More than 300 ISPs, industry groups urge action on USF reform

A coalition of 332 broadband providers, industry associations, public interest groups and anchor institutions called on the Federal Communications Commission (FCC) to reform the Universal Service Fund’s (USF) contribution mechanism, arguing the program is in danger of collapse.

Today, money for USF is collected from operators, which are required to contribute a portion of their telecom revenues. That funding is then distributed through USF’s four primary programs: the Connect America Fund, Lifeline, E-rate and Rural Health Care.

In a letter to FCC officials, however, the coalition noted “the USF fee has spiraled from about 7% in 2001 to over 30% in 2021 and could exceed 40% in the coming years.” Signatories of the letter backed “immediate action to reform and stabilize the funding mechanism that supports the USF by expanding the list of services that pay into it to include broadband internet access services.”

They argued this solution would help reduce regulatory uncertainty, reflect the changing uses of services and be more equitable than the current system. Additionally, the FCC could make such a change without needing to wait for Congress to pass new legislation, they said. Indeed, the FCC has made such a move before, expanding the USF contribution base to include voice-over-internet-protocol services in 2006.

The letter was signed by INCOMPAS, NTCA – The Rural Broadband Association, the Rural Wireless Association various state-level telecom and broadband associations, Public Knowledge, National Digital Inclusion Alliance, and operators from across the country including TDS Telecom, Great Plains Communications and Lumos. The coalition previously sent a similar letter urging action in November 2021.

RELATED: New Senate bill takes aim at USF contribution base

Calls for USF reform have come from other parties as well. Following the U.S. election in November 2020, trade group USTelecom urged President Joe Biden’s administration and Congress to expand “the base of financial support for universal connectivity beyond just telephone consumers to include a broader cross-section of the Internet ecosystem, including its largest companies.”

But not everyone agrees that expanding the contribution base is the right path forward. The National Taxpayers Union argued last year a move include streaming and internet platforms could hamper efforts to close the digital divide and potentially make broadband less affordable for struggling consumers. The group instead suggested other reforms, including increased oversight of USF spending or the creation of a program which distributes vouchers directly to consumers for broadband service rather than handing USF support directly to ISPs.  

While the latest letter suggested reforms which skirt Congressional involvement, USTelecom, NTU and AT&T have all called on Congress to take action and directly appropriate money to the USF.

“Bottom line: the FCC has attempted multiple times to reform the contribution rules, at least in my memory. And despite broad consensus that reform was essential, all those attempts failed,” AT&T EVP of Federal Regulatory Relations Joan Marsh wrote in 2020. “It’s time to chart a new course.”

In November 2021, two Senators introduced legislation which would initiate an overhaul of the USF’s funding mechanism. However, no action has been taken on that measure yet.