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

WASHINGTON, February 8, 2022 – In submissions to the Federal Communications Commission, large industry groups have proposed adding broadband internet service revenues to the Universal Service Fund, which provides basic telecommunications services to rural and low-income Americans.

The FCC delayed its comment window on its proceeding for the Future of the Universal Service Fund until February 17, with a reply to comments period until March 17, 2022.

The proposal to add broadband revenues to the fund, which relies on telecom companies’ dwindling voice service revenues, has gained industry support.

Trade association industry groups such as INCOMPAS, NTCA – the Rural Broadband Association, and the Schools, Health & Libraries Broadband Coalition joined the chorus of calls to explore options for USF reform, including adding broadband revenues.

“All four programs in the USF promote universal broadband. The revenues from broadband internet access services that are increasingly used by Americans today should contribute to the USF programs that support the expansion of such services to all,” INCOMPAS argued. “This will better reflect the value of broadband internet access service in today’s marketplace for both consumers and businesses.”

If the FCC were to expand the contribution base to include revenues from broadband internet access service, which has increasing support from a variety of members of the telecommunications industry, the contribution rate for telecommunications providers would remain under four percent, some groups argue. This could increase the pool of taxable revenue while lowering consumers’ phone bills.

The NCTA echoed this proposal during meetings with the FCC Commissioner’s staff, signaling an interest in urging the Commission to “broaden the base of contributors as widely as possible to capture all of those that make use of or otherwise benefit from the widespread availability and affordability of broadband.”

The Universal Service Fund may be on shaky ground

Industry stakeholders have argued that the USF’s financing method faces challenges. Lincoln Policy Group reported that the FCC is “running out of money to keep the USF program afloat because telecommunication companies’ revenues are steadily declining,” that will result in “a smaller pool of money to tax.”

USF taxes have increased from 6.8 percent to 33.4 percent of voice revenues from 2002 to 2021. During that time, telecommunications service providers’ revenue has declined from $80 billion in 2002 to $40 billion in 2021.

“Despite these falling revenues, the FCC still authorized $8.3 billion in disbursements through the USF in 2020 and 2021,” the policy group said.

Groups following USF’s financing method say there is a growing consensus that the current methodology for assessing the fee is unsustainable. Internet trade association INCOMPAS said, “all of the USF programs that are critical to the availability of broadband across the U.S.” are at risk of failing if the funding mechanism is not stabilized.

The Universal Service Administrative Company, a non-profit agency, is responsible for administering the USF.