Several U.S. senators introduced legislation that if passed, would direct the Federal Communications Commission (FCC) to assess contributions from broadband and edge providers to the Universal Service Fund (USF).
The USF is allocated to broadband builds in rural and Tribal areas, connections for schools, hospitals and libraries, as well as a low-income affordability program.
Until now, broadband and edge providers haven’t been required to contribute to the USF. Since its launch in 1997, USF funding has been the burden of traditional telecommunications companies, including wireline and wireless companies, as well as cable companies that provide voice services. Amid fears over that revenue base "trending toward $0," the proposed allocated budget for the USF in the fourth quarter of 2023 was still $6.03 billion.
The proposed Lowering Broadband Costs for Consumers Act of 2023, sponsored by Senators Mullin (R-OK), Kelly (D-AZ), and Crapo (R-ID), would see providers that account for more than 3% of total U.S. annual internet traffic and earn more than $5 billion in annual U.S. revenue contribute to the USF. This could have implications for companies including Alphabet, Meta, Amazon, Apple, Microsoft and Netflix, according to some in the industry.
The legislation defines edge providers as any procurer of online content or services, including an advertising service, search engine, social media platform, video gaming service or e-commerce, to name a few.
“Fair contributions to the USF from edge providers are long overdue,” said Sen. Mullin in a statement. “Video streaming services account for 75% of all traffic on rural broadband networks. However, unrecovered costs from streaming companies are often shifted and borne by small rural broadband providers.”
The new bill would also direct the FCC to adopt a new mechanism under the current USF high-cost program to provide “specific, predictable and sufficient support for expenses incurred by broadband providers that are not otherwise recovered.”
The legislation would explicitly limit the FCC’s authority over edge providers and broadband providers only to requiring contributions to the USF.
The Lowering Broadband Costs for Consumers Act has been publicly supported by several stakeholders including USTelecom – The Broadband Association, NTCA - The Rural Broadband Association and WTA – Advocates for Rural Broadband.
Brandon Heiner, SVP of Government Affairs at USTelecom – The Broadband Association, said the legislation will help ensure the USF’s long-term impact and sustainability by “modernizing its contributions system to include the dominant Big Tech companies, which benefit significantly from the broadband connectivity made possible by the Fund.”
WISPA spokesperson Mike Wendy said the association is in support of broadening the contributions base in a manner that “is fair and would allow companies like [those belonging to WISPA] – who provide fiber and wireless broadband services – to receive such funding in their service areas should they qualify.”
Meanwhile, there are also some concerns about the bill.
Wendy noted that providers with revenues above the de minimis threshold would be most affected by the bill’s requirements, and will ultimately have to decide whether to internalize their contribution into the USF, or pass it along to consumers.
Brian Dietz, SVP of Strategic Communications, NCTA – The Internet & Television Association, said that the bill could potentially raise, not lower, the cost of broadband service for consumers.
“Given the massive federal spending on deployment already underway,” Dietz said, pointing to several including ARPA, BEAD, ACAM and ReConnect, “it seems premature and ill-advised for Congress to create yet another subsidy mechanism for rural telcos.”
In discussions with Fierce Telecom, analysts noted the bill raises several other interesting questions, among them why Congress and the FCC didn’t determine how much additional money the USF will need through economic study before firming up the legislative proposal.
Whether the bill is passed will also depend on how an existing 5th Circuit litigation turns out, which could result in courts throwing out the legislation due to concerns over giving the FCC a taxing power that Congress cannot delegate.
And even if that case doesn’t thwart the legislation, it will still need sufficient votes in Congress to approve the expansion of the FCC's powers to collect funds.
If passed, the Lowering Broadband Costs for Consumers Act would direct the FCC to complete a rulemaking, after taking public comment, in 18 months that authorizes the Commission to assess edge providers for USF contributions.
Strand Consulting noted that without reform, the USF is expected to go bankrupt “because fees based on voice services have been declining for years.”