AT&T: Now is the Time for Congress to Appropriate Universal Service Funds

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According to Joan Marsh, AT&T Executive Vice President of Regulatory & State External Affairs, “It’s time for us to  fundamentally rethink how we fund USF programs – programs that have become even more essential” due to both COVID-19 and, “the clear need for all Americans to access a reliable broadband service.” Her recent blog post then tells us how, why, and to what end we must rethink the process.

Ms. Marsh lists three reasons, “why we shouldn’t wait any longer to address the problem.”

“First,” she contends, “the contribution mechanism is hopelessly outdated. At one time, in the not too distant past, USF programs were primarily voice-focused. The original goal of the USF program was to make basic telephone service available to all Americans, even those in the most remote parts of the country…In the years since, all USF programs, including the Lifeline program, have transitioned to support broadband services and demand for funding has increased.”

“Second,” according to the AT&T exec, “the current contribution system is unsustainable…We are using declining voice revenues to pay for programs that are increasingly broadband-centric. As the factor increases, customers who traditionally purchased the legacy services that that fund USF today are opting to switch to IP-based alternatives…that don’t incur the USF tax. The loss of that accessible revenue then triggers another increase in the contribution factor, and so the death spiral accelerates.”

Third, opines Ms. Marsh, “reform of the existing mechanism is politically impossible…and might just be a temporary band-aid at best…Bottom line: the FCC has attempted multiple times to reform the contribution rules, at least in my memory. And despite broad consensus that reform was essential, all (previous attempts at such reforms) failed.”

She concludes that, “It does not make sense to impose a narrow excise tax on one industry to fund services that are so broadly beneficial and economically important for all American citizens.” Her solution? “It’s time for Congress to directly appropriate the funds to get the job done.”

While we understand much of this logic, it leaves out one extremely important point. That is, AT&T and other huge broadband providers are governed federally as information providers under light touch Title II rules (which we have said, many times, properly fit their services). Telecommunications providers such as RLECs, conversely, are subject to more stringent Title I regulation. RLECs are required to provide Universal Service at affordable prices to every customer in their franchised areas. AT&T and other information providers have no such legal Universal Service/Carrier of Last Resort obligations. Any reform of the USF contribution and/or distribution system must recognize the inherent regulatory advantages that the mega-broadband providers have over RLECs. USF contributions from AT&T and similar broadband providers must reflect this rational, but none-the-less substantial, regulatory divide.