R Street Submits Comments to Senate Universal Service Fund Working Group
Senator Ben Ray Luján
498 Russell Senate Office Building
Washington, DC 20510
Senator John Thune
511 Dirksen Senate Office Building
Washington, DC 20510
Senator Amy Klobuchar
425 Dirksen Senate Office Building
Washington, DC 20510
Senator Shelley Moore Capito
170 Russell Senate Office Building
Washington, DC 20510
Senator Gary Peters
724 Hart Senate Office Building
Washington, DC 20510
Senator Jerry Moran
521 Dirksen Senate Office Building
Washington, DC 20510
RE: Universal Service Fund (USF) Working Group Request for Comment
Dear Senators Luján, Thune, Klobuchar, Capito, Peters, and Moran:
Thank you for the opportunity to submit comments before you on the future of the Universal Service Fund (USF). The working group has requested comment on a series of questions, some of which we seek to address and make recommendations for the committee on how to proceed with a 21st century USF.
The R Street Institute is a think tank engaged in policy research in support of free markets and limited, effective government.[1] One of our areas of focus is finding market-based solutions to bridge the digital divide, which includes proposing meaningful reforms and improvements to the USF.
On Nov. 15, 2021, the Infrastructure Investment and Jobs Act became law and included language creating the Affordable Connectivity Program (ACP), which provides eligible customers with a voucher for fixed or mobile broadband for a discount of up to $30.[2] What sets the ACP apart from other broadband programs is its tech neutrality. It does not limit customers to a specific means of connection and instead allows them to choose the services they want.[3] It also affords flexibility to providers, who can offer any of their plans to ACP customers without undue burdens or restrictions that many other broadband-access programs include. In fact, several carriers began offering broadband plans for $30 or less, essentially providing a zero-cost broadband plan to eligible consumers.[4]
As this working group and Congress consider reforms to the USF program, we strongly urge that any reforms include the ACP Program. Absent Congressional intervention, ACP funds may run out as early as the first half of next year.[5] Before any long-term solution is considered, Congress should at least ensure a short-term extension of the ACP. Doing so would also provide Congress with an opportunity to examine the program’s eligibility criteria to potentially lower the cost of the benefit and ensure that the ACP targets customers who depend on it to remain connected. Additionally, an extension of this program would provide more time to fix the USF program and address the affordability gap of the digital divide.
Currently, unlike the ACP, the USF is not funded by congressional appropriation but by “a percentage of […] interstate end-user revenues to the United Service Fund.”[6] The current contribution has reached 29 percent.[7] This results in a regressive tax on those who still depend on traditional telephony. As Congress reforms the programmatic aspects of the USF, it should also look to address the contribution factor and consider a direct appropriation. This would ensure that Congress could continue to play a hand in the program and keep spending to a fixed amount every year.
Currently, the USF has several core programs. Below, we propose ways to modernize and improve those programs.
Lifeline
The Lifeline program provides eligible customers a discount of up to $9.25 for internet or voice service.[8] Like the ACP, it uses the Universal Service Administrative Company (USAC) to disburse funds. However, Lifeline, unlike the ACP, does not offer the flexibility of service that allows customers to choose their service.[9] Additionally, Lifeline requires providers to carry an Eligible Telecommunications Carrier (ETC) designation.[10] This regulatory burden limits the number of providers able to participate in the Lifeline program, which is a detriment to customers. The ACP could replace much of Lifeline’s function by providing a larger, more flexible benefit to cover broadband or internet services.
Importantly, because Lifeline also covers telephony, we suggest a smaller Lifeline benefit that provides a voucher to subsidize the cost of only voice telephony. This would dramatically reduce the budget for the Lifeline program and make it narrowly tailored to voice, as the original statute intended.
E-Rate
The E-Rate program subsidizes the cost of internet service, internet infrastructure, and devices for schools and libraries.[11] The goal of this program has evolved to “expand WI-FI access.”[12] Currently, E-Rate schools receive discounts of between 20 percent and 90 percent based on the poverty levels of the schools.[13] E-Rate relies on vendors participating in a system of competitive bidding to USAC, which limits options and choices of what services and devices the school can purchase.[14]
In 2021, the funding cap for the program was $4.276 billion. During the COVID-19 pandemic, the Federal Communications Commission tried to expand the program to help connect families during lockdown by allowing E-Rate to purchase devices to be issued to homes and students.[15] Although the E-Rate program is seen as a political landmine, we suggest that this working group consider a voucher program that provides a tech-neutral discount to simplify the process for schools and libraries to cover the costs of connectivity through devices or services.
High Cost
The High Cost program provides ETCs with funds—largely from Connect America Fund dollars—to offer voice and broadband services in unserved areas.[16] In November 2021, the president signed the Infrastructure Investment and Jobs Act (IIJA), which included $42.45 billion to develop deployment and adoption programs in the United States.[17] In addition, earlier this year, the Government Accountability Office released a report highlighting that the federal government currently operates 133 funding programs across 15 agencies.[18] Congress should consider consolidating as many of these programs as possible, including the High Cost program. This program is not necessary with the Broadband Equity, Access, and Deployment (BEAD) program and is likely to result in overbuilding or duplicative investments. However, a smaller program to maintain networks in high-cost areas could be considered.
Conclusion
With the ACP funding due to expire early next year, Congress is in the perfect position to not only continue the program but also make meaningful changes to ensure its longevity and sustainability. By extending the ACP, Congress would have the opportunity to revisit the USF and design a modern, 21st century broadband-affordability program that reflects the growing competition and technological advances in a tech-neutral, long-term, sustainable way.
R Street looks forward to continuing this important conversation and is happy to serve as a resource on this issue.
Respectfully submitted,
__/s/________________________
Jonathan Cannon
Policy Counsel
R Street Institute
1212 New York Ave. N.W.
Suite 900
Washington, D.C. 20005
(202) 525-5717
[email protected]
[1] R Street Institute, About Us, https://www.rstreet.org/about-r-street (last visited Aug. 10, 2023).
[2] Text – H.R.3684 – 117th Congress (2021-2022): Infrastructure Investment and Jobs Act, H.R.3684, 117th Cong. (2021), https://www.congress.gov/bill/117th-congress/house-bill/3684/text.
[3] Jonathan Cannon, The Affordable Connectivity Program: When Government Spending is Good (Apr. 19, 2023). https://www.rstreet.org/commentary/the-affordable-connectivity-program-when-government-spending-is-good.
[4] White House, Get Internet, https://www.whitehouse.gov/getinternet (last visited Aug. 10, 2023).
[5] Affordable Connectivity Program, Institute for local self-reliance, https://public.tableau.com/views/ACPDashboard-Iteration4/Dashboard-IT4?:showVizHome=no (last visited Aug. 10, 2023).
[6] Federal Communications Commission, Contribution methodology & Administrative Filings, https://www.fcc.gov/general/contribution-methodology-administrative-filings (last visited Aug. 10, 2023).
[7] Federal Communications Commission, Contribution Factor & Quarterly Filings – Universal Service Fund (USF) Management Support, https://www.fcc.gov/general/contribution-factor-quarterly-filings-universal-service-fund-usf-management-support (last visited Aug. 10, 2023).
[8] Federal Communications Commission, Lifeline Program for Low-Income Consumers, https://www.fcc.gov/general/lifeline-program-low-income-consumers (last visited Aug. 10, 2023).
[9] Id.
[10] Universal Service Administrative C., Join Lifeline as an ETC, https://www.usac.org/lifeline/get-started/join-lifeline-as-an-etc/#:~:text=Eligible%20telecommunications%20carriers%20(ETCs%2C%20or,the%20federal%20universal%20service%20fund (last visited Aug. 10, 2023).
[11] Federal Communications Commission, E-Rate: Universal Service Program for Schools and Libraries, https://www.fcc.gov/consumers/guides/universal-service-program-schools-and-libraries-e-rate (last visited Aug. 10, 2023).
[12] Id.
[13] Id.
[14] Id.
[15] Universal Service Administrative Co., COVID-19 Response, https://www.usac.org/e-rate/resources/covid-19-response (last visited Aug. 10, 2023).
[16] Universal Service Administrative Co., High Cost, https://www.fcc.gov/general/universal-service-high-cost-areas-connect-america-fund (last visited Aug. 10, 2023).
[17] Text – H.R. 3684 – 117th Congress (2021-2022): Infrastructure Investment and Jobs Act, H.R. 3684, 117th Cong. (2021), https://www.congress.gov/bill/117th-congress/house-bill/3684/text.
[18] GAO, Broadband: A National Strategy Needed to Coordinate Fragmented, Overlapping Federal Programs, GAO-23-106818, https://www.gao.gov/products/gao-23-106818 (May 10, 2023).