Telecommunications law primer: The Federal Universal Service Fund

[Commentary] A common lament of telephone consumers is that they don’t always pay what they expect to pay for their phone plans. They purchase these plans at a fixed price, but when the bill comes, the total is inflated by a laundry list of regulatory fees. As part of an ongoing series of telecommunications law primers, we will explore the law underlying the most prominent of these charges: those related to the Federal Universal Service Fund (USF). The 1996 Telecommunications Act defined and subsequently expanded the FCC’s universal service mandate. The agency established four programs under the universal service umbrella:

1. Lifeline and Link-Up, which provide need-based subsidies to low-income households for monthly telephone service;
2. The High-Cost Program, which provides subsidies directly to telephone companies that serve “high-cost” (largely rural) areas, offsetting some of these companies’ costs and encouraging them to charge lower monthly rates to customers;
3. The E-Rate Program, which subsidizes broadband access for eligible schools and libraries; and
4. The Rural Health Care program, which subsidizes broadband and telemedicine services for rural health care facilities.

To fund these four initiatives, the FCC charges a fee on all interstate telecommunications (or interconnected VoIP) providers. This funding mechanism has proven problematic. Since 1996, the fund has doubled in size, costing over $8 billion annually.

[Daniel Lyons is an Associate Professor at Boston College Law School]