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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

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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.

FCC

FCC Seeks Comment on Higher Broadband Speeds and Increased Security Measures for Certain Carriers

FCC will consider raising the speed standard for certain carriers that receive fixed monthly funding from the agency.

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Screenshot of FCC Commissioner Geoffrey Sparks

WASHINGTON, May 19, 2022 – The Federal Communications Commission voted at its open meeting Thursday to seek comment on enhancing the Alternative Connect America Cost Model program, which would raise speed deployment obligations and align security goals with the Infrastructure, Investment and Jobs Act.

The ACAM program, established in 2016, provides fixed monthly funding to certain carriers serving high-cost and hard-to-reach areas in return for commitments to provide broadband service to all eligible locations.

The ACAM broadband coalition requested that broadband deployment obligations be raised from the current federal standard of 25 Megabits per second download and 3 Mbps upload to 100/20 Mbps, the standard now set by the IIJA that will then be required of ACAM carriers to deliver.

Baseline cybersecurity proposal

The FCC is also requesting comment on whether it should “require A-CAM carriers and carriers receiving high-cost support to have a baseline cybersecurity and supply chain risk management plans.”

Commissioner Geoffrey Sparks indicated that the FCC will focus its efforts on harmonizing ACAM’s modification proposal with cyber security standards indicated in the Broadband, Equity, Access and Deployment program, which is managed by the Commerce Department’s National Telecommunications and Information Administration and that will be disbursing billions in broadband infrastructure funding.

“Networks that are subsidized or built with federal funds must be secure,” Sparks said. “This is evident in the constant barrage of attacks on American networks from hostile state and non-state actors.”

FCC Chairwoman Jessica Rosenworcel, who said the FCC is looking to align its goals with the IIJA, concluded that “this is not the only effort we’re making to ensure that new broadband programs are working hand-in-glove with long-standing FCC efforts.”

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FCC

Treasury Department Joins FCC, USDA and NTIA in Collaborating on Broadband Funding

Agency leaders sign pact to formalize information-sharing on broadband deployment projects.

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Photo of Janet Yellen from January 2018 by the European Central Bank

WASHINGTON, May 13, 2022—Just in advance of the deadline for the release of the funding requirements under the Infrastructure Investment and Jobs act, the four principal federal agencies responsible for broadband funding released an interagency agreement to share information about and collaborate regarding the collection and reporting of certain data and metrics relating to broadband deployment.

The agencies are the Federal Communications Commission, the U.S. Department of Agriculture, the National Telecommunications and Information Administration of the Commerce Department, and the U.S. Department of the Treasury.

The Memorandum of Understanding is the latest development in federal efforts to coordinate high-speed internet spending, and the Treasury Department is the new addition to agreement.

The other three agencies signed a prior memorandum in June 2021 to coordinate the distribution of federal high-speed internet funds. That June 2021 Memorandum of Understanding remains in effect.

The respective Cabinet and Agency leaders announced that their agencies will consult with one another and share information on data collected from programs administered by the FCC, the USDA’s Rural Utilities Service, programs administered or coordinated by NTIA, and Treasury’s Coronavirus Capital Projects Fund and State and Local Fiscal Recovery Fund.

“No matter who you are or where you live in this country, you need access to high-speed internet to have a fair shot at 21st century success. The FCC, NTIA, USDA and Treasury are working together like never before to meet this shared goal,” said FCC Chairwoman Jessica Rosenworcel. “Our new interagency agreement will allow us to collaborate more efficiently and deepen our current data sharing relationships[and] get everyone, everywhere connected to the high-speed internet they need.”

Agriculture Secretary Tom Vilsack said, “When we invest in rural infrastructure, we invest in the livelihoods and health of people in rural America. High-speed internet is the new electricity.  It is necessary for Americans to do their jobs, to participate equally in school learning, to have access to health care and to stay connected.”

“USDA remains committed to being a strong partner with rural communities and our state, Tribal and federal partners in building ‘future-proof’ broadband infrastructure in unserved and underserved areas so that we finally reach 100 percent high-speed broadband coverage across the country.”

“Our whole-of-government effort to expand broadband adoption must be coordinated and efficient if we are going to achieve our mission,” said Alan Davidson, Assistant Secretary of Commerce for Communications and Information and head of the NTIA, the agency responsible for administering the vast bulk of the broadband funding.

“This MOU will allow us to build the tools we need for even better data-sharing and transparency in the future,” he said.

“Treasury is proud to work with our federal agency partners to achieve President Biden’s goal of closing the nation’s digital divide,” said U.S. Treasury Secretary Janet L. Yellen.  “Access to affordable, high-speed internet is critical to the continued strength of our economy and a necessity for every American household, school, and business.”

As part of the signed agreement, each federal agency partner will share information about projects that have received or will receive funding from the previously mentioned federal funding sources.  More information on what the interagency Memorandum of Understanding entails can be found on the FCC’s website.  The agreement is effective at the date of its signing, May 11, 2022.

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Expert Opinion

Christopher Mitchell: Former Sen. Heitkamp’s Attacks on Gigi Sohn for FCC are Wildly Off-Base

Former North Dakota senator sounds practical, but she is misreading quotes or taking them out of context.

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The author of this Expert Opinion is Chris Mitchell, director of the Community Broadband Networks Initiative at Institute for Local Self-Reliance

Gigi Sohn is still up for confirmation by the Senate to complete the Federal Communications Commission – an independent agency in the executive branch of the federal government that has been stuck at a 2-2 split of Democrats and Republicans since President Biden took office. The FCC is supposed to operate with five commissioners, with the party of the President in power having 3 seats.

She was the obvious choice in December of 2020, when it was clear that Joe Biden would take office. With decades of history in telecom and media-related policy as well as a recent stint as Counselor to Tom Wheeler when he was Chair of the FCC, she would be among the most-qualified people to serve on it since I began working in telecom in 2007. And by among, I mean at the top.

I’ve known Gigi for many years and respected her from the first time I saw her in action. She isn’t a political agent trying to figure out the best path to the top. She has strong beliefs, and she’ll tell you what they are in a wonderful Long Island blur of passion. She respects other beliefs and ideas but she isn’t going to pretend she agrees with you when she doesn’t.

Maybe my word isn’t that persuasive, because I tend to agree with Sohn on many issues. But a lot of people with far more credibility among conservatives have spoken up on Gigi. So I hadn’t written anything about this because I assumed it would take time but Gigi would get confirmed. Plus, I focus my work outside DC and there is a lot going on that is keeping us busy.

Gigi was always under fire by the likes of the Wall Street Journal Opinion page, which has made baseless claims about her not being committed to free speech, using tortured logic around denying mergers. If I went off every time that bunch embarrassed the good work of their reporters, I wouldn’t do anything else.

But then some allies forwarded me claims coming from former North Dakota Senator Heidi Heitkamp – someone I have listened to being interviewed on podcasts and generally thought well of because she sounds practical. But the attacks from Heitkamp on Gigi are so off-base that I had to respond because I’m often working with people in rural communities for whom this issue is not theoretical. They have suffered for more than a decade of federal and state mismanagement of broadband expansion programs. Their towns are struggling as hospitals close and jobs move away to areas with better access. Their children have fewer educational opportunities. They face greater risk from communications failures in natural disasters. Getting this right is important.

Multiple off-base complaints about Gigi Sohn and rural America

Heitkamp makes multiple claims that Gigi’s confirmation would be bad for rural America based on misreading quotes or taking them out of context to pretend that Gigi is not concerned with rural broadband challenges. Like this:

  • During an April 2021 interview with Bloomberg Government, saying ‘What [have we gotten] for [the federal government’s existing] $50 billion investment? Not much.’

Is this a sign that Gigi thinks we shouldn’t spend money in rural America?  That is what Heitkamp wants you to believe. But the very next passage in that article says this:

  • ‘What do we get for a $50 billion investment? Not much,’ she said in an interview. ‘What we don’t want is to be in the position we are today: where we built networks that were for then, and not for now, and not for the future.’

The article is about whether money spent on rural broadband subsidies should be built using yesterday’s or tomorrow’s technology. Gigi has been on the right side of this question – we should be making sure that investments in rural America will permanently solve the problem.

Heitkamp was Senator from 2013-2019, a time when the federal government gave multiple billions of dollars to the biggest telecom monopolies – like AT&T. They didn’t even meet the pathetic requirements of that program. Like, at all.

Don’t just take my word for it. Minnesota’s Blandin Foundation has long been a national model for seeking broadband solutions that really work. That work is run by Bernadine Joselyn, someone I have worked with off and on and who has put real thought into rural policy. Regarding the billions of dollars under Connect America Fund, she was quoted here:

  • Those speeds were ‘such a waste of public dollars,’ said Bernadine Joselyn, public policy director for the Blandin Foundation, a Grand Rapids, Minnesota, nonprofit focused on rural issues. ‘If you’re going to make an investment in broadband, you want it to be future proof, especially with public funds. I think it’s reasonable to expect it would benefit a community for decades.’

Heitkamp’s time would be far better used exposing the policies in DC that sent billions to AT&T and bankrupt companies like Frontier that failed to connect rural America.  Instead, she is running a national campaign to tank Gigi’s nomination because Gigi dared to suggest that subsidies to rural America should actually benefit rural residents and businesses. Because Gigi also believes that we should balance rural investment with subsidies to cities, where millions more Americans are ignored or poorly served by cable monopolies and where little girls do their homework at Taco Bell in the city of Salinas just like their peers in rural McDonald’s parking lots.

North Dakota once broke free of big monopolies

Here is the savage irony of Heitkamp running down Gigi with this attack. Heitkcamp is positioning herself as the savior of rural America while selling it out to the monopolies that have refused to invest in it. And she does it while knowing that her former constituents in North Dakota won’t be as harmed as the rest of the country because North Dakota is already wired. 77 percent of the rural areas in the state can connect to the Internet via future-proof, fiber networks, compared to just 20 percent of rural Americans as a whole. North Dakota broke free of the big monopolies that refused to invest outside of the cities, when local cooperatives and independent telcos bought the lines from those monopolies decades ago to better serve their subscribers.

Tanking Gigi’s nomination on these grounds sends a message that rural subsidies should continue going to those companies that simply extract wealth from rural areas. Gigi stands to make sure we invest in networks that are accountable to rural communities rather than handing billions to companies that are better at astroturf marketing campaigns than connecting farms with fiber. I understand why the telecom monopolies are frequently happy to bankroll misinformation campaigns to further their interests. I’m confused why so many people are so easily taken by them.

Gigi is deeply respected by the people who oppose damn near everything she does. I want to see Gigi on the FCC for the same reason her opponents do – because she is not the type to sell out for a buck. She is the model for who we need on the FCC.

Editor’s Note: This piece was authored by Christopher Mitchell, director of the Institute for Local Self Reliance’s Community Broadband Network Initiative. His work focuses on helping communities ensure that the telecommunications networks upon which they depend are accountable to the community. He was honored as one of the 2012 Top 25 in Public Sector Technology by Government Technology, which honors the top “Doers, Drivers, and Dreamers” in the nation each year. This piece was originally published on MuniNetworks.org on April 26, 2022, and is reprinted with permission.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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