equity, Access, and Deployment (BEAD) program, which is part of IIJA, has been fully awarded. “The Commission will then be able to identify remaining unserved areas and assess whether new high-cost support is needed to meet the nation’s universal service goals,” stated Verizon.
NCTA – The Internet & Television Association said arguments to maintain the status quo or expand existing USF programs at this time are difficult to reconcile with the new reality of IIJA funds. “Rather than spend USF resources, which may clash with state activities already in progress under BEAD and other funding programs, NCTA would rather have the FCC pause any new high-cost support for unserved or underserved areas.”
The mobile carriers
Even though many people think of the decades-old USF as a program benefiting wired telecom providers, Tim Donovan, SVP of Legislative Affairs with the Competitive Carriers Association (CCA), said that USF assessments are actually “heavier on the mobile side” than the landline side.
CCA is very concerned that if the USF program is paused, their members, which provide wireless services, will be left out in the cold. They won’t receive USF monies, and they’re also getting the short end of the stick with the IIJA, which has stated a preference for fiber deployments above all other forms of broadband connectivity.
CCA sees the potential for a “5G Gap” that may disproportionately harm rural wireless carriers and consumers. It hopes that the FCC will address this issue in its report this week.