The U.S. has made leaps and bounds in blanketing the population with a myriad of connectivity options, but there are still millions of Americans on the wrong side of the digital divide. About 19 million Americans have no access to high-speed Internet, while an additional 100 million have broadband access, but choose not to subscribe. ITI applauds policymakers’ previous successes and their steps to expand affordability and access for all.
Programs like the Universal Service Fund and the Affordable Connectivity Program will remain vital even after network investments from the historic Infrastructure Investment and Jobs Act (IIJA) to fund technological upgrades and continued deployments of next generation networks. Congress and the FCC should work together to shore up these funds, but we are concerned that calls to fold in digital services will increase burdens on end-users raising barriers to adoption and full participation in the digital ecosystem.
ITI strongly supports the goals of the Universal Service Fund (USF), a currently $9-billion program that enables broadband connectivity through: high cost support for rural areas, Lifeline for low-income areas, the E-rate program for schools and libraries, and a rural healthcare support program. USF has been under pressure because the funding for these programs comes from a user fee based on voice service revenues. In its recent report on the future of USF, the FCC recognized challenges for continuing to rely on a declining revenue source but said its authority to expand the types of contributors to USF beyond voice is unclear.
It is important to recognize that despite the recent allocation of approximately $42.5 billion under the IIJA for the construction of broadband networks in areas with limited or no service, this substantial one-time expense will not eliminate the ongoing need for support towards the development, upgrading, and maintenance of broadband infrastructure and services. Additionally, as the non-USF broadband funding is depleted, it will also become important to secure a permanent funding source to reduce the cost of broadband subscriptions and devices. Although the IIJA is a significant step towards improving broadband access, it is not anticipated to fully replace the need for ongoing funding from USF.
The FCC rightly notes in its August 2022 USF report that “the Commission now has the opportunity to consider how existing universal service programs can take full advantage of Infrastructure Act funding and begin the exercise of assessing the role of universal service in a post-Infrastructure Act national broadband landscape.” Considering this, the focus of the future of the USF will be on “maintaining new and existing networks, promoting equitable access in underserved communities and populations, and ensuring sufficient support for the ever-expanding broadband needs of schools, libraries, and health care providers.”
With this in mind, we must plan for the USF of the future. Currently only voice service revenues are included in the contribution scope. The services eligible for assessment and contribution to the USF are restricted to circuit-switched or mobile lines, select enterprise telecommunications solutions, and Voice over Internet Protocol (VoIP) services. Much of the USF budget is funded by a fee on consumer bills from traditional telecommunications providers, including both wired and wireless carriers; however, customers of satellite operators, cable companies that provide voice services, and interconnected VoIP providers also make significant contributions. This current USF contribution base is indeed unsustainable, outdated, and in desperate need of a 21st Century makeover.
That said, we are concerned that proposals seeking to assess USF contributions on digital services are at odds with the goal of universal connectivity, as it would impose new fees on the services that drive consumers to seek broadband connections from mobile and wireline providers.
As use and reach of content and application services grows, consumers purchase additional upgrades and products from broadband providers to access the internet, thereby creating a virtuous cycle where consumers buy high speed internet access to reach content and applications. This mutual interdependence has delivered huge advantages to consumers and users who benefit from unfettered access to a rich ecosystem of online content, applications, and services, bringing socio-economic benefits and access to entertainment and information that enriches consumers’ lives as well as economic opportunities. Further, a number of digital services already contribute to USF as they provide both enterprise and VoIP services as part of their offerings.
It is also important to note that broadband providers’ costs are primarily driven by the number of lines provided, and not the amount of traffic carried. End users pay internet service providers for an internet connection with the expectation that it will allow them to reach all legal content available on the internet and there is no evidence that operators’ network costs are already not fully covered and paid for in the Internet value chain.
The most logical step to put USF on a more stable, future-focused foundation would be for the FCC to move forward with assessments on broadband internet access service (BIAS) revenues. This would reduce the contribution from 33% to less than four percent – broadening the base, lowering the rates, and avoiding policies that could damage many of the free and open applications purchasers of internet access have come to expect. We believe the FCC already has the authority to extend USF contributions to BIAS revenues and any action from the U.S. Congress should include broadband revenues as part of future funding streams.
We also suggest that the U.S. Congress go beyond USF for addressing affordability and look to the success of the Affordable Connectivity Program. This program has helped low-income American families defray the cost of broadband service and devices needed to connect to the Internet. More than 17 million households now depend on the program and the $14.2 billion that the U.S. Congress initially allocated will be depleted quickly with even the most conservative estimates expecting funding to dry up by mid-2024 at the latest.
Sustained federal investment is essential to help every American get and stay connected. Expanding the USF contribution base to broadband and reinvesting in successful programs like the ACP will help extend and maintain networks across the United States and address affordability for Americans for years to come.