A common-sense opportunity to reform the Universal Service Fund

The time is long past for Congress to adopt outgoing Federal Communications Commission Chairman Ajit Pai’s recommendation: Move the universal service program on-budget, which will shore up its precarious financial state and cure many of the real or perceived problems with the existing program. Some have suggested expanding the revenue base to include broadband access. An alternative proposal floated by state utilities commissioners would have replaced the existing surcharge with a per-number tax on residential lines and a revenue-based tax on commercial telephone revenue. But perhaps the simplest and most elegant solution is also the most revolutionary. Rather than tinkering at the edges of an archaic off-budget program, Congress should simply fund universal service through a direct appropriation, like most other entitlements.

An on-budget program would make it easier for Congress to monitor the program directly through inquiries and hearings. Second, a direct appropriation would avoid the market distortion of trying to tax some goods but not others (substitutes) in order to fund the program. Third, the program would be subject to a hard budgetary cap on annual expenditures. Finally, moving on-budget gives Congress a chance to overhaul the program. Designing a new, on-budget USF program would invite a fresh, critical assessment of these programs rather than giving in to bureaucratic inertia.

[Daniel Lyons is a professor at Boston College Law School]