Universal Service Fund

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In the recent days and weeks there has been a great deal of discussion at the FCC regarding the issue of Enhanced ACAM (see ICORE Blog entry of 1/20/23). Representatives of the ACAM Broadband Coalition have met with the FCC regarding their Enhanced ACAM proposal and urged immediate adoption of the plan which would include the provision of broadband service at speeds of 100/20 versus the current ACAM deployment obligation of 25/3 as well as increases in the level and term of support. The coalition noted that customers continue to wait for higher speed services and reiterated previous requests for quick action by the FCC to adopt and implement the plan.

Not all Parties agree with the Coalition’s call for immediate adoption of the Enhanced ACAM plan. AT&T has also had discussions with the FCC in recent weeks. Citing concerns regarding the USF contribution factor, AT&T urges the FCC to not take any action that would increase the size of the USF without first addressing the contribution factor and the USF funding mechanism. AT&T estimates that even without adopting the Enhanced ACAM and CAF-BLS proposals, the USF contribution factor could exceed 40% in the next few years (currently the factor is 32.6%). In order to avoid increasing the size of the USF, AT&T suggests that when addressing changes to ACAM the FCC should consider whether certain ACAM locations should be made eligible for the BEAD program, whether other technologies such as fixed wireless would be more cost effective to reach certain high cost locations, eliminating certain areas from ACAM funding where other state or federal agencies have provided funding, and whether the funding term should be significantly shorter than the Enhanced ACAM proposal. In it’s comments/discussions AT&T points to the FCC’s 2022 Report on the Future of the Universal Service Fund (Report) for support of it’s comments and positions.

In the Report, the FCC did spend considerable time addressing the contribution factor and the funding mechanism as well as a myriad of other issues that must be addressed in the future regarding the USF. The Report points to sharp increases in the contribution factor from 16.7% in 2017 to 33.0% in 2022. While disbursements from the fund remained relatively stable, the contribution base has steadily declined leading to an increase in the contribution factor. The Report also indicates that residential household contributions have remained stable in spite of the sharp increase in the contribution factor. In the Report, the FCC acknowledges the need to address the contribution factor and the funding mechanism in general. Considerable discussion is included in the Report addressing the issue, most notably expanding the contribution base to include entities that currently are exempt from contributions to the USF. On this topic, the FCC concludes that it is unclear whether it’s existing authority provides the ability to broaden the base of contributors and recommends that Congress provide the FCC with the authority to make changes to the contributions methodology and base in order to reduce the burden on consumers and to sustain the USF over the long term.

The FCC’s Report as well as recent comments by AT&T and other interested parties indicate that much work lies ahead for the FCC relative to the USF. Notably these issues include Enhanced ACAM and CAF-BLS, the contribution factor and base, and the coordination of USF support with other state and federal broadband grant programs. These efforts will take time especially if Congressional action is required to provide the FCC with the authority to expand the USF contribution base. In the meantime, the ACAM and CAF-BLS programs continue to be based on deployment obligations and support amounts that have become antiquated. In a recent discussion with the FCC, the Broadband Coalition noted that if the Enhanced ACAM program were in place today the USF contribution factor would increase from the current level of 32.6% to 34.0%, an increase of 1.4%. We believe that the benefits that would be derived from the immediate adoption of Enhanced ACAM and CAF-BLS outweigh any negative impacts that might occur as a result of a nominal increase to the USF contribution factor and hope for quick action by the FCC.

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