Universal Service Fund

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On 3/16/23 bipartisan legislation was introduced in the U.S. Senate aimed at strengthening the USF by expanding the contributions base. Titled the Funding Affordable Internet with Reliable (FAIR) Contributions Act, the legislation, if enacted, would direct the FCC to conduct a study and submit a report to Congress examining the feasibility of collecting USF contributions from internet edge providers. The Bill defines an edge provider as a provider of online content or services, such as a search engine, a social media platform, a streaming service, an app store, a cloud computing service, or an e-commerce platform. The FAIR Act would require the FCC to issue a Notice of Inquiry (NOI) seeking public comment on the issue and to issue a final report within 180 days. The NOI would consider, among others, the following issues:

* The class of firms and services on which contributions could be assessed such as digital advertising and user fees.

* The fairness of the current contribution system as well as the fairness of alternative contribution systems that would create new funding sources for USF.

* The feasibility of assessing contributions on such a broad category of firms that do not currently register with the FCC.

* The effects such a change would have on consumers, including low-income, elderly, and Tribal consumers.

* The effects on the sustainability of the USF both in the immediate and long-term time frames.

* The statutory authority the FCC would require enacting such a change and how such a change would interact with existing Federal and State laws.

As mentioned in the ICORE Blog entry dated 3/10/23, in its 2022 Report on the Future of the Universal Service Fund (Report), the FCC spends considerable time addressing increases to the USF contribution factor that have occurred over time as well as the declining contribution base. The Report discusses expanding the contributions base to include edge providers such as streaming video providers, digital advertising firms, and cloud services companies rather than relying solely on end users that have historically paid the USF fee passed through by providers. Another issue receiving a good deal of discussion in the Report is the scope of the FCC’s existing authority to broaden the base of contributors to include edge providers and possible other entities. Ultimately the FCC concluded that there is significant ambiguity in the record regarding its existing authority and the Report recommends that Congress provide the FCC with the legislative authority to make changes to the contributions methodology. Perhaps the FAIR Act will be the piece of legislation that will provide that authority.

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