For years, the federal government has avoided any attempt to resolve a long-standing problem: how to sustain funding for the Universal Service program. But perhaps that could change now that the lack of funding for the Affordable Connectivity Program (ACP) has gained substantial mindshare with the American public.

Some stakeholders believe both problems can be solved by funding the ACP through the Universal Service Fund (USF) and expanding the types of entities that are required to pay to support the program.  

The past week brought two proposals along these lines. The text of the proposed Promoting Affordable Connectivity Act of 2024 was made public. And USTelecom President and CEO Jonathan Spalter penned a blog post titled “The Solution to Affordable Connectivity is Staring Us in the Face.”

The ACP and USF

The ACP was created by an act of Congress and kicked off in January 2022. Until its demise last month, the program paid up to $30 a month toward the cost of broadband for low-income households. But Congress only allocated enough funding for the program to run partway through this year and couldn’t be pressured to allocate more funding.

The Universal Service program sidesteps the need for regular re-funding from Congress because it is funded by telecom service providers as a percentage of revenues. The problem is that the program initially focused on voice services and is funded primarily as a percentage of service providers’ voice revenues, even though it is now primarily a broadband program. It covers some of the costs of broadband for low-income households, for high-cost rural areas, for rural healthcare and for schools and libraries.

Voice providers pass their costs of supporting USF on to their voice customers as a fee on customer bills, and those fees have risen dramatically as voice revenues decline. Telecompetitor has reported for years that the program is becoming increasingly unsustainable.

USTelecom’s Take

According to USTelecom, the solution to the ACP funding problem is for Congress to “instruct the FCC to modernize and right-size the [USF] to also include a new, financially responsible and self-sustaining version of the ACP, all while dramatically reducing the fees charged to consumers to fund this important effort.”

That move also would benefit other USF programs.

Spalter’s blog post stops short of recommending who should pay into the fund, although he does note that adding digital advertising revenues into the contribution base would reduce the fees on customers’ bills dramatically, according to the FCC.

The Promoting Affordable Connectivity Act

The Promoting Affordable Connectivity Act, introduced by Pennsylvania Senator John Fetterman, is more specific about what types of entities should pay to support the fund. Reading between the lines, the emphasis is on internet giants such as Facebook, Amazon, Google and Netflix.

That’s not a new idea. Those companies benefit tremendously from broadband connectivity, and people have talked about requiring them to pay into the USF for years. But the proposed act is the first place I have ever seen anyone attempt to determine how to define an internet giant.

The act proposes assessing contributions from “edge service providers” and “prioritizing” those whose annual revenue is greater than $5 billion. “Edge service providers” are defined as entities whose “primary or only business revenue is derived from providing an edge service.”

Edge services are defined to include cloud computing and digital advertising services, as well as those that:

  • Allow users to purchase, download or access content, applications or services from the edge provider or that require users to divulge personally identifiable information
  • Enable the user to initiate a search query using the internet and that can return at least one search result unaffiliated with the edge provider

Certain exemptions, such as for patient portals, would apply.

How much support the Fetterman bill will have remains to be seen. But at least it’s a starting point for more detailed discussions on an idea that just might provide a solution to two important problems.

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