Universal Service Fund Reform

The FCC should review and update the Universal Service Fund (USF) to ensure that funding is still going to where it is truly needed.

With the billions of dollars that Congress and the Biden Administration are investing in broadband infrastructure deployment and affordability programs through the bipartisan Infrastructure Investment and Jobs Act (IIJA) and other pandemic-related funding, the FCC should review and update the Universal Service Fund (USF) to ensure that funding is still going to where it is truly needed.

The USF has helped millions of families, community anchor institutions, and small businesses connect to voice and broadband services for several decades, but it is in a crisis. The USF is funded by assessing a fee (“contribution factor”) on interstate and international telecom revenues, which have been declining as broadband revenues increase. As a result, the contribution factor continues to increase and add a large fee to customers’ bills. The contribution factor reached 34.5% in Q4 2023 and is expected to reach almost 50% by 2027 if no action is taken. Such a high fee is unsustainable, harms consumers, and causes market distortions.

The USForward Report

The USForward Report—written by a USF expert and former FCC official—recommends that the FCC expand the USF contribution base to include broadband internet access service revenues. We support the USForward Coalition, which consists of over 340 diverse organizations that all agree with the USForward Report’s recommendation. Doing so would decrease the factor to less than 4% and ensure that every consumer and business that relies on broadband is contributing to the USF. An economic report by the Brattle Group supports this recommendation and found that assessing broadband internet access service revenues is the least distortionary and best path forward.

The FCC has the authority and statutory responsibility to complete reform to ensure that the USF can continue to meet its mission.It is time for the FCC to modernize the contribution system and put the USF on a sustainable path.

Resources