Regulation - What is it Good For?

The Future of the Universal Service Fund

The FCC adopted a Notice of Inquiry on December 15 that asks for comments about the future of the Universal Service Fund. There is not a lot of time to respond with the holidays in the middle since comments are due on January 18. But the NOI is asking the right questions.

High-Cost Programs. On the topic of the High-cost programs, it asks how the giant BEAD grants will impact the future of the FCC broadband awards. It asks if there should be an additional round of RDOF. It asks if some of the highest-cost areas constructed with the BEAD grants will need ongoing high-cost support. It asks if the FCC should adopt a standard of 100/20 Mbps as a requirement for future high-cost support. It asks about the use of future reverse auctions.

Lifeline. The NOI asks about the future of the existing Lifeline fund in light of the funding given to the EBB program and now to the ACP program that provides a larger monthly broadband subsidy.

E-Rate. The NOI asks if the E-Rate program for schools and libraries should be changed due to anything that came out of the Infrastructure Act. It asks about ways to protect against waste, fraud, and abuse.

Rural Health Care. The NOI asks if the program changes due to telehealth funding in the Infrastructure Act.

Funding. The NOI asks if the method of funding the USF should be changed.

I’ve written about all of these questions before. Here are a few quick thoughts I have on these questions – each question deserves a much longer response:

The FCC’s high-cost funding has outlived its usefulness. While this funding did a lot of good and helped telcos build rural fiber, it also made some telco owners rich through overpayments. The overpayments became obscene when the FCC gave $11 billion in CAF II funding to the big telcos and then ignored the reports that upgrades weren’t being done. The RDOF reverse auction is a giant mess and will turn into a disaster if the FCC doesn’t soon kill off unworthy awards in favor of BEAD grants. It’s time to kill this program completely, get the FCC out of the broadband funding business, and downsize the USF accordingly. The need for broadband funding can always be revisited in a decade if some rural places still need ongoing support. But even revisiting the idea is suspect because the FCC is always going to rely on poor mapping and inadequate cost models to determine who gets funded.

The $9.95 Lifeline fund still has some use to support cellphone for homeless and other forgotten communities. But the monthly subsidy is too small to make home broadband more affordable. The FCC should either re-purpose the Lifeline fund to strictly support low-income cellphones or kill the program.

The E-Rate program provides noticeable benefits to schools and has brought gigabit broadband to some of the poorest parts of the country. I’ve never heard anything but good about the Rural Health Care funding.

As far as funding – if the High-cost fund and Lifeline programs are curtailed or eliminated then the amount of needed funding drops drastically. But I think a more fundamental question needs to be asked. Why is the FCC still being allowed to operate a giant slush fund? A huge percentage of the funding over the years has gone to the big ISPs. The USF has been riddled with stories of abuse and fraud. The primary problem with the USF is that regulators are trying to run national one-size-fits-all programs without the needed facts or staffing to do it right. I think it’s time to have a conversation about ending the Universal Service Fund. The E-Rate and Rural Health Care programs are successful, but they are something that should be funded by Congress. Let’s get regulators out of the funding business and aim the agency back towards their primary goal of regulating the broadband industry – instead of funding the companies the FCC is supposed to be overseeing.

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