Arkansas Capitol

Federal legislators are taking another shot at reforming the Universal Service Fund (USF) program. The Reforming Broadband Connectivity Act introduced in the House and the Senate would direct the FCC to initiate a rulemaking process to reform the contribution system for the program.

The legislation is similar, if not identical, to legislation introduced in 2021.

The USF covers some of the costs of rural broadband and telecom deployments; low-income connectivity; school and library connectivity and a rural telehealth program. Currently the program is funded by service providers, who pay into the program as a percentage of telecom, primarily voice, revenues, and those costs are passed on to customers.

That approach has become increasingly impractical as voice revenues decline and a higher and higher percentage of telecom revenues has been required to keep the program afloat. A 2020 Telecompetitor analysis estimated that the contribution factor could hit 50% by 2030.

The Reforming Broadband Connectivity Act wouldn’t prescribe how the FCC should reform the system. Instead, it would direct the FCC to take into account “the fairness and the relative burden that any changes in fees will have on consumers and businesses, as well as the impact the proposed changes to the contribution system will have on seniors.”

The news of the reintroduced legislation comes just days after a court case upheld the FCC’s USF authority.

FCC Requested the Legislation

In a report about the future of Universal Service released by the FCC in August, the commission asked Congress to give the commission “the legislative tools needed to make changes to the contributions methodology and base.”

The same report offered some ideas about the sort of reforms the commission might favor.

While some stakeholders say the contribution base should be expanded to include broadband internet access service, others argue that this would make consumers responsible for a greater share of contributions because business customers are heavier users of traditional telecom services and therefore pay a greater share today. Certain language in the FCC report echoes that concern.

The FCC report is also unenthusiastic about having Congress appropriate USF funding directly from taxpayers because that approach would lack stability.

The solution that the commission seems to favor is one that would require edge providers such as Amazon and Netflix to pay into the fund.

The Senate version of the Reforming Broadband Connectivity Act was introduced by Amy Klobuchar, John Thune, John Hickenlooper and Jerry Moran. The House version was introduced by Joe Neguse, Lizzie Fletcher and Angie Craig.

At least two service provider associations – USTelecom and NTCA-The Rural Broadband Association – issued statements in support of the legislation.

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