Smartly Reforming USF While Building Broadband to All

broadband for all

Over the next few years, federal and state governments will pour once-in-a-generation funding totaling over $140 billion into making robust broadband services available to every American. Chief among these efforts will be NTIA’s Broadband Equity, Access, and Deployment (BEAD) program, representing the country’s largest investment ever in broadband deployment – $42.5 billion. This massive amount of government support will, in turn, unleash additional billions in new private investment to help finish the job of constructing robust networks in places of greatest need. 

This is a historic opportunity for federal policymakers to get broadband deployment right. If properly targeted, we can finally close the digital divide and make broadband networks available to all. At the same time, it is an opportunity for policymakers to right-size and rethink legacy programs to ensure that we minimize the burdens on consumers and do not inadvertently dampen demand for the very services we are making available to unserved consumers.      

Unfortunately, rather than seizing this opportunity to reduce the burden on consumers, there are troubling signs that some beneficiaries of legacy universal service seek only to increase consumer burdens and perpetuate, and even expand, less efficient funding streams. The recent announcement that the FCC will consider a proposal to provide over $2 billion in additional universal service support (almost $400 million per year for a period of six years) to a subset of rural telephone companies is puzzling, to put it mildly. The draft item acknowledges that more than a million locations covered by this new support likely will be eligible for funding under the massive BEAD program. Moreover, deployment under BEAD would happen sooner and with better performing networks than those contemplated by the proposal. Equally troubling is that the support contemplated by the proposal would be available only to rate-of-return carriers and would exclude all other qualified broadband providers from potentially competing to provide faster service at lower cost.    

To make matters worse, the same parties that are pushing to secure this additional universal service funding are advancing other proposals that could result in new fees on broadband customers. Rural telcos and others have argued that the best way to sustain the existing Universal Service Fund, which is funded through contributions from providers of telecommunications services and their customers, is to expand the existing revenue base to include revenue from broadband services. That approach could have significant negative consequences for American consumers, including the potential for increased fees at a time when bringing affordable high-speed broadband to all is a national priority.       

This proposed assessment on broadband service is not only bad policy, but it also is the very definition of putting the cart before the horse. Before we rush to add new taxes on internet services, policymakers should recognize the paradigm shift that has occurred in support of broadband and reform existing support mechanisms so that they will work more efficiently and effectively for consumers. The massive influx of funding from Congress to address broadband deployment and adoption provides an undeniable opportunity to reduce and potentially eliminate some duplicative forms of universal service support. 

The FCC is working on a report to Congress considering issues related to the future of the Universal Service Fund in light of recent broadband investments, including how to sustain the fund going forward. This evaluation should also consider how requirements will change as government subsidies are used to finance capital investments in remote areas and how existing mechanisms to finance such support should evolve to ensure the fair distribution of burden and benefit. 

At a minimum, tens of billions of dollars in new funding supporting the cost of network construction should allow the Commission to decrease high-cost universal service support. Rather than adopting wasteful new programs like the enhanced Alternative Connect America Cost Model proposal or imposing new fees on broadband subscribers, the Commission should focus on stabilizing the Universal Service Fund through increased efficiency and more targeted spending.