With June’s Supreme Court decision that the Universal Service Fund (“USF”) is constitutional (see our newsletter of June 30th), a bipartisan and bicameral Congressional USF Working Group has been reactivated and is seeking public comment on the future of the USF.
This is a critical issue. To briefly review, USF is the funding source for four important FCC programs comprised of the High-Cost Program (providing subsidies for telecommunications services in high cost parts of the country, the Low-Income (or “Lifeline”) Program subsidizing telephone and internet services for low-income Americans, our beloved Schools and Libraries (“E‑rate”) Program, and a smaller Rural Health Care Program. For many years, these USF programs have been funded by revenue contributions from interstate telephone service. But it has only been in the past decade or so that the “contribution factor” (i.e., the percentage of revenues supporting USF) has skyrocketed into the 30% range.
As we have been discussing on a quarterly basis, the rise in the contribution factor is only marginally attributed to increases in USF expenses, which have been minimal, but is instead due to dramatically falling interstate telephone rates and charges.
Every knowledgeable industry observer recognizes and agrees that the contribution base needs to be expanded to fund USF more fairly. The most likely targets being the broadband service providers, the broadband content providers, or both — neither of which are volunteering; both of which are finger-pointing the other way.
We have been down this dead-end road before. The hope this year is that, with the USF constitutionality issue resolved, a bipartisan, bicameral Congressional committee can reach a consensus.
The USF Working Group is led by Senators Deb Fischer (R-NE) and Ben Ray Luján (D-NM), Chair and Ranking Member of the Telecommunications and Media Subcommittee, and joined by Senators Shelley Moore Capito (R-WV), Amy Klobuchar (D-MN), Jerry Moran (R-KS), Gary Peters (D-MI), Dan Sullivan (R-AK), and Jackie Rosen (D-NV). Representatives Richard Hudson (R-NC9) and Doris Matsui (D-CA7), Chair and Ranking Member of the Communications and Technology Subcommittee, lead the Group’s efforts in the House.
Last week, as a first step, the USF Working Group began soliciting comments on USF. Comments, which can be submitted directly online or emailed in, are due by Monday, September 15th. Specific areas of interest for which comments are solicited include the following:
Effectiveness of Programs:
- How should Congress evaluate the effectiveness of each USF program in achieving their respective missions to uphold universal service?
- How well has each USF program fulfilled Section 254 of the Communications Act of 1996?
- Has the FCC adequately assessed each USF program against consistent metrics for performance and advancement of universal service?
Consideration of Reforms:
- What reforms within the four existing USF programs would most improve their:
- Transparency;
- Accountability;
- Cost-effectiveness;
- Administration; and
- Role supporting universal service?
- What reforms would ensure that the USF contribution factor is sufficient to preserve universal service?
- What reforms would reduce waste, fraud, and abuse in each of the four USF programs?
- What actions would improve coordination and efficiency among USF programs and other FCC programs, as well as broadband programs housed at other federal agencies?
- For any recommendations on reforms, does the Commission currently have the feasibility and authority to make such changes?
- Is the USF administrator, the Universal Service Administrative Company (USAC), sufficiently accountable and transparent? Is USAC’s role in need of reform?
We encourage all interested E-Rate participants to submit supportive comments. Those located in states represented by Working Group Senators or Representatives should consider reaching out to these individuals directly to stress the importance of resolving USF’s future.