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The FCC should improve how it tracks the effectiveness of the Universal Service Fund high-cost program, according to a new report from the Government Accountability Office. The Government Accountability Office USF review also had harsh words for the contribution system through which the high-cost program is funded.

The GAO studied the USF high-cost program in response to a request from the House of Representatives Committee on Energy and Commerce. The report includes four recommendations for addressing the problems, placing responsibility for implementing the recommendations on the FCC chairman, which currently is Ajit Pai but could be someone else beginning early next year, depending on the results of this week’s presidential election.

Government Accountability Office USF Review
As the GAO report notes, the USF high-cost program has five goals, including:

  • Preserving and advancing universal availability of voice service
  • Ensuring universal availability of voice and broadband to homes, businesses and community anchor institutions
  • Ensuring universal availability of mobile voice and broadband where Americans live, work or travel
  • Ensuring that rates are reasonably comparable in all regions of the nation for voice as well as broadband services
  • Minimizing the universal service contribution burden on consumers and businesses

The Government Accountability Office USF report examined how well the FCC tracks progress on meeting each of these goals based on nine attributes that, according to the GAO, are key to successful performance measures. These include:

  • Linkage to agency-wide goals and mission clearly communicated throughout the organization
  • Clarity – measure is clearly stated
  • Measurable target in the form of a numerical goal
  • Objectivity – measure is reasonably free from significant bias
  • Reliability, meaning the measure produces the same result under similar conditions
  • Core program activities are the focus of the measure
  • Limited overlap with information provided by other measures
  • Balance, meaning that a suite of measures ensures that all organization priorities are addressed
  • Government-wide priorities, meaning each measure covers a priority such as quality, timeliness, etc.

The GAO review gauged whether existing performance measurements for each of the five high-cost USF goals included each of the nine key performance measures.

The FCC got the best grades for its tracking on the goal of ensuring reasonably comparable rates. The GAO said the commission fully met eight of the nine key attributes.

The FCC also scored relatively well on the goal of measuring progress on ensuring universal availability of voice and broadband to homes, business and anchor institutions, meeting seven of the nine key attributes.

The worst scores were for the goals of ensuring universal availability of mobile services and minimizing the universal service contribution burden. The GAO said the FCC performance measures for these goals met only five of the nine criteria.

Contribution System Gets a Blasting
The USF program is funded as a percentage of carriers’ voice revenues, with carriers typically passing the cost on to voice customers on their bills. The Government Accountability Office USF report’s take on this system:

“FCC has not set a target for this measure’s per-household expenditure amount. . . Absent a target, [the contribution factor] has grown from about 6% . . . in 2000 . . . to over 26% in 2020. . . .

“Our leading practices on user fees say, among other things, that agencies should take into account equity and sustainability considerations when collecting fees to fund programs. However, it does not appear that FCC has taken equity and sustainability considerations into account. . . .[A]ccording to economists and stakeholders we interviewed, the way the contribution factor is assessed may raise equity concerns. For instance, a consumer advocacy group said the factor functions like a ‘regressive tax,’ which is a tax that is not sensitive to the income levels of consumers and businesses. Additionally, the high-cost program . . .  has focused relatively more on broadband than on voice services in recent years. According to some stakeholders, this situation raises equity concerns because those demographics paying into the USF – users of mobile and fixed-voice services—pay for USF’s support for broadband services, which they may not use.

“Furthermore, because the factor is drawn from a diminishing base, . . . stakeholders we interviewed expressed concerns about the sustainability of USF funding.”

Telecompetitor has previously raised the same concerns about the sustainability and equity of the USF contribution factor.

The GAO stopped short of recommending a specific solution to these concerns, however, which as we’ve also noted, are a political hot potato.

Instead, the GAO said the FCC chairman “should ensure the high-cost performance measure for the goal of minimizing the universal service contribution on consumers and businesses takes into account user-fee leading practices, such as equity and sustainability considerations.”

The Government Accountability Office USF report makes three other recommendations for the FCC chairman, stating that the chairman should:

  • Revise the high-cost performance goals so that they are measurable and quantifiable
  • Ensure high-cost performance measures align with key attributes of successful performance measures, including ensuring that measures clearly link with performance goals and have specified targets
  • Publicly and periodically report on the progress the FCC has made on high-cost performance goals by, for example, including relevant performance information in the Annual Broadband Deployment Report or the USF Monitoring Report

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