Daniel Lyons

Once Democrats finally secured a 3-2 majority in the Federal Communications Commission, the agency lost no time in approving a long-anticipated proposal to reintroduce net neutrality by reclassifying broadband providers as common carriers. While its commitment to reclassification seems unwavering, the agency has equivocated about the preemptive effect of agency action.

The basic tenet of universal internet service—that the government should assist those who cannot afford basic access to the network—has long been a cornerstone of American telecommunications policy. Unfortunately, it is far from clear whether Lifeline, the federal program tasked with getting low-income households online, actually addresses this problem. The recently enacted Affordable Connectivity Program (ACP) threatens to compound Lifeline’s errors. The advent of ACP provides a unique opportunity to rethink our approach to broadband affordability initiatives.

E-Rate is the forgotten child of the universal service family. While commentators and Congress have spilled significant ink examining the government’s broadband build-out and affordability initiatives, E-Rate has been quietly subsidizing broadband service to schools and libraries for a quarter century. Promoting community connectivity and education is a worthwhile policy goal.

The Universal Service Fund is funded  by a quarterly surcharge on interstate and international telecommunications revenue. Each quarter, a private nonprofit known as the Universal Service Administrative Company (USAC) estimates how much money it needs to fund the Federal Communications Commission’s (FCC) myriad universal service initiatives. It also estimates the amount of telecommunications revenue expected to be generated by industry, and from there calculates the surcharge percentage necessary to cover program costs.

Reducing the broadband affordability gap is an important and noble goal. Unfortunately, it is far from clear whether Lifeline, the federal program tasked with getting low-income households online, actually addresses this problem. For over a decade, academics, government watchdogs, and independent auditors have criticized the Federal Communications Commission’s inability or unwillingness to measure the program’s effectiveness—while private studies suggest much of this spending may be misdirected toward families at no risk of losing internet access.

Back in 1996, Congress amended the Communications Act to include antidiscrimination as part of American telecommunications policy.

Each quarter, the Federal Communications Commission (FCC) determines the Universal Service Fund (USF) surcharge that is placed on customers’ telecommunications bills. The surcharge is calculated by estimating the cost of the agency’s various universal service programs, divided by the industry’s anticipated telecommunications revenue. As those programs have grown, and that revenue has shrunk, the surcharge has risen from 3 percent in 1998 to a whopping 33 percent in 2021.

As the midterms approach, the White House may resurrect earlier proposals to overhaul the corporate tax program. One component, sometimes called the “Amazon tax,” would impose a 15 percent minimum tax on large corporations’ book income (the income reported to investors on financial statements) rather than taxable income, to ensure all companies pay each year. This impulse may seem egalitarian, but because of a quirk in accounting rules governing spectrum licenses, this proposal disproportionately harms wireless companies and could deter broadband buildout.

Congress is finally demanding action on the Universal Service Fund.

Building on previous initiatives, the Infrastructure Investment and Jobs Act represents a potentially significant improvement over previous efforts to help low-income families get online. But as always, much will depend on how the Federal Communications Commission carries out its new congressional mandate. The Affordable Connectivity Program will provide $30/month in assistance on an ongoing basis, plus equipment subsidies. There is much to like about the new Affordable Connectivity Program.