The FCC recently released a short document that highlights the benefits that come from the Universal Service Fund. I have to imagine they published this in response to the Universal Service Fund being under fire by the courts and other critics. The biggest current controversy is how the USF is funded, which is mostly on the backs of telephone and cellular customers.
The U.S. Court of Appeals for the Fifth Circuit in New Orleans recently ruled, in a 9-7 vote, that the FCC’s Universal Service Fund structure is unconstitutional. If that case holds up through an appeal to the Supreme Court, the entire fund could be ended. That would force action by Congress to redefine the USF rules to keep the fund operating.
The FCC touts the following benefits from the Universal Service Fund:
E-Rate Program
This program provides subsidized broadband connectivity to schools and libraries. From 2022 to 2024, 106,000 schools and 12,597 libraries received over $7 billion in benefits to reduce the cost of broadband connectivity and internal connections. This benefitted over 54 million students.
Rural Health Care Program
This program provides discounted connections for rural nonprofit healthcare providers. From 2021 to 2023, this fund provided over $1.6 billion to benefit 16,080 health care providers with connectivity costs.
The fund also provided over $98 million in the Connected Care Pilot Program to support 107 projects that are exploring creative ways to provide telehealth services.
Lifeline Program)
As of March 2024, over 7.5 million low-income households were receiving the $9.25 monthly discount for phone and/or broadband service.
High-Cost Program
In 2023, carriers nationwide received over $4.2 billion to build infrastructure to bring better broadband to rural communities.
There are critics of some of these programs. There have been claims over the years of fraud in the Lifeline program. That may still be true to some degree, but the FCC created a fairly effective portal used to qualify Lifeline recipients that should have greatly tamped down the opportunity for fraud.
There are many who think the high-cost programs pay out too much money to rural telcos. In the past, much of this money was a simple subsidy, but more recently these funds are aimed more directly at funding rural infrastructure.
I’ve heard industry folks complain that the E-Rate Program mechanism encourages ISPs to charge higher rates for school broadband since those rates are mostly paid by the USF.
I have a lot of first-hand experience with these programs.
e-rate is a disaster. We compete directly with other providers doing e-rate and we come in with a faster and better product for half the BILLED price. Just do a little napkin math on the quoted numbers above. 106,000 + 12,567 = 118,567 site serviced. 7,000,000,000 / 118,567 = 59038 per location. divided by 24 for the 2 year period = $2,459.93 on average per site for 200Mbps-1Gbps services. That’s unbelievable.
I also run an MSP and we’re seeing obscene billing under e-rate programs. Usually by companies who’s primary ‘skill’ is e-rate and all other skills are… absent.
These programs are surely intended to do good, but it puts the responsibility in the wrong hands almost as if designed to do so. ie, where’s a rule that services have to be at market rate?