It’s Time to Shore up the Universal Service Fund So It Can Live up to Its Name

The pandemic continues, highlighting the need of every American for fast, reliable broadband to function effectively in these challenging times. Those needs have been elevated in the past several months as so much more of our lives, from working to learning and receiving health care, has moved online. So the question of how best to ensure that every American has affordable access to broadband has taken on a new urgency. 

There’s a major stumbling block though. To put it simply, the Federal Communications Commission’s Universal Service Fund, or USF, which was set up to ensure all Americans have access to communications services, to this day depends on a “tax” on revenues from what most of us know as “long-distance” phone service. And as you might imagine, those revenues have declined precipitously as consumers cut the cord in favor of broadband-enabled options (which are not subject to the USF “tax” or contribution rate). 

Unsurprisingly, therefore, the contribution rate has shot up—it’s now more than 26% of total long-distance and international phone charges. And it will continue to rise as the services upon which the rate is based further decline. At the same time, USF programs face increasing demands as more Americans realize the need for broadband and want to be connected. The existing USF funding structure of drawing an ever-increasing amount from an evaporating pool is unsustainable and in urgent need of reform.

The pandemic did not cause the problem. The writing has been on the wall, as Americans have been rapidly moving from landline phones to broadband for many years.

Crises, though, have a way of bringing long-simmering problems into sharp relief. The USF program’s funding mechanism is doomed for failure, and addressing the issue cannot wait any longer. The question really becomes whether we want everyone to have access to fast broadband, or not. If we do, then fundamental change to the USF system—moving to one of direct appropriations—is essential.  

The current funding mechanism made rough sense when the goal of USF was to ensure that everyone had access to basic telephone services, but in 1996 Congress changed the USF to include support for broadband deployment, increasing program cost without modernizing the old funding formula. It’s a matter of time until it collapses under its own weight.

Instead of simply tinkering with the existing funding mechanism, it’s time to implement a 21st-century solution, one that reflects how Americans actually use telecommunications services rather than how we once did—and, equally importantly, one that reflects the obvious fact that the way Americans communicate will continue to change. Otherwise, we could reform the system now only to discover that the funding base has again shifted, and we wouldn’t have solved the problem. That’s why a more fundamental change is appropriate, one that reflects the essential importance of broadband in the daily lives of Americans.

The most sensible approach is for Congress to provide general fund monies for universal service, completely replacing the reliance on telephone revenues.

Congress should determine the scope of the broadband deployment gap and set program size accordingly. As the pandemic has taught us, broadband is more essential today than ever before, and there is a national need for government to fill the gap, providing broadband in unserved areas. Now is the perfect time to merge the longstanding need for USF reform with the urgent need for greater broadband deployment to make its availability universal. 

Unfortunately, there’s sometimes been a long history of inertia in telecom policy formulation. For instance, a 3% tax on telecommunications services that was imposed in 1898 to fund the Spanish-American War wasn’t repealed until 2006. No American should have to wait that long—or, really, any longer—for the broadband necessary for education, telehealth, commerce and entertainment. 

Congress should get this right and fast. Fundamental change now is the best way forward for universal access to broadband.

Rick Boucher was a member of the U.S. House for 28 years and chaired the House Energy and Commerce Committee's Subcommittee on Communications and the Internet. He is honorary chairman of the Internet Innovation Alliance and an attorney in the Washington DC office of the law firm Sidley Austin.