Sustaining Universal Service Programs

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.