Experts Debate Future of FCC USF Contribution System

The FCC should act now to ensure the Universal Service Fund remains sustainable once programs funded through the Infrastructure Investment and Jobs Act are fully implemented, panelists said during a Broadband Breakfast webinar Wednesday. Some disagreed about whether the FCC should expand the contribution base to include broadband internet access service (BIAS) or wait for Congressional action.

The USF system “has been steadily declining” in recent years as voice revenues continue to decline and the marketplace moves “to new means of communications” that don’t fit into the traditional telecom market, said consultant Carol Mattey. The “primary options” the FCC has to address the issue are to assess broadband revenue, to assess connections for voice and broadband, and to base assessments on telephone numbers, Mattey said, saying the “best of those three” is to assess broadband revenue.

“You need a system that is based on a measure that is easily audited and defined for both the stability of the fund as well as for the contributors,” Mattey said. It “makes sense that the services that are being supported by the fund would contribute into the fund,” she said, noting more than 340 organizations have supported this recommendation. It’s “unfortunate” the FCC “punt[ed]” the issue to Congress in its August report on the future of USF, Mattey said, because the commission “really cannot afford to wait.”

The IIJA's broadband funding won’t “solve the problem forever,” said Incompas General Counsel-Chief Advocate Angie Kronenberg, and “we’re going to need to continue to have a federal Universal Service Fund that functions and is funded to be functionable.” Strand Consult Senior Vice President Roslyn Layton agreed, saying the program’s current design “is not sustainable.”

Incompas was “disappointed” the FCC didn’t use its report as “an opportunity to solve this problem” given the broad support to expand the USF contribution base to include BIAS, Kronenberg said (see 2208150048). USF “needs to continue,” she said, and the FCC has “a statutory obligation to act on reform" to ensure the program is sustainable. Expanding the base to include BIAS could decrease the contribution factor to as low as 4%, she said.

We want to do it in a way that's fair and equitable, that is proportional,” Kronenberg said. A “key critique” of including BIAS in the USF contribution base is that it could increase the cost of broadband and lead to 10 million broadband subscribers losing their service because “broadband is already too expensive” for them, Layton said.

The FCC could consider a “broadband fair cost recovery,” Layton said, such as adding a “transit fee” on certain online services (see 2204130065). A “pay as you grow strategy” would be "based upon the actual traffic that you put into the network,” she said. Including BIAS “is the most efficient, effective way to do this,” Kronenberg said. “Consumers are buying the broadband internet access service to consume anything and everything on the internet that they're interested in,” she said, “so you need something that's predictable.” Anything that requires Congressional action “will take time,” Mattey said, and the FCC can’t wait for Congress to "pull the rabbit out of the hat and sort of come up with a fully formed plan.”