Influential Trade Groups Advocate for Inclusion of Broadband and Wireless Data Revenue in USF Contribution Base; Conclude New Revenue Will Lower USF Contribution Factor to 4% or Less

WASHINGTON, September 14, 2021—The Universal Service Fund (“USF”), a critical component in ensuring the expansion of broadband in the United States, is under significant duress. But now they are strong signs that change is in the offing.

Because the revenues subject to USF assessment have declined 63% in the last two decades, the contribution factor has risen dramatically. This contribution factor went as high as 33.4% in the second quarter of 2021. It will dip to 29.8% during the fourth quarter of 2021, but a new report finds that, without change, it will reach 40% within three years.

On Tuesday, INCOMPAS, NTCA–The Rural Broadband Association, and the Schools, Health & Libraries Broadband (SHLB) Coalition released a report, “USForward,” by Carol Mattey of Mattey Consulting. The report, the first of its kind on the USF contribution dilemma, details the current crisis with relevant data about how we got to current unbearable situation.

It also explains why, in the view of the three trade groups, it is time for the Federal Communications Commission to “move forward” on USF reform. Specifically, the report and the associations propose broadening the base of USF assessment to include broadband internet access service. Specifically, the report finds that if the FCC proceeds in this fashion, the contribution factor would fall significantly and remain under 4% over the next several years.

INCOMPAS, NTCA and SHLB have different sets of membership interests. Yet they came together to launch a publicity campaign around the report’s proposals, which they believe can be implemented quickly.

Not everyone will agree that broadband services should now be subject to assessment.

But it is indisputable that the current means of calculating USF fees places an inequitable burden upon the customers of certain businesses – including, among others, Voice over Internet Protocol providers.

The report analyzes the facts about the decline in USF revenues and debunks myths about landline use and highlights activity by current providers that impact the program’s bottom line.

Recognized expert Carol Mattey served as the Deputy Chief of the Wireline Competition Bureau at the FCC from 2010 to 2017. She focused on and supervised the Commission’s ongoing initiatives to reform the USF.

Based on Ms. Mattey’s findings, and collaborative conversations involving INCOMPAS, NTCA, SHLB as well as the non-profit advocacy group Public Knowledge, the four organizations support including broadband internet access in the contribution base for the following reasons:

(1) SMART: It is smart public policy. Broadband internet access service is the primary form of access to networks today. All four USF programs support broadband connectivity and these services should contribute to support connectivity for every American.

(2) STABLE: Broadband service revenues are expected to remain stable, which would stabilize the current funding mechanism into the future.

(3) FAST: It can be implemented more quickly than alternative proposals because the FCC can use its existing authority to do so. Additionally, companies have been contributing based on revenues for decades so it is a known system.

(4) TRANSPARENT: Retaining the current revenues-based financing system allows for an additional level of scrutiny—the vast majority of USF contributions comes from publicly traded companies whose revenues are already audited for financial reporting purposes.

(5) EQUITABLE: As more consumers have shifted their usage to broadband services, the end-user charge has fallen on those that have not made the switch, such as older Americans. Including broadband service revenues will ensure the costs of achieving our universal service goals are equitably shared.

As part of the groups’ plans to educate policymakers on why the FCC should move forward with this proposal, INCOMPAS, NTCA—The Rural Broadband Association, SHLB, as well as Public Knowledge, will be participating in a webinar on Monday, September 27 at 12:30 p.m. to further unpack the research from the Mattey Report on the issues and the best path forward.

In addition, at the INCOMPAS Trade Show, INCOMPAS’ Lindsay Stern will be moderating a panel on USF reform with representatives from member-company BT, Public Knowledge, and the USForward Report’s author Carol Mattey. This panel will take place on Monday, October 25 at 9:30 a.m.

Quotes by association members:

Chip Pickering, CEO of INCOMPAS:
“The Universal Service Fund (USF) has long been a beacon of hope for families, rural communities and small businesses. Saving USF is a priority and broadband expansion is a smart, natural step in the program’s evolution that will ensure all students and job seekers have a pathway to a better future.” 

Shirley Bloomfield, CEO of NTCA:
“The federal Universal Service Fund is essential for the delivery of high-quality voice and broadband services to millions of Americans. USF not only helps make the business case for building networks, but it is critical as well in sustaining those networks and keeping services delivered over them affordable.” 

John Windhausen Jr., Executive Director of the SHLB Coalition:
“The Universal Service Fund exists to ensure that every person, no matter who or where they are, can obtain high-quality, affordable broadband. But the current funding mechanism is on an unsustainable path, which could end internet access for many students, patients, and other community-members. Furthermore, the current USF fee is spiraling upwards and increasingly imposes an unfair burden on low-income people.”

Chris Lewis, President and CEO of Public Knowledge:
“The promise of universal broadband service remains an unfulfilled one. The Universal Service Fund is and will remain an essential tool in our nation’s effort to ensure all Americans have broadband access. Contributions to the USF have been in need of updating for some time, but we have reached a critical point where the decline in the revenue base subject to contribution and the inequity it creates for consumers must be addressed.”

What Does This Mean for You? 

If you are a current client of Marashlian & Donahue, PLLC, The CommLaw Group, and require guidance or assistance with your company’s annual FCC regulatory fee calculation and payment, contact your assigned attorney.

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