The Universal Service Fund was created by the FCC in 1997 as mandated by the Telecommunications Act of 1996. The goal of the fund is to advance the availability of services to low-income, insular, high-cost and rural areas.
The cable industry has long supported the goals and policies of universal service (USF). Cable voice and other phone customers pay a fee equal to more than 15% of their monthly phone bill into the USF each month. It is vital that the USF work efficiently and effectively for consumers in rural areas and for consumers everywhere who pay the subsidies. Cable supports clarifying the legal obligation for providers of IP-enabled telephony services to pay into USF.
In today’s competitive broadband marketplace, exclusively limiting availability of USF to certain phone companies should be a non-starter. Competitive bidding among all interested companies is proven to be just as effective in delivering broadband to areas that need it, while staying true to the principles of efficiency, competitive neutrality and fiscal control.
The cable industry shares the goal of many policymakers to transition the high-cost fund away from a monopoly-era support program and toward a more modern, neutral, forward-looking and fiscally responsible mechanism. Such a fund would promote efficiency and complement competitive markets by targeting support to those limited areas of the country where it is necessary to make the provision of service economic.
The universal service program, as it stands today, is not sustainable. To address this problem, the cable industry has long advocated the adoption of a mechanism that collects universal service contributions based on assigned telephone numbers. This simple yet effective reform will sustain the long-term health of this fund while still adapting to the evolving technology and economics of voice telephony. Under a telephone numbers-based system, all that matters is whether or not the service uses a phone number. Adoption of this approach would promote competitive neutrality among all voice telephone providers – those who offer their services as a replacement for plain old telephone service (POTS) – and would avoid assessments on services that only include a voice component but are not a substitute for POTS.
Reform of the USF to include subsidizing broadband should limit such subsidy to areas that do not have broadband. The assessment of broadband service is unnecessary to the goal of a stable, sufficient and predictable fund, and would harm those whom policymakers are trying to serve. Instead, an easy solution is at hand – a numbers-based contribution mechanism which is administratively simple, addresses the current problems with declining interstate revenues and bundling of services, and captures new technologies and protocols such as IP-enabled telephony. Competitive bidding should be expanded and must not be delayed or rolled back in the face of pressure from large phone companies who have to date enjoyed exclusive contracts.