ruralReforming how the Universal Service program is funded is critical at a time when a wide range of reforms have been made to how Universal Service funding is spent, said several telcos and telecom associations in comments filed with the House Energy & Commerce Committee on Friday. The comments were made in response to a white paper issued by the committee asking a range of questions about the Universal Service fund that is governed by the FCC and funded by the telecom industry. Traditionally the USF was voice-focused but the FCC is in the process of transitioning the program into a broadband-focused Connect America Fund.

“Congress and the FCC must immediately address the contribution mechanism of the Universal Service Fund,” wrote the ITTA, which represents mid-size communications companies. “Failure to date to revise how contributions are assessed and who contributes to the Fund is irresponsible in light of the fundamental changes that have occurred in the telecommunications marketplace over the past decade.”

Universal Service Reform
Several commenters suggested expanding the services upon which USF fees are based.

“Contribution reform has been pending before the FCC since 2006 with no action,” wrote Comptel, which represents competitive carriers. “Since that time, the FCC has expanded the permissible uses of universal service funds to include the support of broadband Internet access service, but continues to exempt such services from contribution to the Universal Service Fund. As a result, the entire burden of subsidizing both telecommunications and information services falls on voice customers, whose interstate services are assessed at the rate of 16%. The FCC must broaden the contribution base to include all of the services and technologies that people in the 21st century use to communicate.”

NTCA – the Rural Broadband Association also advocated expanding the USF contribution base to include broadband services. “Consider, for example, a consumer’s purchase of private line or special access services as compared to dedicated Internet access (DIA). Both offer capacity to connect to the provider’s network and ultimately to other networks, albeit through different protocols. . . Yet the arbitrary and artificial classification of these functional equivalents skews regulatory outcomes and marketplace behavior in ways that should be deemed unacceptable in an efficient and effective market. Specifically, the customer buying a private line pays contributions in excess of 15% to USF simply because the capacity being procured has been classified as a ‘telecommunications service,’ while another customer buying precisely the same amount of capacity as DIA pays no USF contribution. Fixing such market-skewing disparities… should be seen as a priority of any legislative review and update.”

Some other comment filers, including the ITTA and Centurylink, stopped short of recommending that broadband Internet or information services be included in the contribution base, but hinted that such a move could be an appropriate solution. Centurylink, for example, mentioned expanding the contribution base as one of several reforms that might be considered.

Other Viewpoints
Those advocating expanding the Universal Service contribution base will face opposition, although the extent of that opposition may not be apparent from comments filed with Congress.

At least two organizations that previously opposed expanding the Universal Service contribution base to include broadband – including the FTTH Council and the Free Press — opted not to file comments with the Congressional committee.

Meanwhile, the National Association of Regulatory Utility Commissioners, which represents state regulators, argued in its filing that the FCC should refer the issue of USF contribution reform to a federal state joint board. And the National Cable & Telecommunications Association’s response on the contribution question said simply that the USF should be capped.

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2 thoughts on “Telcos on Universal Service Reform: Contribution Base Must Be Addressed

  1. I agree with the commenter from Comptel. This has been an issue for a very long time, and the loss of landlines has only contributed to the problemby increasing the USF contribution percentage. Having voice customers contributions pay for broadband customers' access to broadband is like mixing apples and oranges.
    Voice customers should only have to contribute for USF for voice services, while broadband customers should be required to contribute for broadband if USF will be supporting the broadband access.
    Makes perfect sense to me.

  2. USF makes sense in a world where telcos have to buy and build a voice network and defray that real cost for delivery to rural areas to make it an affordable service for those subscribers. That was the old way. Today, the cloud can be leverage by telcos to deliver VoIP. That means they cloud source and right-size the cost to deliver. So contributions formerly made to subsidize voice can be shifted to funding broadband build-outs and then telcos can layer cloud voice on top of it.

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