The Future of Universal Service is Still in the Future

 You’re reading the Benton Institute for Broadband & Society’s Weekly Digest, a recap of the biggest (or most overlooked) broadband stories of the week. The digest is delivered via e-mail each Friday.

Round-Up for the Week of August 15-19, 2022

When it comes to broadband, the Infrastructure Investment and Jobs Act is about more than money. For example, Congress also directed the Federal Communications Commission to consider the impact of the law's $65 billion broadband investment on the FCC's existing broadband support programs under the umbrella of the Universal Service Fund (known to wonks as the USF). Congress asked for a report on the future of the USF including the FCC's options for improving its effectiveness in achieving the universal service goals for broadband in light of this COVID-era legislation including the Infrastructure Investment and Jobs Act. Congress explicitly said that the FCC could make recommendations on further actions the Commission and Congress could take to improve the ability of the FCC to achieve the universal service goals for broadband, but the FCC could not make recommendations that in any way reduce the congressional mandate to achieve the universal service goals for broadband. Recommendations could expand the universal service goals for broadband, if the FCC believes such an expansion is in the public interest.

The FCC sent that report to Congress this week and below we look at what the FCC is recommending about its universal goals for broadband, the four main USF programs, and how the USF is paid for.

I. The FCC's Universal Service Goals for Broadband

Section 706 of the Telecommunications Act of 1996 requires the FCC to encourage the reasonable and timely deployment of broadband to all Americans. In addition to this goal, the FCC now adopts the following goals: universal deployment, affordability, adoption, availability, and equitable access to broadband throughout the United States.

"[W]e believe the adopted goals suitably capture the necessary objectives of the universal service programs," the report states. Of note, the FCC rejected competition as a separate goal, saying, "Our existing goals of affordability and equitable access will further competition." 

The FCC also found it unnecessary to embrace a goal focused only on mobile deployment. The Commission believes that its goals of deployment and availability necessarily encompass deployment and availability of both fixed and mobile broadband.

The FCC concludes it can measure progress towards its goals:

• For deployment and availability goals, the FCC may rely in large part on more precise and granular broadband mapping data.
• For affordability, adoption, and equitable access goals, the FCC may look at existing universal service and appropriated programs: Are universal service programs as well as the Affordable Connectivity Program widely available and meeting the broadband needs of eligible households and institutions? Adoption goals may be evaluated by comparing access and subscription data.
• The FCC can measure progress towards the goal of equitable access to broadband through its work to take action to prevent and eliminate digital discrimination.

II. Reorientation of the High Cost Program

The Telecommunications Act of 1996 codified the FCC’s long-standing universal service policy, providing that consumers in all regions of the nation—including rural, insular, and high-cost areas—should have access to telecommunications and information services at rates “reasonably comparable” to the services and charges offered in urban areas. The 1996 Act also expanded the traditional goals of universal service to include increased access to advanced services—such as high-speed internet for all consumers at just, reasonable, and affordable rates.

The FCC's High Cost program provides support through more than a dozen separate legacy and modernized funds (all under the Universal Service Fund umbrella) to eligible telecommunications carriers (ETCs)(1) to deliver affordable voice and broadband service in rural areas that would otherwise be unserved or undeserved. The legacy funds support voice service and the modernized funds that make up the Connect America Fund (CAF) and Rural Digital Opportunity Fund (RDOF) help support building broadband infrastructure in rural America.

Over the next few years, Congress will allocate tens of billions of dollars towards deployment of broadband services at 100/20 Mbps upload/download speeds to unserved and underserved areas within the United States. This infusion of new capital will move the United States closer to near ubiquitous broadband deployment, thus materially impacting the need for the FCC to support infrastructure development.

The FCC concludes that it should continue to administer High Cost support already committed and consider potential enhancements to these programs to ensure better quality service. But as support terms end for its existing programs, the FCC will consider whether these kinds of support mechanisms are still necessary. 

With that in mind, the FCC recommends:

1. Starting a proceeding (at the FCC) to consider the future support needs of networks serving high-cost and other hard-to-serve areas.
2. Considering if, when, and under what circumstances continuing support is necessary to develop, sustain, and improve broadband operations and how best to determine which carriers may need such support and in what amounts. 
3. Exploring and developing strategies to ensure that consumers have continuing access to broadband services in high-cost areas that are reasonably comparable to that offered in urban areas at reasonably comparable prices. 
4. Examining potential competitive allocation mechanisms that could bridge any enduring deployment gaps after completion of USF High Cost and other federally funded projects.
5. Evaluating the funding needs of existing and future providers that have already deployed high-speed broadband networks and consider the creation of new support processes (e.g. support operating costs that are not recoverable from revenues earned when prices are set at just, reasonable, and affordable levels and from other sources of income, like governmental grants).
6. Developing a standard business case analysis that accounts for a provider’s total costs and revenues, includes funding from other government grants, and estimates the required level of support for the provider to continue operating profitably.
7. Proceeding with providing additional support for mobile broadband through a competitive process.
8. Considering how and/or whether future planned processes, such as RDOF Phase II, remain necessary after Infrastructure Act deployment commitments are made. If there are still areas lacking broadband service meeting the speed and latency standards required by Congress in the Infrastructure Act, the Commission should initiate a rulemaking to determine how to most efficiently bring broadband service to those areas and reevaluate whether additional support processes are needed.

III. Lifeline and the Affordable Connectivity Program

The FCC's Lifeline program was established in 1985 to help low-income consumers afford voice service and has evolved to include support for broadband internet access service. In fact, in 2016, the FCC made changes to shift the focus of Lifeline toward enabling low-income consumers to obtain and use broadband. As of March 2022, approximately 94% of Lifeline consumers subscribe to a rate plan that includes broadband service.

In 2020, Congress appropriated $3.2 billion to make broadband more affordable to low-income consumers during the COVID-19 pandemic and directed the FCC to establish the Emergency Broadband Benefit (EBB) Program. In the Infrastructure Investment and Jobs Act, Congress appropriated an additional $14.2 billion for the longer term Affordable Connectivity Program (ACP), which extended the temporary EBB Program. 

The Lifeline program and the Affordable Connectivity Program are similar in some respects and different in others but both are fundamentally focused on making connectivity reliably affordable for low-income households. 

The FCC recommends:

1. Initiating a rulemaking (at the FCC) to evaluate how the Lifeline program can best operate with the Affordable Connectivity Program and examine lessons learned from implementation of the EBB Program and the Affordable Connectivity Program that may be able to be applied to Lifeline.
2. Considering the role of both affordability programs and ways each program can maximize the different benefits for eligible households. To the extent the FCC determines Congressional action would be necessary to provide additional flexibility for each program, the Commission should consider making a referral to Congress to consider such action.
3. Reconciling any differences that exist when it comes to eligibility for the Lifeline program.
4. Facilitating and funding further Lifeline outreach efforts by the FCC and external stakeholders. Again, the FCC should consider making a referral to Congress to consider such action.
5. Evaluating whether to change the existing approach that allows for the benefits from the two programs to be combined. In doing so, the FCC would also consider how changing the approach to the types of services supported by the two programs would impact consumers’ ability to obtain both mobile and fixed services.(2) (The FCC might recommend to Congress flexibility in any statute should it determine that such flexibility—in the ways in which the ACP benefit is applied—would be helpful.)
6. Based on the similarities between the Affordable Connectivity Program and the Lifeline program, and the fact that both programs are designed to benefit low-income consumers, consider adopting consumer protection provisions similar to those adopted for the Affordable Connectivity Program to the Lifeline program.
7. Evaluate whether there are tools that could be implemented to further strengthen efforts to prevent waste, fraud, and abuse in both Lifeline and the Affordable Connectivity Program.
8. Collecting additional Lifeline program data including conducting surveys to better understand households’ broadband needs, households’ awareness of the Lifeline program, and their interactions with providers. 
9. Continuing Lifeline support for voice-only service halting the further phase-down of support for voice-only service.
10. Revisit Lifeline's minimum service standards. Specifically, the FCC recommends that any rulemaking regarding minimum service standards consider a collection of subscriber usage data. (Of note, the FCC declined to adopt similar minimum service standards for the Affordable Connectivity Program.)
11. Encourage provider participation in the Lifeline program, including improving the application and enrollment process for service providers. The recommendation includes revising the requirement that Lifeline providers be ETCs. 
12. Seeking comment on whether there are specific ways the Affordable Connectivity Program could be leveraged to address the homework gap.  
13. Closely monitoring the Affordable Connectivity Program and consider measures to ensure there is no lapse in support for connectivity for low-income households.

IV. E-Rate and the Emergency Connectivity Fund Programs

The E-Rate program has provided connectivity to, and within, eligible schools and libraries, and it has been instrumental in providing students and library patrons access to essential communication services.  Eligible schools, libraries, and consortia (comprised of eligible schools and libraries) may request universal service support for what are called “category one” services (which provide connectivity to schools and libraries) and “category two” services (which provide connectivity within schools and libraries). In 2014, the Commission focused the E-Rate program to provide funding for high-speed broadband connectivity and set as its first goal to ensure “affordable access to high-speed broadband sufficient to support digital learning in schools and robust connectivity for all libraries."

The American Rescue Plan Act established the $7.171 billion Emergency Connectivity Fund (ECF) to allow eligible schools and libraries to purchase eligible equipment and/or advanced telecommunications or information services for use by students, school staff, and library patrons at locations other than a school or library. The FCC has opened and closed three ECF application filing windows and to date, has committed over $5.3 billion in ECF program support to connect over 12.7 million students in all 50 states, American Samoa, the District of Columbia, Guam, Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands

Although the Infrastructure Act provides that community anchor institutions—such as schools, libraries, and health clinics—that lack access to gigabit-level broadband service are eligible recipients for broadband funding, network construction is probably years away from completion. So the FCC concludes it is too early to assess the effect this funding will have on existing efforts to use E-Rate, and in some cases ECF funding, to deploy gigabit-level broadband service to eligible schools and libraries, as well as the impact this additional funding will have on demand for E-Rate category one services. The FCC says it is possible that an influx of network construction funding may increase demand for E-Rate support for the recurring services provided over these newly constructed high-speed networks. The FCC will need time to analyze the impact of Infrastructure Act funding regarding the deployment of broadband connectivity to community anchor institutions. And the FCC concludes that any analysis of the impact of the E-Rate and ECF funding on network construction will need to wait until these networks are built and there's an opportunity to analyze the effects of the E-Rate and ECF programs through these projects. 

In the meantime, the FCC:

1. Will continue to work with its federal partners to monitor the progress of deployment of gigabit-level networks for use by eligible schools and libraries through the Infrastructure Act;
2. Should, in its own estimation, continue to evaluate the results of ECF and consider how to continue to support the connectivity for students and library patrons that has been provided by the program; and
3. Should analyze the impact of Infrastructure Act program-funded network construction projects after such funding has been allocated and consider the implications for the E-Rate program.

V. Health Care Equipment and the Rural Health Care Program

The FCC's Rural Health Care (RHC) Program consists of two component programs: 1) the Telecommunications (Telecom) Program and 2) the Healthcare Connect Fund (HCF) Program. Under the Telecom Program, eligible rural health care providers can obtain rates on telecommunications services in rural areas that are reasonably comparable to rates charged for similar services in corresponding urban areas. The HCF program provides a flat 65% discount on an array of advanced telecommunications and information services such as Internet access, dark fiber, business data, traditional DSL, and private carriage services. 

For the COVID-19 Telehealth Program, the Universal Service Administrative Company (USAC) will provide a report to the FCC on the program’s effectiveness on “health outcomes, patient treatment, healthcare facility administration, benefits from services and connected devices on patient’s treatments and outcomes, administration, and healthcare providers overall expanded telehealth, and any other relevant aspects of the COVID-19 pandemic."

The FCC has also supported telemedicine and the emergency connectivity and connected device needs of healthcare providers responding to the COVID-19 pandemic through the Connected Care Pilot Program and the COVID-19 Telehealth Program. The Connected Care Pilot Program is a $100 million, three-year program that funds selected pilot projects’ qualifying purchases necessary to provide connected care services, with a particular emphasis on low-income and veteran patients, and will also study how the USF can help support the continuing trend toward wider adoption of connected care services by patients and health care providers. 

The FCC's  Wireline Competition Bureau will issue a final report on the Connected Care Pilot Program at the conclusion of the program.

The two reports mentioned above will inform future FCC action in these areas. The Future of the Universal Service Report makes no recommendations to the FCC at this point. 

However, the FCC does have a recommendation for Congress: to consider revisiting the list of entities defined as health care providers. For the FCC's purposes, current law defines health care providers as:

1. post-secondary educational institutions offering health care instruction, teaching hospitals, and medical schools;
2. community health centers or health centers providing health care to migrants;
3. local health departments or agencies;
4. community mental health centers;
5. not-for-profit hospitals;
6. rural health clinics;
7. skilled nursing facilities; or
8. consortia of health care providers consisting of one or more entities falling into the first seven categories.

The FCC believes a reexamination of statutorily eligible health care providers could improve the RHC Program and the quality of telehealth services in rural America. 

VI. Universal Service Fund Contributions

The Communications Act directs that every telecommunications carrier that provides interstate telecommunications services shall contribute, on an equitable and nondiscriminatory basis, to the specific, predictable, and sufficient mechanisms established by the FCC to preserve and advance universal service. To this end, the FCC has determined that any entity that provides interstate telecommunications services (think long-distance telephone service) to the public for a fee must contribute to the USF. 

Source: FCC

Over the past decade, USF program disbursements and demand have remained relatively stable: in 2012, USF disbursements were $8.71 billion, and in 2020 disbursements were $8.27 billion. So the contribution burden on households has been relatively stable in recent years, but the contribution factor has increased in recent years, from 16.7% in the first quarter of 2017, to 25.2% in the first quarter of 2022, 23.8% in the second quarter of 2022, and 33.0% in the third quarter of 2022. These increases are due in large part to a decline in the contributions revenue base, i.e., reported revenues from interstate telecommunications services, which decreased from $65.9 billion in 2011 to $41.4 billion in 2020.

In order to collect the same amounts to fund the USF, a higher contribution factor must be applied to the smaller revenue base.

So, how to pay for the USF? The FCC considers a couple of ideas:

1. expanding the contribution base to include revenues from broadband internet access service, and
2. broadening the base to include “edge providers” such as streaming video providers, digital advertising firms, and cloud services companies rather than relying solely on the end-users—or consumers and enterprises—that have historically paid the line item fees passed through by providers. 

The FCC takes no position on either proposal. Instead the FCC:

• Will continue to evaluate developments concerning the burden of contributions on households and businesses, the USF contribution factor, and contribution base, as well as the scope of the FCC’s authority, and consider further actions if necessary; and 
• Should, in its own estimation, closely evaluate the record that informed the Report on the Future of the Universal Service Fund and take efforts to avoid raising the cost of broadband service and shifting the financial burden from corporations to consumers at a point in time when the federal government is working to address affordability challenges contributing to the digital divide. 

The FCC finds that there is significant ambiguity in the record regarding the scope of its existing authority to broaden the base of contributors.  The FCC recommends Congress provide the Commission with the legislative tools needed to make changes to the contributions methodology and base in order to reduce the financial burden on consumers, to provide additional certainty for entities that will be required to make contributions, and to sustain the USF and its programs over the long term.

Conclusion

As our title today may suggest, the Report on the Future of the Universal Service Fund includes a great many recommendations from the FCC to the FCC, to be considered at some unspecified future date. Since the recommendations include initiating public proceedings concerning the High Cost Program, Lifeline, and the Affordable Connectivity Program, attention will turn now to how long it takes the Commission to follow its own suggestions and start acting.

Notes

1. State utility commissions must certify that carriers under their jurisdiction are eligible to receive High Cost support in their states and use all support only to provide, maintain, and upgrade the facilities for which the support was intended. 
2. Any such consideration would have to be limited to the Lifeline program, given the statutory limitations placed on the Affordable Connectivity Program.

Quick Bits

• NTIA Announces All States and Territories Have Submitted Applications for BEAD Program Planning Funds (NTIA)
• Faster Internet Is Coming to America—as Soon as the Government Knows Where to Build It​ (WSJ)
• How an 81 year-old farmer helped residents in 3 North Dakota counties get high-speed internet (KFGO)
• Hamilton County Schools' free internet program increases parental involvement, research shows (Chattanooga Free Press)

Weekend Reads (resist tl;dr)

• Report on the Future of the Universal Service Fund (FCC)
• New Research Finds Extending School, Library Networks Key to Connecting Households (Schools Health & Libraries Broadband Coalition and New America's Open Technology Institute)

ICYMI from Benton

• Reimagining Lifeline: Universal Service, Affordability, and Connectivity
• Your Chance to Weigh in on the Future of the Universal Service Fund
• How can the FCC deliver better broadband to rural health care providers?
• Introducing the Affordable Connectivity Program
• How You Can Partner With the FCC to Improve Broadband Adoption
• Broadband Is Not Taking An August Recess

Upcoming Events

Aug 23—Using the Broadband Data Collection System and Common Error Codes (FCC)

Aug 23—Building a Connected and Equitable Future (National Urban League)

Aug 30—How Can the United States Address the Data Divide? (Center for Data Innovation)

Aug 30—Consumer Advisory Committee (FCC)

Sep 8—Commercial Surveillance and Data Security Public Forum (FTC)

Sep 13—Workshop On Environmental Compliance And Historic Preservation Review Procedures (FCC)

Sep 14—Internet for All Webinar Series – Review Top FAQs of the Enabling Middle Mile Broadband Infrastructure Program Application (NTIA)

Sep 22—40th Annual Parker Lecture & Awards Ceremony (United Church of Christ Media Justice Ministry)

Sep 24—ACP Sign Up Day (Black Churches 4 Digital Equity)

Sep 24—Capital Projects Fund Grant Plan Deadline (Department of Treasury)

Sep 25-28—The Right Connection (CENIC)

Sep 28—Local Coordination in NOFOs (NTIA)

Sep 29—September 2022 Open Federal Communications Commission Meeting

Sep 30—Enabling Middle Mile Broadband Infrastructure Program Applications Due

The Benton Institute for Broadband & Society is a non-profit organization dedicated to ensuring that all people in the U.S. have access to competitive, High-Performance Broadband regardless of where they live or who they are. We believe communication policy - rooted in the values of access, equity, and diversity - has the power to deliver new opportunities and strengthen communities.

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