Wei Zhao

The authors were previously asked to analyze from an economic perspective the appropriate contribution methodology for the federal Universal Service Fund (USF). In a prior study, they analyzed the effects of modifying and expanding the “contribution base,” i.e., the supply of financial resources for the USF, to include both voice and broadband connections. In particular, the prior study investigated the economic effects of modifying and expanding the contribution base on broadband adoption rates.

This analysis explores, from an economic perspective, the effects of modifying and expanding the “contribution base”—the supply of financial resources for the Universal Service Fund—to include both voice and broadband connections. While the Federal Communications Commission has updated the way universal service funds are distributed to orient them more toward support of both voice and broadband services, the contributions system that pays for the FCC’s mission-critical USF initiatives continues to rely precariously upon a dwindling pool of revenues from legacy services.