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At US Telecom Event, Broadband Leaders Call For Changes in Universal Service Funding Mechanism

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Screenshot of AT&T CEO John McElfresh from the US Telecom webinar

December 4, 2020 — Broadband industry leaders on Thursday called for the Federal Communications Commission to modernize Universal Service Fund programs, and highlighted other steps critical to making broadband affordable and available to all Americans, speaking during a US Telecom forum.

“Affordability is a problem,” said John McElfresh, CEO of AT&T Communications, “35 percent of households which bring in less than $30,000 a year don’t have fast internet service.” McElfresh noted that the COVID-19 pandemic accelerated trends toward broadband inequality.

“This is just a preview of what lies ahead,” he said, “everything relies on broadband.”

Panelists throughout the event stressed the need to revisit the Universal Service Fund, a system of telecommunications subsidies managed by the FCC, intended to promote universal access to telecommunications services in the United States.

The program, created before the advent of modern broadband technology, originally operated as a mechanism by which interstate long distance carriers were assessed to subsidize telephone service to low-income households and high-cost areas.

The Telecommunications Act of 1996, which officially established the USF and placed its administration under the charge of the Federal Communications Commission and an agency that it created, expanded the traditional definition of universal service.

In particular, the traditional definition of universal service as affordable, nationwide telephone service was expanded to include broadband support via the E-Rate Program to eligible schools and libraries.

How speakers said the Universal Service Fund program needs to change

With broadband emerging as the new standard communication medium, many believe the FCC should transition the USF to subsidize broadband.

McElfresh called further for a change in the funding mechanism of USF, currently based on fees on telecommunications-based services. “Revenue from these services is declining and it isn’t working,” he said, adding that the current system penalizes wireline customer and is difficult to access.

Broadband experts agree that a lack of broadband data stands in the way of achieving universal service.

“We need to pinpoint the problem,” said McElfresh, who detailed that the Broadband DATA Act, which requires the FCC issue rules relating to the collection of broadband availability data, was enacted in March, but has yet to be fully funded by Congress.

While the industry leaders agreed on solutions to broadband data, affordability and adoption issues, they held different views on what the roles of public and private entities are when it comes to investing in infrastructure.

While the AT&T CEO championed the light-touch regulatory approach the Trump FCC has practiced, saying it “has served our country well,” panelist Frank Pallone, D-New Jersey, and chairman of the House Energy and Commerce Committee, said that when it comes to solving the lack of infrastructure issue, he doesn’t believe “that industry can bridge this gap alone.”

“The government needs to make those investments,” said Pallone, calling for government and industry to work together. Pallone noted the status of House Democrat’s Moving Forward Act, which authorizes $80 billion to build and upgrade broadband infrastructure, and which is currently stuck in the Senate.

Pallone, who has been very critical of the FCC under Chairman Ajit Pai, said he believes part of the problem is that the current FCC “acted as if state and local entities are the enemy, and preempted what they have done, rather than working with them.”

Pallone called for more cooperation and coordination between federal, state and local government.

In a panel that took place after McElfresh and Pallone gave keynote speeches, broadband champions called for strengthening the social contract of what it means to be connected. They further argued that a lack of infrastructure itself remains the largest barrier to connecting the approximate 21 million Americans who remain unversed.

“We need more players in the market,” said Nicol Turner Lee, senior fellow in governance studies and director of the Center for Technology at Brookings Institute, finding that increased competition will be the key to driving investment in infrastructure.

Turner Lee also called for the FCC to abandon incremental pay models, saying Americans need funding for these initiatives immediately.

Former Assistant Editor Jericho Casper graduated from the University of Virginia studying media policy. She grew up in Newport News in an area heavily impacted by the digital divide. She has a passion for universal access and a vendetta against anyone who stands in the way of her getting better broadband. She is now Associate Broadband Researcher at the Institute for Local Self Reliance's Community Broadband Network Initiative.

FCC

Federal Communications Commission Implements Rules for Affordable Connectivity Program

The agency implemented new rules on the Affordable Connectivity Program, which makes a new subsidy permanent.

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Photo of Jessica Rosenworcel by Rob Kunzig of Morning Consult

WASHINGTON, January 24, 2022 – The Federal Communications Commission adopted rules Friday for its Affordable Connectivity Program that changes and, in some cases narrows, the eligibility requirements for the subsidy to allow for more households to be connected.

An extension of the former Emergency Broadband Benefit Program, which offered discounts to broadband service providers to subsidize connectivity and devices, the new program will make it easier for providers to get in the program by automatically making eligible providers in good standing.

Additionally, the FCC maintains that the monthly discount on broadband service is limited to one internet discount per household rather than allowing the benefit for separate members of a household. “Adopting a one-per-household limitation best ensures that Program funding is available to the largest possible number of eligible households,” the agency said in its report.

To accommodate the volume of eligible households enrolling in the ACP, the FCC allowed providers until March 22 – 60 days after its Friday order is published in the Federal Register– to make necessary changes to ensure that the ACP can be applied to providers’ currently sold plans.

“So much of our day to day—work, education, healthcare and more—has migrated online. As a result, it’s more apparent than ever before that broadband is no longer nice-to-have, it’s need-to-have, for everyone, everywhere,” said FCC Chairwoman Jessica Rosenworcel. “But there are far too many households across the country that are wrestling with how to pay for gas and groceries and also keep up with the broadband bill. This program, like its predecessor, can make a meaningful difference.”

The Infrastructure Investment and Jobs Act transformed the EBB to the longer-term Affordable Connectivity Program by allocating an additional $14.2 billion to it.

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Universal Service

Advocates Call for Universal Service Fund to Include Broadband Revenues

Letter cites Carol Mattey report, which recommends broadening the base.

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Carol Mattey of Mattey Consulting LLC

WASHINGTON, November 29, 2021 – A broad swath of organizations on Monday is calling for policymakers in Washington to reform and stabilize the Universal Service Fund by broadening its funding base to include broadband revenues.

The Universal Service Fund, which supplies the nation’s low-income and rural and remote communities with basic telecommunications services, currently relies on voice service revenues, which has been a dwindling for years. Debate has emerged about how the fund can be stabilized, with some asking for the money to come from a congressional budget item and others asking for it to come from broadband revenues.

The latter is being recommended by over 254 organizations, including public interest groups, anchor institutions, trade associations and broadband service providers, in a Monday call to action letter to policymakers in Washington. The letter cites a September report by Carol Mattey, a former deputy chief of the Federal Communications Commission, which said broadband revenues should be incorporated into the USF base of money to draw upon.

“Unfortunately, this universal service system is in danger of collapse because the mechanism that funds it has not been updated since it was adopted nearly 25 years ago,” the letter said. The USF program is a relic from 1997 and a product of the Telecommunications Act of 1996.

The letter features organizations including Public Knowledge, the Schools, Health and Libraries Broadband Coalition, Gigabit Libraries Network, California Emerging Technology Fund, and a number of telecoms and telecom associations and anchor institutions from over a dozen states.

The contribution percent – the percent providers must pay of their voice revenues – has reached an all-time high in the second quarter this year, at 33.4 percent in the second quarter this year, and decreased slightly after that. Mattey and the signatories, however, warn that the contribution could soar as high as 40 percent in the coming years, as the fund operates at around $10 billion annually.

Citing the Mattey report, the letter suggests that including broadband revenues into the fund would reduce the USF fee to less than 4 percent, adding it would not stunt broadband adoption or retention, as fees are often passed down to customers.

“Our recommendation would reduce regulatory uncertainty, would better reflect evolving uses of services, would be straightforward to administer, and would be more equitable and nondiscriminatory for residential and business consumers than the current system,” the letter said.

“Moreover, the Federal Communications Commission could make this change under its existing authority without requiring new legislation,” the letter added, as Mattey and Greg Guice, Public Knowledge director of government affairs, said at a conference recently.

FCC Commissioner Brendan Carr suggested earlier this year that Big Tech companies like Google, Apple, and Facebook should contribute to the fund because they benefit from broadband services. FCC Chairwoman Jessica Rosenworcel called the idea “intriguing,” while FCC Commissioner Nathan Simington also raised the idea at an event in September.

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Universal Service

Experts Urge FCC Unilaterally Broaden Revenue Base of Universal Service Fund

Consultants say the Federal Communications Commission has the authority to do so.

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Carol Mattey and Greg Guice at INCOMPAS event on October 25.

WASHINGTON, November 3, 2021 – Telecommunications experts are recommending that the Federal Communications Commission unilaterally expand the revenue base of the Universal Service Fund to include broadband revenues, rather than waiting on Congress to do so.

Advocates such as Public Knowledge Director of Government Affairs Greg Guice cite congressional infighting over the bipartisan infrastructure bill as an example of inefficiency in the legislature that would stall the passage of urgent reform for the USF, a fund that helps deliver basic telecommunications services to low-income Americans and those in remote regions.

Telecommunications policy experts said at the INCOMPAS Show in Las Vegas October 25, on which Guice was a panelist, that it is essential that the USF force broadband revenues into the pool of funds, as the fund’s overreliance on voice revenues – even as those revenues decline – is putting a strain on the programs.

Guice and Carol Mattey, principal of Mattey Consulting LLC and former deputy chief of the FCC, told Broadband Breakfast Tuesday that the agency has the jurisdiction to broaden the base of the contribution to the USF under the Telecommunications Act of 1996 if it is in the public interest.

“My view is the FCC has the statutory authority to assess broadband internet access service,” said Mattey in an email. “Under existing law — specifically, section 254(d) of the Telecommunications Act of 1996 —  the FCC has the statutory authority to require any ‘providers of interstate telecommunications’ to contribute to the universal service fund if the public interest warrants.

“The FCC has classified broadband internet access service as an information service,” she added. “Under the ’96 Act, the definition of an information service is a service that offers the capability to generate, acquire, store, transform, etc. etc. information ‘via telecommunications.’”

Recommendations for reform

Mattey published a report in September that laid out the case for the fund to be expanded to incorporate a broadband range of money sources, including broadband.

And there has been no shortage of recommendations to help the fund prosper. Earlier this year, a panel of experts debated the merits of having Congress wholly assume contributions to the fund from general tax dollars, while others suggested that recommendation would destabilize the fund because it would swing with the political winds. Those people, instead, focused on simply broadening the base to include other sources, including broadband.

More recently, FCC Commissioner Brendan Carr penned an op-ed in Newsweek recommending the fund include contributions from Big Tech because that industry benefits from broadband. It was a suggestion that FCC Chairwoman Jessica Rosenworcel called “intriguing.”

But while Guice and Mattey argue for the FCC to step in and make changes unilaterally, in a one-on-one interview with the Internet Innovation Alliance in September, FCC Commissioner Nathan Simington – in pontificating about Carr’s recommendation for Big Tech contributions – said he didn’t want to get ahead of Congress on the matter, suggesting a wait and see approach.

USF in need of change

Over the last two decades, the USF has seen the revenues subject to its assessment decline by 63%. This money goes to support four main programs: high cost support for rural areas, Lifeline for low income areas, the E-rate program for schools and libraries as well as a rural healthcare support program.

This year, the contribution percentage relative to revenues hit an all time high.

The panel at the INCOMPAS show pinpointed the major factor behind declining USF revenues as decreases in mobile service revenues due to providers setting lower mobile rates. These decreases come despite continual increases in communications revenues overall.

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