Report: Levy USF Fees on Broadband

(Image credit: Mattey Consulting LLC)

A new report, USForward, argues that the Federal Communications Commission needs to start requiring broadband service providers to pay into the Universal Service Fund if it is to save the program.

The USF currently taps telecom providers to subsidize advanced telecommunications service, including broadband service, to low-income areas and high-cost areas where there is less of a business case to reach, as well as to eligible schools and libraries.

Also Read: Who Should Pay for Broadband Connectivity

Those telecom providers — currently landline and mobile providers and cable and other voice-over-internet protocol (VoIP) providers — in turn, pass along the USF contribution as a line item on customers' bills.

The report, written by Carol Mattey of Mattey Consulting LLC, was released by NTCA-The Rural Broadband Association; INCOMPAS, whose members include competitive carriers and computer companies; and the Schools, Health & Libraries Broadband (SHLB) Coalition.

The report points out that the USF contribution base has declined significantly — “from $79.9 billion in 2001 to $29.6 billion in 2021” — as traditional phone service has been supplanted by broadband as the connection of choice, “placing inequitable [and it says, "unsustainable"] burdens on certain consumers and businesses and calling into question the sustainability of the USF programs,” it argued.

The report says the biggest decline has come in mobile voice revenue, since most mobile service revenues are attributed to data, which is not included in the assessment.

By contrast, the broadband revenues not subject to assessment have grown from $173 billion to $361 billion.

“Reforming the current revenues-based system to include broadband internet access service revenues is the preferred approach, both as a matter of policy and ease of implementation. Doing so would reduce the contribution factor to less than 4%,” the report said. That would be appropriate because USF now promotes universal broadband, because broadband access revenues are expected to be stable in the future, and because it can be done more quickly than other alternatives like assessing a USF fee on connections for phone numbers, the report said.

One alternative not offered up in the report, whose backers include streaming companies, is making streamed content services as well as broadband service providers pay into the USF fund, something contemplated in a Republican-backed bill, the Funding Affordable Internet with Reliable [FAIR] Contributions Act. The legislation asks the FCC to consider if it should add to the contribution base ”a search engine, a social media platform, a streaming service, an app store, a cloud computing service, or an e-commerce platform.“

Republican FCC commissioner Brendan Carr, a Big Tech critic, supports that suggestion, pointing out that “Big Tech derives extraordinary value from the use of these high-speed networks.”

Also Read: House Bill Would Make Streamers, Others Pay into Broadband Subsidy Fund

The FCC would be asked to assess which sources of revenue to tap, including digital advertising and user fees, and assess the current cost burden of USF on those who purchase legacy telecommunications services. Broadband providers, which are currently classified as information rather than telecommunications services, do not pay into the fund.

Raising new fees on broadband to help subsidize service would come on top of the billions of dollars the Biden Administration is putting into various new broadband subsidies to ensure universal and affordable broadband access.

During the Obama administration, Mattey, the report author, was deputy chief of the FCC's Wireline Competition Bureau, working to shift the USF‘s focus to subsidizing universal broadband, including launching the Connect America Fund.

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.