The Congressional directive in the Telecommunications Act of 1996 is for the Federal Communications Commission FCC to ensure that there be specific, predictable, and sufficient Federal and State mechanisms to preserve and advance universal service. The dilemma is that the source of Universal Service Fund (USF) programs is end user (i.e. retail) revenues from international and interstate wireline and mobile services, as well as revenue from providers of interconnected Voice over Internet Protocol (VoIP) services. The reduction of long-distance (inter-state) voice minutes, the transition to non-interconnected services, and cord cord-cutting of wireline phone services have reduced the contribution base—the revenues used to calculate USF contributions—by more than 60 percent over the last two decades. As a consequence, the contribution factor, i.e., the percentage surcharge added to remaining telecommunications service bills, has increased by significant amounts.

There is little dispute that the contribution base for USF must be broadened. There are a number of proposals to accomplish that goal, some of which the FCC may be able to employ using its existing powers, and others that would require legislation. The Benton Institute takes no position at this time as to which mechanism would be best.  However, Benton does emphasize that proposals to finance the USF via the Congressional appropriations process are ill advised and, indeed, extremely dangerous. Even with multiyear appropriations (something which is very difficult to accomplish legislatively for both political and technical reasons), leaving USF to the vagaries of the appropriations process would unquestionably conflict with the established—and essential—objective of maintaining a specific and predictable funding mechanism, and would likely endanger sufficient funding as well.

A potential impact of the Infrastructure Investment and Job Act’s historic investment in broadband network deployment and its emphasis on currently unserved, underserved, and high-cost areas is that it raises the potential that one of the USF programs, the Rural Digital Opportunity Fund (RDOF), could soon be unburdened by the need to continue to invest capital in rural broadband network deployment.  Billions of RDOF dollars could be more productively used if they were redirected over coming years to other USF programs and goals around sustainability and affordability. In this scenario, gradual decreases in interstate end-user revenues could be offset in part by reductions in overall USF spending, especially RDOF/high-cost area spending.

But Congress wisely instructed the FCC to not just preserve universal service but to advance it as well. Policymakers, therefore, should explore ways to advance a contribution mechanism that has long-term stability and predictability, is specific, and can provide sufficient funding for the expansive universal service goals Congress has set not only in the Telecommunications Act of 1996 but updated in the Infrastructure Investment and Job Act. Whatever approach is adopted, it needs to be especially cautious to address the needs of low-volume, low-income, and other vulnerable users, so that they do not end up paying a disproportionate rate or substantially more than they are today. That would hinder universal service goals and efforts to keep communications affordable for these important communities. 

Policymakers would be wise to engage in a broad-based economic analysis to develop an approach to contribution reform that ensures that average vulnerable users do not end up paying more than they are today in the aggregate. If there are greater contributions that need to be collected to support the system as a whole, then the additional burden should be shouldered by enterprise users—so that USF can meet its mandate to support an evolving level of services, and achieve truly “universal” service.

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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Kevin Taglang
Executive Editor, Communications-related Headlines
Benton Institute
for Broadband & Society
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Wilmette, IL 60091
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