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Universal Service

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



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.

12 Days of Broadband

How Long Will it Take Congress to Revamp the Universal Service Fund?

Critics urged the FCC to expand the fund’s contribution sources, but the agency chose to punt the decision to Congress.



Graphic courtesy of Dmitry Kovalchuk / Adobe Stock

From the 12 Days of Broadband:

The Federal Communications Commission this summer waived away the issue of revamping the Universal Service Fund, pointing to the need for Congress to give it the authority to make changes to the multi-billion-dollar fund that goes to support basic telecommunications services to low-income Americans and rural communities. 

Up to this point, the agency had a virtual megaphone to its ear with critics saying that it needs to make the changes necessitated by the fact that the nearly $9-billion fund this quarter is supported only by dwindling legacy voice service revenues as more Americans move over to broadband-driven communications services. 

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Chairman Pallone Says Service Providers May Be Abusing ACP

‘These reports detail problems customers have faced,” wrote Energy and Commerce Committee Chairman Frank Pallone



Photo of Rep. Frank Pallone, Jr., D-NJ, obtained from Flickr.

WASHINGTON, October 26, 2022 – Rep. Frank Pallone, Jr., D-N.J., sent letters to thirteen leading internet service providers requesting information on potential “abusive, misleading, fraudulent, or otherwise predatory behaviors” engaged in through the Emergency Broadband Benefit Program and the Affordable Connectivity Program.

Pallone, chairman of the House Energy and Commerce Committee, expressed concern over allegations that providers are conducting business in violation of the programs’ requirements. Pallone cites as evidence several stories, including pieces from The Los Angeles Times and The Washington Post.

“These reports detail problems customers have faced, including either having their benefits initiated, transferred to a new provider, or changed to a different plan without their knowledge or consent,” Pallone wrote.

“Other customers have reported a delay in the application of the benefit or a requirement to opt-in to future full-price service, which has resulted in surprise bills that have been sent to collection agencies.”

“There have also been reports of aggressive upselling of more expensive offerings, requirements that customers accept slower speed service tiers, and other harmful and predatory practices,” he added.

Pallone asked the providers for several categories of records, including each company’s number of benefit recipients, complaint-resolution protocols, degree of knowledge of incorrect customer bills, protections against upselling, and more. Letter recipients include AT&T, Comcast, T-Mobile, and Verizon.

The ACP, established by the Infrastructure Investment and Jobs Act of 2021 and overseen by the Federal Communications Commission, subsidizes monthly internet bills and device purchases for low-income applicants. Non-tribal enrollees qualify for discounts of up to $30 per month, and qualifying enrollees on tribal lands for discounts of up to $75 per month. Enrollees also qualify for one-time discounts of $100 on qualifying device purchases.

The EBB program was the predecessor to the ACP.

The ACP, a favorite of many politicians and federal entities, including the White House, is no stranger to controversy. In September, the FCC Office of Inspector General issued a report that found the ACP doled out over $1 million in “improper payments” to service providers due to “fraudulent enrollment practice[s].”

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Universal Service

Lines Are Sharpening Over Who Drives the Future of Universal Service: Congress or Broadband Providers?

Big communications companies want Congress to tax telecom, while many others want higher fees on broadband service.



Photo of panel moderator Julie Veach, Alex Minard, Greg Guice, and Angie Kronenberg at AnchorNets 2022.

CRYSTAL CITY, Va., October 14, 2022 – Should contributions to the Universal Service Fund originate from Congress or from fees paid by communications companies to an agency responsible to the Federal Communications Commission? A panel of experts speaking Friday at AnchorNets 2022 debated this issue.

The Universal Service Fund, created in 1997 to improve telecommunications connectivity nationwide, is funded primarily by voice-based services. In recent years, voice-based subscriptions have substantially dropped, creating a revenue crisis and leaving remaining voice-based customers to foot a climbing per-person USF bill.

To rectify this imbalance, industry players have proposed a variety of new funding sources. The two core options are direct taxation by Congress, or by broadening the base of the USF.

The latter option would require broadband providers to contribute to levies collected by the Universal Service Administrative Company, a non-profit entity accountable to the FCC.

Urging Need for FCC Action on Universal Service Fund, Expert Says Congress Too Slow

Speaking at the Friday conference of the Schools, Health and Library Broadband Coalition, Greg Guice, director of government affairs at Public Knowledge, argued that the FCC has the legal authority to require broadband service providers to contribute to the USF.

“The language of the statute says every carrier shall contribute and any other provider of telecommunications that the Commission decides may contribute to Universal Service,” he said.

Angie Kronenberg, chief advocate and general counsel at industry trade group INCOMPAS, said Congress shouldn’t be relied upon for intervention: “It is very helpful when Congress recognizes that there is a problem and is willing to appropriate, but that is not a sustainable, predictable model.”

Petition Challenges Constitutionality of Roles FCC, USAC Play in Universal Service Fund

The USF has of late made substantial investments in broadband projects, and many industry experts say broadband services should be required to contribute thereto. In August, however, the FCC declined to unilaterally reform the fund’s contribution system and asked Congress to review the matter.

“On review, there is significant ambiguity in the record regarding the scope of the Commission’s existing authority to broaden the base of contributors,” the Commission’s report stated.

Alex Minard, vice president and state legislative counsel at NCTA – The Internet and Television Association, suggested Congress should be the driver of USF reform.

Policy Groups Want Bigger Contribution Base to Shore Up the Future of the Universal Service Fund

“Maybe the FCC does have the legal authority – maybe – to include broadband revenues,” said Minard. “If we’re going to…newly tax such a significant part of the economy, maybe it’s Congress that should be making this decision, and not an independent federal regulatory agency.”

Minard also argued the need for USF reform is less urgent than some believe. “It has been in crisis for 20 years,” he said. “What’s a little bit longer?”

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