TR Daily Draft NPRM to Set Overall USF Cap Sparks Debate
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Wednesday, March 27, 2019

Draft NPRM to Set Overall USF Cap Sparks Debate

A draft notice of proposed rulemaking (NPRM) that FCC Chairman Ajit Pai is circulating among his fellow Commissioners would seek input on the possibility of setting an overall cap on the agency’s various Universal Service Fund (USF) programs.

Advocates for USF programs and the agency’s two Democratic Commissioners are saying that such a cap is contrary to the FCC’s stated goals on deploying broadband, especially in light of major concerns that the FCC has not done a good job of measuring where broadband is still needed. One Republican Commissioner, however, has already voted to adopt the NPRM.

The FCC currently sets separate caps or budgets for the various components of the USF, which includes programs such as the Connect America Fund and Mobility Fund to subsidize service in high-cost areas with low population density and challenging topography; the Lifeline and Linkup programs to fund service discounts for low-income consumers; the E-rate program to fund service discounts for schools and libraries based both on population density and population incomes; and the rural healthcare or telemedicine program to fund discounted telecom service for hospitals and clinics serving rural communities.

The draft NPRM would invite input on the possibility of setting an overarching cap for the combined USF program, on what the overall cap should be, and on methods for dealing with prioritizing funding among the programs if the overall cap were breached.

The USF is funded through contributions assessed on service providers’ interstate and international telecom service revenues, which are typically passed on to customers as a line-item surcharge on their bills. The contribution factor is calculated quarterly by the Universal Service Administrative Co., subject to FCC approval. The FCC’s Office of Managing Director recently announced that the proposed universal service contribution factor for the second quarter of 2019 will be 18.8%, absent action by the Commission (TR Daily, March 13).

In a statement, Commissioner Mike O’Rielly said, “Adopting an overall spending cap for the Universal Service Fund, as proposed in the recent circulation item, is both overdue and incredibly needed. The Commission must inject fiscal responsibility into the USF by establishing an upper boundary of how much we are willing to take from hardworking American consumers who support the program through higher fees on their phone bills. I appreciate the Chairman’s willingness to circulate the item, which I have voted to approve, and look forward to a robust record that will result in a final cap in the very near future.”

Commissioner Jessica Rosenworcel said, “The FCC’s proposal flies in the face of the agency’s own rhetoric about bridging the digital divide. It threatens to cut off broadband in rural areas, limit high-speed Internet access in America’s classrooms, shorten the reach of telemedicine nationwide, and foreclose opportunity for those who need it most.”

Commissioner Geoffrey Starks said, “It is incredible to me that the Commission would consider an item proposing to limit our ability to fund our Universal Service programs, which support broadband buildout and adoption in this country, at the same time that we have before us a broadband deployment report riddled with significant and unresolved allegations of inaccuracies and overstatements. It has become increasingly clear to me that we cannot currently claim with any confidence to know who in this country has broadband and who does not. This relentless desire to claim victory despite overwhelming evidence that much work remains to be done is counterproductive to good policymaking.”

Commissioner Starks added, “I have recently had the opportunity to visit people and anchor institutions across the country who deeply rely on our universal service programs to get and stay connected. I know the value of these programs and every dollar that they distribute. Putting an arbitrary limit on the amount of money that we can spend at this stage is premature, runs counter to the goals and obligations imposed on us by Congress, and would necessarily pit hospitals, schools, libraries, students, patients, and millions of Americans who lack broadband — in both rural and urban areas — against one another for these funds. This would be a terrible result. The circulated item takes us in the wrong direction.”

Spokespersons for Chairman Ajit Pai declined to comment on the circulating item or the reaction it has received.

Commissioner Brendan Carr is in Kenya, meeting with African regulators in Nairobi to discuss 5G wireless technology and other connectivity issues, and traveling as part of a broader U.S. delegation, and he could not be reached for comment.

John Windhausen Jr., executive director of the Schools, Health & Libraries Broadband (SHLB) Coalition, issued a statement urging the FCC not to cap the USF programs.

“The SHLB Coalition completely agrees with the importance of fiscal responsibility, but imposing an arbitrary cap on the USF expenditures is an awkward approach that could undermine the FCC’s stated ‘top priority’ of closing the digital divide. A more effective strategy would be to improve the operation of the USF programs and streamline the application processes. For example, the FCC could get more ‘bang for its USF buck’ by eliminating silos and allowing applicants to apply for multiple USF programs in a single application,” Mr. Windhausen said.

Benton Foundation Executive Editor Kevin Taglang said, “The Benton Foundation unequivocally opposes any proposals from the Federal Communications Commission that would allow the FCC to shirk its responsibilities to meet its Congressionally-mandated mission.”

He added, “USF budget reductions or caps could stall and stifle America’s internet opportunity. They would undercut critical efforts to close the digital divide, efforts meant to ensure that every American can take advantage of the transformative opportunities that broadband can deliver.”

Mr. Taglang said that the FCC should instead “spend its time working to eliminate the bureaucratic barriers that are preventing these programs from getting the most bang for the buck and achieving their maximum potential.” —Lynn Stanton, [email protected]

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