WASHINGTON, November 17, 2023 – Three senators proposed a bill on Thursday that would tap broadband providers and tech companies to contribute to a major internet subsidy.

The Universal Service Fund is a roughly $8 billion annual broadband subsidy for low-income households, schools, libraries, and healthcare providers. It’s funded by fees on voice service providers, leading to talks of reform as voice revenues decline and broadband adoption increases.

The Federal Communications Commission administers the fund, but has left it to Congress to change the USF’s contribution base, citing doubts about the agency’s legal authority to make that change on its own.

A Senate working group, which does not include the senators who proposed the new legislation, has been evaluating potential reforms to the fund since May.  

Commenters to that working group largely supported fees on broadband providers as a more sustainable long-term solution for the fund. A more contentious point has been whether or not to call on some tech companies to contribute as well.

The argument is that tech companies which operate largely online, like Google and Amazon, should pay into the USF because they benefit so directly from more people being able to access broadband. 

Tech companies have opposed the proposition, saying broadband companies are a more stable source of funding. FCC Commissioner Brendam Carr and broadband companies publicly support the idea.

So does the bill proposed on Thursday. It would direct the FCC to expand the USF contribution base to both broadband and online tech companies, known as “edge providers.” Those edge providers would be limited to companies responsible for more than 3% of the country’s internet traffic and with more than $5 billion in annual revenue.

Multiple broadband industry groups came out in support of the legislation, including USTelecom, which represents major providers like AT&T and Lumen, and two rural broadband coalitions.

Conservative groups are also challenging the USF in court. The right-wing nonprofit Consumers’ Research and other organizations currently have four pending suits alleging the fund is unconstitutional.

They argue Congress gave the FCC unfettered authority to collect a tax by establishing the fund in 1996, and that the FCC abused that authority by delegating USF management to a nonprofit under the commission’s control.

The Fifth Circuit Court of Appeals reheard one such case with a full panel of judges on September 19 and has yet to issue a ruling. The Sixth Circuit struck down a petition from the group in May, while the Eleventh and D.C. circuits also have yet to issue rulings. 

Senators Markwayne Mullin, R-O.K., Mark Kelly, D-A.Z., and Mike Crapo, R-I.D., proposed the bill. Kelly, along with Senate working group leader Ben Luján, D-N.M., reintroduced another bill in March that would also direct the FCC to research the feasibility of tapping big tech for funds.

Congress dedicated more than $42 billion to help states and companies build out broadband networks to all Americans. This program, called the Broadband Equity, Access, and Deployment Program, marked a crucial step towards bridging the digital divide in our nation. But this program will fail if Congress doesn’t renew the Affordable Connectivity Program that states are relying on to connect low-income Americans.

Bipartisan legislation from Congress made it clear that states needed to offer a low-cost broadband plan to residents to qualify for BEAD funding. For the uninitiated, the ACP is a $30-a-month subsidy that an eligible consumer can use towards any broadband plan a participating service provider offers.

In fact, many providers have started offering broadband plans at a $30 price point so the effective cost of broadband to the consumer is zero. Using ACP is an easy way for ISPs to meet the affordability requirement, a “short-hand” of sorts for them to offer affordable plans using an existing — and successful — model.

However, the ACP is expected to exhaust its funding in the first half of next year, leaving a potentially disastrous scenario for families who may have little savings or discretionary income. Ultimately allowing the ACP to end leaves a crucial question unanswered: what good are networks if people cannot afford to connect to them?

During a congressional oversight hearing in May, National Telecommunications and Information Agency Administrator Alan Davidson explained to Members of Congress that the BEAD program will be negatively impacted if continued funding for the ACP is not found. He emphasized that for low-income rural Americans, the ACP is the lifeline ensuring they can afford to access the internet. Without it, some providers may hesitate to deploy in rural areas over fear that the investment will be sustainable. Subscribership concerns may prove to be a limiting factor on which rural areas are served.

The ACP extends every BEAD dollar further. A study conducted by Common Sense Media found that the ACP could reduce the BEAD subsidy needed to incentivize providers to build in rural areas by up to 25% per year. According to the study, ACP reduces the per-household subsidy required to incentivize ISP investment by $500. Simply put, ACP improves the economic case because it 1) effectively lowers the cost of service, 2) creates a customer base with less churn, and 3) makes subscribers easier to acquire because of the massive public and private investment in raising awareness for the program.

But if the ACP is allowed to end, the federal government could end up overspending on every broadband deployment made through BEAD. This ultimately means BEAD networks will fail to connect millions of Americans.

The ACP is more than a simple affordability program; for over 21 million households; it’s a gateway to our ever-increasing digital society. Without it, millions of Americans will be unable to see doctors, visit with family, shop, and engage with their communities online. At the same time, the ACP plays a significant role in future infrastructure deployment. Allowing the ACP to end all but ensures that millions will be disconnected and future funding dollars won’t go the distance to close the digital divide.

Ryan Johnston is senior policy counsel at Next Century Cities. He is responsible for NCC’s federal policy portfolio, building and maintaining relationships with Federal Commissions Commission officials, members of Congress and staff, and public interest allies. Working with various federal agencies, Ryan submits filings on behalf of NCC members on technology and telecommunications related issues that impact the digital divide such as broadband data mapping, benchmark speeds, spectrum policy, content moderation, privacy, and others. This piece is exclusive to Broadband Breakfast.

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.

WASHINGTON, November 15, 2023 – The Federal Communications Commission approved digital discrimination rules Wednesday that will take a tougher tack on companies providing disparate broadband services, scrutinizing policies that are not intentionally denying service to protected groups.

The FCC has said in its approved rules it will accept legitimate logistic and economic barriers as defenses from companies accused of discriminatory practices, and will evaluate those claims on a case-by-case basis. Companies found to be in violation of the new rules will be subject to the commission’s existing enforcement measures.

The measure, proposed in October, passed on party lines, with the three Democratic commissioners voting in approval and the two Republicans dissenting. 

“Many of the communities that lack adequate access to broadband today are the same areas that suffered from longstanding patterns of residential segregation and economic disadvantage,” said FCC Chairwoman Jessica Rosenworcel. 

In adopting the order, the commission will also begin accepting comments on establishing a civil rights office within the agency and imposing additional reporting and compliance requirements on broadband providers.

The commission was required by the Infrastructure, Investment and Jobs Act to develop policies to prevent gaps in broadband access among different races, ethnicities, income levels, and other demographic characteristics – known as digital discrimination. Its adoption of those rules comes on the two-year anniversary of the IIJA, the deadline set by the law.

In an update to the public draft that was released in October, the approved rules exempt providers participating in the $42.5 billion Broadband Equity, Access and Deployment program and the FCC’s Universal Service Fund. The policies of those programs, commissioners said, already prevent disparate deployment in service areas that are difficult or expensive to reach.

Industry groups have been lobbying against the rules, meeting with commission staff repeatedly in recent weeks to advocate a lighter touch. Civil rights groups have applauded it, making a push of their own to urge commissioners to stand firm.

The Joe Biden administration also supports the rules, asking commissioners to adopt a similar digital discrimination framework weeks before Rosenworcel’s announcement.

The commission approved additional measures at its November 15 open meeting, including an order aimed at protecting victims of domestic violence, an inquiry into artificial intelligence’s impact on robocalls, and an order addressing SIM swap fraud.

Safe Connections Act

The commission adopted an order implementing the 2022 Safe Connections Act, a law aimed at protecting the privacy of abuse survivors.

The order requires mobile providers to allow domestic abuse victims to quickly separate phone lines from family plans. It also requires providers to omit from customer-facing logs any records of calls or texts to abuse hotlines. 

Large and medium-sized providers will have 12 months to comply with these requirements, while small carriers will have 18 months.

Abuse survivors will be able to receive six months of support from the FCC’s Lifeline program, a monthly internet discount funded by the Universal Service Fund.

Artificial intelligence and robocalls

The commission voted to move forward with a notice of inquiry on using artificial intelligence to prevent robocalls.

Commissioners will seek comment on which AI technologies are relevant to the FCC’s authority to protect consumers from scam calls. That will include feedback on how AI could be used to help the commission combat robocalls, and on how it could be used by bad actors to facilitate those calls now and in the future.

The move comes as the FCC has taken an aggressive stance on scam calls, moving in October to block call traffic from 20 companies for lax enforcement policies and extending in August strong identity verification requirements to a wider array of voice providers.

It will also seek input on verifying AI-generated voices and texts from callers or trustworthy entities legitimately using such tools.

SIM swap and port-out fraud

The FCC also voted to adopt an order addressing two common cell phone scams: SIM swap fraud and port-out fraud.

SIM swap fraud involves scammers transferring a victim’s account from one subscriber identity module, or SIM, generally a physical card used to verify a user’s identity, to another SIM out of the victim’s control. 

Port-out fraud involves scammers opening an account with a different wireless provider and arranging for a victim’s number to be transferred – or ported out – to the new provider.

Both allow scammers to pose as their victims online.

The new rules set up a framework for preventing this kind of fraud that, among other measures, requires providers to notify subscribers whenever a SIM change or port-out request is made. The order also kicks off an inquiry into harmonizing these rules with existing FCC and government policies.