The Time for Can-Kicking Has Passed: Fix Universal Service Contribution Now

“When it comes to USF contributions reform, kicking the can down the road is no longer an option” - FCC Commissioner Brendan Carr

On August 15, the Federal Communications Commission released its “Future of Universal Service Fund” report from Congress. This report was required by the Infrastructure Investment and Jobs Act (IIJA), which directed the FCC to consider “recommendations on further actions the Commission and Congress could take to improve the ability of the Commission to achieve the universal service goals for broadband and to expand the universal service goals for broadband, if the Commission believes such an expansion is in the public interest.” As the report found, the critically important programs that comprise our universal service fund (USF) are foundational to our telecommunications policy. But while the FCC found the expansion “is in the public interest,” the report declines to provide any roadmap for getting there.  

Congress established the USF out of the belief that rural consumers, low-income consumers, schoolchildren, and library patrons all deserve access to affordable communications services. In the past, the USF was instrumental in connecting communities across the nation to affordable, ubiquitous phone service, the essential communications service of the time. Congress gave the FCC authority to fund the USF by levying a surcharge, known as a “contribution,” on the providers of telecommunications service, which it did, and it based that funding on revenues earned from telecommunications services. 

Today, the efforts of USF are focused on providing access to affordable, ubiquitous broadband, the essential service of our time. While Congress has passed significant one-time funding to help promote access to and the affordability of broadband networks as part of the IIJA, the USF remains an important tool in addressing the ongoing efforts to meet our broadband needs. As the Commission assured Congress in the USF report, the agency’s duty for the future of the USF is “maintaining new and existing networks, promoting equitable access in underserved communities and populations, and ensuring sufficient support for the ever-expanding broadband needs of schools, libraries, and health care providers.” Closing the digital divide is not a one-and-done effort; it takes ongoing work and that work is the work of the USF. 

The ability to meet the expectation of affordable, pervasive broadband is contingent on the FCC fixing the way in which it funds the USF, which is something the agency has not been willing to do in over 15 years. The FCC still relies on contributions from the same base of telephone and related telecommunications services revenue for its funding. But that source of funds has declined by almost 50% since 2011, according to the USF report. Think about it: During the “information revolution” and surge in our “connected economy,” the USF has been supported by the one segment of that revolution that is declining, while communications service revenues overall have been increasing. The time for reform is now.

This is why Public Knowledge joined with more than 332 organizations earlier this year to call for the FCC to reform the USF’s contribution mechanism. Given the urgency of the need for reform, these groups came together around one central principle: The FCC should take whatever steps are within its existing authority to stabilize the contribution mechanism and it should take that step now by including broadband internet access services in the contribution base. A study that was developed for the USForward Coalition, which Public Knowledge is a part of, showed the effect of including broadband revenues in the base would reduce the contribution factor from its current 33% of telephone bills to 3.8%. This would mean that consumers would likely pay a USF fee on their broadband services for the first time, but they would also see a reduction in the USF fees charged on their mobile and home telephone services.   

Under the statute, Congress directed the FCC to establish the funding mechanism with the requirement that all carriers contribute and that “other providers of interstate telecommunications” may be required to contribute to advance and preserve universal service upon a determination that it would serve the public interest. Broadband fits within the latter and at times has been rightly classified as fitting within the former. It is simply a non-answer for the FCC to claim, as it does in this report, that it “recommend[s] 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 Fund and its programs over the long term.” If Congress wants to do what some others are suggesting, like having digital platforms such as Meta or Google contribute to the USF based on their digital advertising revenues or on some other basis, as FCC Commissioners Carr and Simington suggest, then Congress can certainly engage in that debate. But this is not a reason for the FCC to delay taking steps now to address the urgent need of preserving and advancing universal service.

We need boldness. But a deadlocked FCC with two commissioners from each political party does not produce boldness; a deadlocked FCC produces, unsurprisingly, deadlock. The universal service programs are far too important to continue to play this game of kick the can. Congress has (finally!) on a bipartisan basis reached consensus on the importance of universal, affordable broadband access. Congress gave low-income families a Lifeline in the Affordable Connectivity Program, it created concrete rural digital opportunities in the BEAD fund, it worked to close the homework gap so schoolchildren could continue to learn at home through the Emergency Connectivity Fund, and it connected rural citizens to health care through the Connected Care program. All of these efforts undertaken by Congress are temporary, though. Our existing USF funding programs have complements to them and the FCC, rightly, has continued doing its job to connect America so that when these programs end, the USF programs will still be there to keep ensuring Americans remain connected. The least the FCC could do would be to ask for public input about what reforms are needed to ensure that the USF contribution mechanism will provide sufficient funding.