If you’re an eagle eyed reader of your monthly phone statement, you’ll recognize the Universal Service Fund (USF) charge among the various government taxes and fees. Congress created USF in 1996 as a dedicated revenue source to connect hard to reach areas in the United States so everyone could have access to reliable telephone service.
Today the fund focuses on broadband connectivity (more on that in a moment), but with cracks in the 25-year-old program starting to show, now is the time to put USF on sound footing.
The reality: USF is currently on an unsustainable financial path, funded by a regressive surcharge on a shrinking base of telephone customers. If it isn’t fixed, and fixed quickly, the fund won’t be able to meet its mandate and fulfill its connectivity promise – not just to the next generation, but to the current one.
Let’s back up. USF started with a small fee on the phone portion of every customer’s bill. That worked well enough for a decade until ubiquitous phone service gave way to the high-speed internet that revolutionized communications and transformed our lives.
As USF evolved into a program to increase broadband connectivity for homes in high-cost rural areas, for low-income consumers, and for schools, libraries and healthcare providers, the funding mechanism stayed the same – a fee on a rapidly shrinking base of telephone-only customers.
To keep USF solvent for these essential universal service programs the fee or "contribution factor" applied on phone service is rising. From five percent of a monthly telephone bill in 1996…to 10 percent in 2005…to 20 percent in 2018.
In fact, the factor crossed the 30 percent threshold in the first quarter of 2021, increased again to 33 percent in the second quarter and is on pace to hit 40 percent by the end of this year. The problem is accelerating – not going away.
In the face of our current pandemic, Washington, to its credit, has increased funding for broadband affordability and access. In December, Congress passed the Emergency Broadband Benefit Program, $3.2 billion to provide up to $50 a month ($75 on tribal lands) for broadband service and $100 for a connected device. President Biden recently signed a plan providing more than $7 billion to expand connectivity for at home learning.
That’s a welcome start, but that money will run out. And soon. If only half of eligible households take advantage of the emergency benefit, it will cost about $800 million a month and be exhausted in six months or less.
So how do we fix USF?
First, Congress should provide more direct and sustainable funding. The FCC just raised more than $80 billion in a blockbuster auction of airwave rights that will carry 5G and other next generation connectivity. Congress should direct a significant portion of that money to universal broadband service or make direct appropriations to shore-up the fund.
Another option – one that should be explored even if Congress appropriates additional funds: broaden the base of USF contributors beyond the shrinking pool of telephone customers to include other players in the internet ecosystem. If Congress doesn’t appropriate funds, then it’s almost a certainty USF will implode absent structural reform. Congress needs to pass legislation – with guidance on how to expand the base – directing the FCC to reform USF.
Congress should also consider whether some of the largest of our nation’s technology, streaming and internet platforms, which don’t currently support our shared networks (but couldn’t have reached trillion dollar market caps without them), should contribute to the costs of ensuring universal connectivity.
A group of top tech and business CEOs recently called on Congress to promote broadband deployment and connect all communities in America. Right on. But it’s time for actions and dollars to meet words.
Because of access issues or affordability challenges that predate, but were put in sharp relief by the pandemic, our country must step up to connect everyone. Everywhere. This starts with a plan to more broadly share responsibility for universal service.
We can debate who should ultimately contribute to USF (and how much), but there’s no denying: the system needs fundamental fixing. If we are to build back better, universal broadband access and affordability are nothing short of foundational. Congress and the FCC should meet this connectivity moment and set the country (and USF) on a better path.
Jonathan Spalter is President and CEO of USTelecom – The Broadband Association.
The smarter way to stay on top of the multichannel video marketplace. Sign up below.
Jonathan Spalter is president and CEO of USTelecom – The Broadband Association.