A new idea for funding the Universal Service Fund (USF) comes from New Street Research and The Benton Institute for Broadband & Society: Tax online gambling.
The authors position the idea as a solution to two problems — USF unsustainability and what they expect to be “the biggest social problem in the U.S. in the year 2030 that rides on communications platforms.”
According to the authors — Benton Senior Fellow John B. Horrigan and New Street Research Policy Advisor Blair Levin — young men gambling online is becoming a serious problem.
They point to a survey showing that as of 2022, 8.3% of 11th and 12th grade males had gambling problems such as lying about how much they lost or being unable to control their gambling. And the percentage had nearly doubled from 4.2% in 2018.
Sports gambling also has been linked to depleted household savings, increased domestic violence and an increase of as much as 30% in the likelihood that a household will go bankrupt.
The authors recommend that the government do “what it has done before to reduce the harm of legal but problematic behaviors such as the consumption of alcohol and cigarettes: tax it.”
There is already such a tax on gambling, but the authors recommend raising it and using the proceeds to fund the USF.
The USF Problem
The other problem that the recommended gambling tax could help solve is the unsustainable nature of the method currently used to fund USF — requiring providers of long-distance telecom services to pay a percentage of those revenues into the fund. Those payments are passed on to telecom service customers as a fee on their bills.
As long-distance telecom revenues have declined, the percentage of telecom service revenues that providers must pay has increased dramatically. It’s now in the range of 35% and the percentage continues to climb.
Funding USF through telecom revenues made sense when the fund was primarily focused on voice services. But over the years, it has increasingly become a broadband program, funding broadband networks, a low-income program, a schools and libraries program and a rural telehealth program.
At least three alternatives to funding USF have been proposed, but none have received widespread support.
One idea is to include broadband rather than just telecom revenues in the USF contribution base — an idea that makes a lot of sense, considering that the fund primarily goes toward broadband. But opponents argue that this approach would increase the cost of broadband, although others have argued that its impact on broadband pricing would be minimal.
Another suggestion is to require Congress to periodically appropriate funding for the program. But that’s particularly problematic for the program that covers some of the costs of operating networks in high-cost areas. As Horrigan and Levin explain, “[S]ervice providers cannot make long-term capital plans that depend on annual appropriations that are subject to the vagaries of politics.”
A third idea is to require online giants such as Facebook and Amazon to pay into the fund. Supporters argue that these companies benefit from broadband and should contribute. But as the authors note, the online giant segment has “a perfect record of defeating any Congressional efforts to regulate or tax it more.”
Prognosis
The idea of funding USF via an increased gambling tax would likely find a better reception than any of the other three recommended solutions. The question is whether the increased gambling tax would offer a complete solution.
Annual USF expenditures run between $7 billion and $9 billion per year, and the authors didn’t estimate how much could be collected via the proposed gambling tax. But even if the gambling tax idea is only a partial solution, perhaps to supplement the current approach, it would appear to merit further exploration.
The USF has another problem as well – at least for the moment. In July a federal court ruled that the program was unconstitutional. But the FCC, which administers the USF, has vowed to challenge that ruling and it may be overturned.
Universal Service is a topic of great importance to Telecompetitor readers and one that we will continue to follow closely as new developments arise.
