FCC Chairman Brendan Carr has been promising a top-to-bottom review of the Universal Service Fund (USF), and on April 29, the FCC released a Notice of Proposed Rulemaking (NPRM) that looks specifically at the High-Cost fund mechanisms that provide ongoing subsidies to ISPs operating in very rural markets. The High-Cost fund is the USF program that most people in the country (and even the industry) don’t understand.
The High-Cost program was initially created to support rural telephone companies in rural markets with the highest network costs per customer. Over time, the subsidy transitioned to provide support for rural broadband networks. Subsidies are paid today through several mechanisms: Connect America Fund Broadband Loop Support (CAF BLS), High Cost Loop Support (HCLS), and the sunsetting Alternative Connect America Cost Model (A-CAM) I, Revised A-CAM I, and A-CAM II mechanisms. Each of these plans is available to a different set of telcos or carriers, and the rules for participating in these plans are written in legalese that would probably confound most readers.
This new FCC NPRM asks a lot of questions about High-Cost support, with an eye towards possibly radically changing the program. The specific areas of questions asked by the FCC include:
Is Change Needed? The NPRM asks if these programs should be modified. It offers three options for respondents: 1) update the mechanisms to reflect the current rural broadband landscape; 2) create a new fixed-support mechanism to replace A-CAM and the other subsidies, or 3) do nothing and let the current A-CAM plan sunset over time and disappear.
Types of Support Needed. The NPRM asks about the type of support that might be appropriate in different circumstances, such as when a carrier is already providing service in an area, when a competitor appears in a rural market, or when new broadband infrastructure is being brought to a subsidy area by BEAD or other funding programs.
Impact of Satellite. The FCC asks if there should be any recognition or consideration in the subsidy plans to recognize low-orbit satellites.
Deployment Obligations. What should a high-cost subsidy recipient have to do in return for accepting the subsidies in terms of constructing infrastructure or maintaining networks?
Extension of the Current A-CAM? The payments for the current A-CAM programs will sunset between 2026 and 2028. The FCC is asking if all of the various remaining plans should be put on the same timeline.
IP Transition. The FCC wants to know if there is a role for the Universal Service Fund to be used to encourage telcos and carriers to complete the IP transition away from TDM technology.
The FCC is also looking at the other parts of the Universal Service Fund. At the end of April, the FCC voted to implement an online competitive portal where ISPs can bid to provide broadband service for schools and libraries that qualify to participate in the E-Rate program. The stated purpose for going to an online portal is to reduce waste, fraud, and abuse.
In April, the FCC issued an NPRM that asks for feedback about the Lifeline Fund. Among the FCC’s proposals in the NPRM is to end the Lifeline subsidy for telephone-only service. The agency also wants to strengthen the use of the National Verifier database that verifies eligibility. The agency was prompted into action when it was alerted that $5 million in Lifeline funds had been distributed to carriers to support service people who had died.
Finally, in April, the FCC sought comments on the structure and operations of USAC, the non-profit agency that administers the USF.
This deals largely with the “output” of USF, or where the money goes. I think Congress needs to revise the “input” to USF, or where the money comes from. A summary from Google AI says “The Problem: While the USF primarily spends its money to support broadband expansion in rural areas and schools, it collects almost all its money from voice-related revenues.”.
In my comments on FCC-108, I wrote “The NPRM cites letters from Congress at
https://ecfsapi.fcc.gov/file/2038710001.pdf as in indication that Congress did not intend for ISPs to be regulated as telephone companies. The first of the cited letters (from John D. Rockefeller IV) concerns ISP contributions to the Universal Service Fund. His letter says “We believe it is also imperative that the Commission revisit its decision regarding the exemption of Internet service providers from universal service contributions and access charges. New reports of offerings of voice to voice telephony and fax services over the Internet — the providers of which do not pay either either access charges or universal service contributions — indicate that these providers are are indeed now offering telecommunications services, and that they should incur universal service obligations. Like long distance carriers, these providers rely on the local phone
network to receive and deliver their services. They should not be allowed to continue to burden without paying their fair share for its upkeep.”
To me, USF should “even out” the cost of service over the country, much as the first class stamp gets a letter (or more like, a bill) delivered to both urban and rural areas.
“the providers of which do not pay either either access charges or universal service contributions”
this is incorrect. VoIP services are telecom services and ISPs do file and pay USF fees for those. The internet service is not telecom, but the voice is and requires appropriate filings and USF fees.