Any USF Contribution Base Revisions Require New Comment Period, Industry Says

The FCC has the authority to include broadband services revenue in the USF contribution base but would need to establish a comment period before making any changes, industry groups said in recent interviews. A new report suggests adding broadband providers could drop the contribution factor to as low as 4% and avoid facing direct congressional appropriations (see 2109130053).

The last time the commission sought comments on whether it should change the USF contribution methodology was in 2012, asking whether broadband service providers should be included in the contribution base. No action was taken after comments were received.

Universal service “must expand its base in order to survive,” said former FCC Commissioner Rachelle Chong: “The logical way is to include broadband internet access service.” Providers “know it’s coming” because “it’s obvious that almost all communications run across either wireless or wireline broadband networks.”

Requiring that broadband providers contribute based on revenue is the most "straightforward" path, said NTCA Senior Vice President-Industry Affairs Mike Romano: "It's something the agency has the authority to do." Romano said most NTCA members already pay into USF and would be willing to pay slightly more if it helped the fund’s sustainability because they also benefit from certain USF programs.

The FCC has two potential avenues to contribution reform, Chong said. The first is reclassifying telecom services under Communications Act Title II authority. The other is setting up a comment period and rulemaking, but “I think that one is more susceptible to legal challenge,” she said. The FCC declined to comment.

The FCC will have to go through a notice and comment period to change rules, said Public Knowledge Director-Government Affairs Greg Guice. Including broadband revenue is a “good path forward” because the FCC has existing authority to do that, he said. The first step would need to be issuing a public notice seeking a refresh of the record.

Contribution reform is “very likely to resurface on the FCC’s list of priorities once the president fills the current commissioner vacancy,” emailed NARUC General Counsel Brad Ramsay. Expanding the contribution base is “certainly feasible,” Ramsay said. Contribution methodology reform "has always been more of a political problem than a legal one" and "the only restrictions in the current statute are on how the funding mechanism is structured are legal."

Adding broadband providers to the contribution base based on revenue is "the fastest and easiest way to save the USF program and do it in a way that's transparent," said Incompas General Counsel Angie Kronenberg. "The system is under duress" and it's "critical" that the issue be addressed because the contribution factor has nearly tripled since the FCC last visited it, Kronenberg said.

Others suggested a more reasonable approach would be direct congressional appropriations. “The tracks are running out in front of the train at this point,” said National Taxpayers Union Policy and Government Affairs Associate Will Yepez: “The general premise that we would tax a service into wide availability doesn’t make as much sense as congressional appropriations at this point.”