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In FCC Proceeding, Multiple Groups Recommend New General Tax for Universal Service Fund

Calls in contrast to growing support for a broader mechanism including broadband revenues



Photo of Federal Communications Commissioner Brendan Carr

WASHINGTON, March 17, 2022 – Some organizations are calling for the Federal Communications Commission to turn the onus of financially supporting key programs for expanding basic telecommunications services from service providers to the general public via taxation, according to rolling submissions to the agency.

The rationale is that the communications landscape since the 1997 adoption of the Universal Service Fund, which goes to support multiple high-cost programs for universal broadband, has changed significantly to where all Americans are reliant on more modern communications. And with that, there are calls to reform the program beyond its reliance on dwindling voice service revenues.

“Direct appropriations [general taxation] would be the most straightforward means of spreading the funding requirements for such programs – which benefit all American businesses and consumers – over the broadest and most equitable funding base,” said AT&T in its submission, which has supported such a position previously.

Thursday was the last day to submit comments to the FCC’s study of the future of the USF. The program supports the schools and libraries E-rate subsidy program, the low-income Lifeline program, the Rural Health Care program and the Connect America Fund for rural areas.

But the USF has been operating under an escalating burden that has gone unchanged for decades: Its reliance on voice service revenues – downloaded onto customers – has put stress on the roughly $8-9 billion per year program, which saw a tax that reached a record 33.4 percent of declining voice revenues last year.

“The Commission has placed increased weight on a small subset of communications services and providers with a shrinking subscriber base to achieve the nation’s universal broadband goals,” AT&T added, “in particular, enterprise services offered by legacy telecommunications companies, companies which historically and today are the largest contributors to the Fund.”

The FCC is looking at a dichotomy of recommendations, according to an analysis of the submissions to the FCC: either derive funding for the USF from general taxation or broaden the base of revenue support to broadband revenues generally and/or include other companies that benefit from broadband, including big technology companies.

More support for congressional budget item

Among those organizations supporting a move to shift the burden on general taxation for the USF are the Internet Innovation Alliance, the Cellular Telecommunications Industry Association, the U.S. Chamber of Commerce, and TechFreedom, a non-profit technology think tank.

“Adopting a general appropriations process for broadband programs will help “future proof” these programs to account for new technologies to provide communications services for consumers and businesses,” said the Chamber of Commerce. “The appropriations process allows Congress to better tailor broadband programs on a regular basis to account for changes in the marketplace and new communications technologies. It will also avoid the challenges currently facing the USF.”

But while TechFreedom argued against expanding contribution to big technology companies because the FCC “cannot unilaterally” do that, others in the group supporting a congressional line item said big tech companies should be a target if support cannot come from taxation.

“Short of general revenues,” the CTIA said, “significant elements of the economy, such as digital advertisers, online marketplaces, and streaming services, rely heavily on broadband networks and leverage the availability of broadband service to generate enormous amounts of revenue.”

Added the IIA: “If adding an $8 billion line item to the annual Congressional budget is deemed unworkable, an alternative approach that should be considered is expanding the USF contribution base to include revenues from large internet companies.”

Big Tech must pay

AT&T said if its general tax proposal cannot be adopted, it should look to expand the base to include big technology platforms, whose business models it said “depend on, and now dominate, the internet ecosystem.”

Verizon recommended the commission broaden the base to online platforms with a “specified number of active users or meet certain sales or market capitalization thresholds,” a recommendation made by FCC Commissioner Brendan Carr in a Newsweek op-ed last year that FCC Chairwoman Jessica Rosenworcel called “intriguing” and that received some Republican support. FCC Commissioner Nathan Simington also raised the idea in an interview in September.

The NCTA Rural Broadband Association is similarly recommending that the FCC move toward requiring contributions from large firms “whose video streaming and other “Internet-based businesses depend substantially on the availability and affordability of robust broadband services throughout the country.”

The Coalition of Rural Wireless Carriers, the non-profit Free State Foundation, and a coalition of academics and policy scholars have also called for the opening of the fund to big technology platforms. The academics and policy scholars argued that it’s not fair that consumers or certain telecom companies are burdened by the weight of the USF and instead should be put onto the “half a dozen tech companies…responsible for as much as 80 percent of network traffic at peak time.”

Bring in broadband revenues

As calls for a possible Big Tech tax were emerging, Carol Mattey, a former deputy chief of the Federal Communications Commission, released a report in September calling for the FCC to broaden the base to include broadband revenues. The report was followed up by calls for Congress to stabilize the fund and for the FCC to take immediate unilateral action because, proponents said, the agency had the jurisdiction to do so.

Advocacy group Public Knowledge, trade associations INCOMPAS and USTelecom, the Rural Wireless Association, the Coalition of Rural Wireless Carriers, and non-profit broadband advocate Benton Institute also proposed that the FCC bring in broadband revenues, which some said can be implemented quickly.

Benton, however, went further to caution against general taxation, calling it “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 the need to provide sufficient funding as well.”

It was a position supported by Chris Nelson, vice chairman of the South Dakota Public Utilities Commission, who said in a debate about USF reform last year that a general appropriations item would mean the fund’s makeup could swing from year-to-year with lawmaker turnover.

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Industry Praises FCC Proposal to Revamp the 5G Rural Fund

The FCC proposed adjusting the $9-billion budget allocated for the fund using updated maps



Photo of FCC Commissioner Nathan Simington by Bonnie Cash from the Hill

WASHINGTON, September 26, 2023 – Industry associations are praising a proposal from the Federal Communications Commission Thursday to review coverage areas based on updated commission maps so that the 5G Fund can reach more communities without the wireless technology.

Thursday’s vote proposes to help dictate the eligibility requirements for areas in need of support of the 5G Rural Fund for America.

The commission proposed adjusting the $9-billion budget allocated for the 5G Fund, the optimal methodology for consolidating eligible areas into smaller geographic regions for bidding, the feasibility to extend 5G Fund support to qualifying regions in Puerto Rico and the U.S. Virgin Islands, possibly mandating cybersecurity and supply chain risk management plans for 5G Fund recipients, and the possibility of whether the 5G Fund should be utilized to encourage the deployment of Open Radio Access Networks.

“What this means is that as we develop the 5G Fund and build the successor to our existing universal service program supporting wireless networks in rural America, known as the Mobility Fund, we will be able to incorporate this detailed picture of where service is and is not,” FCC Chairwoman Jessica Rosenworcel said. “We will be able to see gaps in coverage and ensure support actually reaches the communities that need it most.”

Meredith Attwell Baker, president and CEO of industry association CTIA, praised the commission’s decision “for recognizing the crucial role that mobile wireless services play in keeping Americans connected.”

“Implementing the 5G Fund and using the FCC’s new maps will help extend the benefits of advanced 5G services to more communities and consumers,” she said.

Tim Donovan, president and CEO of the Competitive Carriers Association, also praised the decision, saying the 5G Fund “has been a top priority for CCA, and we will continue to work with the Commission and our members to ensure the final rules preserve and expand mobile broadband access to every American.”

The commission also adopted Thursday new regulations to expedite space applications, the availability of spectrum resources for space launches, old rules to combat robocallers, and handed down over $100 million in fines.

FCC space and spectrum allocations

The FCC unanimously ratified the Expediting Initial Processing of Satellite and Earth State Applications Space Innovation, which is the adoption of new rules to expedite its processing of space and earth station applications.

It also unanimously ratified new rules ensuring that commercial space launches have the necessary spectrum resources for reliable communication. These adoptions will “promote safety, competition, innovation, and continued American leadership in the new Space Age,” the agency said. The new rules will also provide an allocation within the 2025 to 2110 MHz band for ground-to-launch vehicle telecommand which is needed for space launch operations, and make “the entire 2200 to 2290 MHz band available for launch telemetry.”

“I believe that the most important part of streamlining the FCC’s application processing procedures is ensuring swift and efficient FCC action—which will maintain U.S. leadership in the satellite communications service industry. It will also nurture the growth of the broader space sector, which includes new and innovative manufacturing processes, robotics, earth surveillance and exploration and other future innovations,” Commissioner Nathan Simington said.

Robocallers losing access to phone numbers

The FCC also voted in favor of adopting rules that would modernize the commission’s requirements on how Voice over Internet Protocol providers get direct access to telephone numbers.

The adoption sets in motion parameters to limit access to “phone numbers by perpetrators of illegal robocalls, protect national security and law enforcement, safeguard the nation’s finite numbering resources, reduce the opportunity for regulatory arbitrage, and further promote public safety.”

In line with the Telephone Robocall Abuse Criminal Enforcement and Deterrence (TRACED) Act, the new rules will require applicants to submit additional disclosures and certifications in regard to their “ownership structures and compliance with the Commission’s rules and state law and takes targeted steps to address the concerns” that were raised in the rulemaking.

These rules consist of making robocall-related certifications that will help ensure compliance with the commission’s rules targeting illegal robocalls; to keep and disclose current information about ownership, including foreign ownership, that will alleviate the risk of providing violators abroad with access to U.S. numbering resources; guarantee their compliance with other commission rules that are applicable to interconnected VoIP providers including particular public safety and access stimulation rules, and requirements to submit timely FCC Forms 477 and 499 filings; and compliance with state laws and registration requirements that apply to businesses in each state where numbers are requested.

FCC fines Dorsher Enterprise $116 million

The FCC additionally adopted a $116,156,250 fine against the Dorsher Enterprise, a group consisting of Thomas Dorsher, ChariTel, OnTel, and ScammerBlaster.

The Commission’s investigation revealed that the group promoted themselves as a crusade fighting against scam robocalls at the same “illegally robocalling toll free numbers” and used credits from their scam “to fund telephony denial of service (TDoS) attacks on other entities.”

The parties in the group, which allegedly made nearly 10 million robocalls to generate toll free dialing fees, are jointly liable for the fine.

“Dorsher’s claim that he was actually trying to ‘shut down scammers’ is meritless in the face of these facts,” Commissioner Geoffrey Starks said. “As I have said repeatedly, there are numerous hurdles to finding these bad actors, and bringing them to account for violations of our rules. I am pleased to see another example of how, by working together, we can untangle these schemes and protect consumers.”

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Digital Inclusion

Broadband Association Argues Providers Not Engaged in Rollout Discrimination

Trade group says telecoms are not discriminating when they don’t build in financially difficult areas.



Image of redlining from historic map of the Home Owners’ Loan Corporation of Richmond, Virginia, from PBS.

WASHINGTON, September 18, 2023 – Broadband association US Telecom sent a letter to the Federal Communications Commission last week saying internet service providers don’t build in certain areas because it is financially difficult, not because they are being discriminatory.

The FCC proposed two definitions of digital discrimination in December 2022: The first definition includes practices that, absent technological or economic constraints, produce differential outcomes for individuals based a series of protected characteristics, including income, race, and religion. The second definition is similar but adds discriminatory intent as a necessary factor.

“To make business determinations regarding capital allocation, an ISP must consider a host of commercially important factors, none of which involve discrimination,” said the September 12 letter from USTelecom, which represents providers including AT&T, Verizon, Lumen, Brightspeed, and Altafiber.

“As the Commission has consistently recognized, such deployment is extremely capital-intensive…This deployment process is therefore subject to important constraints related to technical and economic feasibility” added the letter.

US Telecom explained that ISPs’ will choose to invest where they expect to see a return on the time and money they put into building broadband.

The association added that factors like population density, brand reputation, competition and the availability of the providers’ other services all go into deciding where broadband gets deployed.

“The starting point of the Commission’s approach to feasibility should be a realistic acknowledgement that all ISPs must prioritize their resources, even those that invest aggressively in deployment,” added the letter.

The association also highlighted the fact that it hopes to see as little government intervention in broadband deployment activity as possible, a concern that has been echoed by lobbyists before.

“Rather than attempting to use Section 60506 to justify taking extra-statutory intrusive actions that could paradoxically undermine ongoing broadband investment, the Commission must enable ISPs to make decisions based on their own consideration of the kinds of feasibility factors discussed above” read the letter.

Section 60506 of the Infrastructure, Investment and Jobs Act says that the FCC may implement new policies to ensure equal access to broadband.

The FCC is also looking to develop guidelines for handling digital discrimination complaints filed against broadband providers.

USTelecom said that ISPs should be allowed to demonstrate financial and logistical concerns as a rebuttal to those claims, in addition to disclosing other reasons for directing investment elsewhere to demonstrate non-discriminatory practice.

Reasons for investment elsewhere would include rough terrain, low-population density, MTE owners not consenting to deployment, zoning restrictions, or historical preservation review.

“To aid in the success of the Infrastructure Act and facilitate equal access, the Commission must continue to foster an environment conducive to ISP investment in the high-speed broadband infrastructure that Congress rightly views as central to our connected future,” concluded the letter.

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FCC Comments

CAF II Auction Recipients Push FCC to Extend Letter of Credit Waiver, Relax Restrictions

The agency proposed a shorter, more restrictive waiver.



Photo of $100 bills

WASHINGTON, September 14, 2023 – Internet service providers who received project funding under the Connect America Fund Phase II Auction are asking the Federal Communications Commission to continue waiving their letter of credit requirements. 

The FCC requested in August comments on a proposal to extend the waiver for one year — through December 2024 from the current December 31, 2023 date — and limit it to providers who have filed all location reports on time and have finished at least 60 percent of the total locations they agreed to build in each state. In 2020 the FCC waived the letter of credit requirements — requiring a cash collateral on agreements for risk assessment — for auction recipients in response to the pandemic, allowing them to comply with the less restrictive Rural Digital Opportunity Fund letter of credit rules. 

Without the waiver, providers would need to secure letters of credit for all support they had previously received, plus the money they are slated to receive in the coming year. The waiver reduces that requirement to a single year of funding if providers build infrastructure at the agreed upon pace.

Auction recipients, through the Connect America Fund Phase II Coalition, pushed back on both conditions in a filing to the FCC dated Monday and asked for a two-year extension on the waiver, citing long-term economic effects of the pandemic and rising interest rates. That would keep the waiver in place until December 31, 2025, the entire remaining build timeline.

The coalition asked for a lighter deployment threshold, 57 percent of a provider’s obligated locations rather than 60. It also pushed the FCC to include providers who have missed a filing deadline in the waiver, calling the “one strike and you’re out” proposal “disproportionate,” the filing said. 

The CAF II auction provided in 2018 nearly $1.5 billion for providers to build out network infrastructure in areas that are expensive to serve. Recipients of funds under the auction are not required to provide broadband speeds, with a minimum requirement of 10 Mbps upload and 1 Mbps upload.

RDOF, which concluded a similar reverse auction in 2020, has allocated over $9 billion for the same purpose, with up to $11.2 million available for a second phase. 

Future auctions are in jeopardy, though, as providers defaulted on nearly $3 billion of the initial award. Those that have not defaulted are pressing the FCC for more funding.

More than 300 people in the broadband industry asked the National Telecommunications and Information Administration to remove the requirement for the upcoming $42.5 billion BEAD grant program, arguing it prevents smaller providers with less capital on hand from participating.

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