Last week, the Federal Communications Commission (FCC) issued yet another increase of the Universal Service Fund’s (USF) contribution factor, continuing to drown businesses and consumers with lofty fees.
For years, we’ve been waving red flags – USF’s current system is broken. And with the Affordable Connectivity Program (ACP) funding at an end, now is the time to find a sustainable and effective way to truly provide universal service – one that includes a revitalized ACP – for all Americans.
What’s changed?
The concept of universal service – the need for everyone to be connected – was introduced over a hundred years ago. For most of the 20th century, this meant access to landline telephones. For decades, plain old telephone service (POTS) was generally offered on a monopoly basis and universal service was accomplished through implicit subsidies.
Then, in 1996, Congress created the Universal Service Fund to make it explicit and better able to conform in the newly competitive telecom environment. And while it certainly was critical to make sure that everyone had access to plain old telephone service in the last century, fast forward to present day and we see a completely different landscape.
Landline telephones are no longer the core communications device for Americans and having a landline is certainly not enough to fully participate in the 21st century economy. In fact, Americans now use a variety of ways to communicate, including texting, social media, video calls and more, and high-speed internet access – both fixed and mobile – underlies all of them.
Consumers have never had more choice in fixed and mobile high-speed internet services than they do in today’s dynamic and competitive communications marketplace. The combination of access to the internet and all that the internet enables means students can complete assignments online, consumers can shop for household products anywhere and anytime, patients can meet with their healthcare providers and children and parents alike can stream videos, movies and more at their leisure.
And in a way, we’ve come full circle. Consumers today use their internet connectivity to participate in virtual meetings – the modern-day update to the telephone call.
This digital economy, led by the largest tech companies, has grown exponentially by offering broadband-enabled services like on-demand cloud services, platforms, and software, and digital ad platforms, that require an internet connection to reach the consumers and businesses they target.
All this modern technology is critical to Americans and their ability to keep pace in our digital world. To reform USF to ensure all Americans have universal access, we need to acknowledge where we’ve been, recognize what’s worked and utilize the marketplace of our forever-changed digital world to the advantage of everyday Americans.
Where we’ve been
Congress recognized the critical nature of high-speed internet access in the 2022 Infrastructure Investment and Jobs Act, creating the Affordability Connectivity Program to help Americans afford connecting to the internet during one our country’s most vulnerable times.
Unfortunately, a few short weeks ago, funding for the ACP officially ran out. We continue to advocate for the reinstatement of the ACP as our primary focus as a company continues to be to connect as many Americans as possible to fast and reliable internet.
Congress should quickly seize this opportunity to reinstate a revitalized ACP by combining it with the urgent USF reform.
What’s the answer?
First, any reform of USF can’t happen in a vacuum. We need to update what’s broken and, except for one-time capital funding projects like the Broadband Equity, Access and Deployment Program, centralize ongoing broadband funding programs to maximize resources and reduce waste. And it needs to be done with the same base goal of universal service in mind – to provide connectivity to all Americans with the understanding that today’s connectivity is not the same connectivity as nearly a century ago.
We know USF currently relies on required contributions from revenues derived from legacy telecommunications services, primarily voice services. We also know Americans today rely on innovative and modern products, services, and platforms to communicate. But the current USF funding model explicitly relies on revenue from those older, legacy products and services for support.
As these legacy products and services fall more deeply into existential decline, the USF funding burden increases for those customers still using them. And their ability to support an enhanced USF that includes ACP is next to impossible. This dynamic has resulted in a USF contribution factor that is now 34.4% – the fourth consecutive quarter that the factor has been over 30%.
Americans deserve a program that increases access to the modern service of today, and is supported by a stable, sustainable and growing revenue source.
While we are encouraged by the work the Congressional USF Working Group is doing to examine and address this, hopefully urgently, we recommend Congress consider the following as they work to assess USF reforms:
Centralize oversight over ongoing broadband funding programs: Not only does USF currently consist of four separate programs, but various other broadband subsidy programs exist across the government. Centralizing these programs allows for a reassessment of how funds are used and increases transparency and efficiency. This helps consumers more easily get access and enables the private sector to do their part more effectively.
Expand the funding base to include tech companies: Our digital ecosystem is thriving thanks to Americans’ ability to get online. Tech companies – like Meta and Google – that utilize consumer broadband connections to offer their broadband-enabled services have seen astronomical benefit because Americans are online. These Tech companies should also contribute to a reformed fund that helps to ensure broadband continues to be universally accessible by supporting that connectivity. It’s our collective responsibility to keep America connected.
Why now?
We’ve come together as an industry with the government and non-profits in the last several years for a massive push to bridge the gap in universal service (what is known as the digital divide). In fact, the National Telecommunications and Information Administration just released a study that shows people without access to the internet went from 14% in 2021 to 12% in 2023. We’re making noteworthy progress, but if we can’t address the reforms needed to USF soon, especially with the funding exhaustion of the ACP – we’re at risk of losing crucial momentum.
And with the unprecedented amount of federal dollars being doled out to connect every corner of America, it will all be for naught if Americans can’t afford to connect.
The bottom line: The time to secure universal service for all Americans is now.
