New legislation proposes broadband providers contribute to USF

The Universal Service Fund provides an annual broadband subsidy of almost $8 billion for low-income homes, schools, libraries, and healthcare facilities.

Because it is financed by fees levied on voice service providers, reform discussions are arising as voice revenues are decreasing and broadband use is rising.

New legislation proposes broadband providers contribute to USF

Senators Mullin (R-OK), Mark Kelly (D-AZ), and Crapo (R-ID) are the supporters of the proposed Lowering Broadband Costs for Consumers Act of 2023, which would call for providers that generate more than $5 billion in yearly income and more than 3% of total United States annual internet traffic to contribute to the USF.

According to some in the industry, this might impact businesses like Netflix, Apple, Microsoft, Amazon, Alphabet, and Meta.

Traditional telecommunications businesses—wireline and wireless, as well as cable providers offering voice services—have been the primary funding source for USF since its founding in 1997.

Despite concerns about the revenue base “trending towards $0,” the USF’s proposed allocated budget for the fourth quarter of 2023 remained at $6.03 billion.

The Federal Communications Commission (FCC) would be tasked with evaluating contributions from broadband and edge providers to the Universal Service Fund (USF) if legislation introduced by several U.S. senators is approved.

The proposed law would direct the FCC to broaden the basis of USF contributions to include broadband and online tech firms, or “edge providers.” Any provider of online content or services, such as e-commerce, social media platforms, search engines, video game services, advertising services, or social media platforms, is considered an edge provider under the legislation.

Sen. Mullin stated, “Fair contributions to the USF from edge providers are long overdue. Video streaming services account for 75% of all traffic on rural broadband networks. However, unrecovered costs from streaming companies are often shifted and borne by small rural broadband providers.”

The proposed legislation would additionally mandate that the FCC implement a new mechanism under the present USF high-cost programme to furnish “specific, predictable, and sufficient support for expenses incurred by broadband providers that are not otherwise recovered.”

The proposed legislation would specifically restrict the FCC’s authority to regulate broadband and edge providers to only requiring contributions to the USF.

Several stakeholders, including USTelecom, The Broadband Association, NTCA, The Rural Broadband Association, and WTA, Advocates for Rural Broadband, have publicly endorsed the Lowering Broadband Costs for Consumers Act.

The legislation will help ensure the USF’s long-term impact and sustainability by “modernizing its contributions system to include the dominant Big Tech companies, which benefit significantly from the broadband connectivity made possible by the Fund,” according to Brandon Heiner, SVP of Government Affairs at USTelecom – The Broadband Association.

According to Brian Dietz, SVP of Strategic Communications at NCTA, The Internet & Television Association, the law may increase rather than decrease consumer broadband service costs.

“Given the massive federal spending on deployment already underway, it seems premature and ill-advised for Congress to create yet another subsidy mechanism for rural telcos,” Dietz stated, citing multiple programmes like ARPA, BEAD, ACAM, and ReConnect.

If passed, the Lowering Broadband Costs for Consumers Act would require the FCC to finish a rulemaking allowing the Commission to evaluate edge providers for USF contributions within 18 months after receiving public comments.

According to Strand Consulting, “because fees based on voice services have been declining for years,” the USF is expected to collapse without reform.