Expanding Broadband Fee to Cloud Services Could Slash State GDPs, Study Finds
New study projects major economic fallout if cloud services are required to help fund USF.
WASHINGTON, June 3, 2025 – Forcing cloud providers to contribute to a major federal broadband subsidy could raise prices, dampen innovation, and cost states billions in economic output, a new report warns.
The analysis, presented Tuesday by economist Dr. Raul Katz, president of Telecom Advisory Services, warned that applying Universal Service Fund fees to cloud providers like Amazon Web Services and Google Cloud could reduce adoption of cloud technologies and undercut the economic gains they enable.
“It sounds simple — charge Google Cloud or AWS a fee,” said Katz. “But when 70% of companies rely on the cloud, that cost trickles down — and it could seriously backfire.”
Katz’s analysis found that imposing a USF surcharge of just 3 to 7 percent could shrink U.S. gross domestic product by between $58.9 billion and $148.2 billion, with states like California, Texas, and New York projected to suffer the largest losses due to their high reliance on cloud infrastructure.
“This isn’t just a national story, every state would feel the pain. When you apply the projected cloud adoption decline to state-level GDP, you’re talking about real economic losses. These aren’t abstract numbers; they translate into jobs, output, and competitiveness across industries like manufacturing and finance,” Katz said.
Cloud services aren’t going to be the only ones who feel the pain, as consumer prices were simultaneously predicted to inflate.
“As in the case of the current system where the contribution percentage is applied to revenues, it is reasonable to consider that such contribution would be passed on to consumers,” Katz’s paper explained.
He warned that this would result in cost-push inflation, estimating a 0.13 percent increase in consumer prices, adding that this shift could erode public trust.
As revenues from traditional voice services decline, policymakers were exploring ways to modernize the USF contribution system by expanding it to include broadband, edge providers, or cloud computing services.
While no formal rule making has yet targeted cloud services, the idea has surfaced in recent policy debates and industry filings as a way to shore up the USF’s financial sustainability.
“Cloud computing plays a key role in our national economy. Imposing a USF fee on cloud computing services would have highly detrimental strategic economic consequences for the United States,” the paper said.
The study was prepared for the Computer and Communications Industry Association with funding from Amazon Web Services, CCIA said.
