Universal Service Fund

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ISPs ask FCC for tax on Big Tech to fund broadband networks and discounts

big tech, Policy, Universal Service Fund / /
Illustration of $100-dollar bills being sucked into a broadband network.

Internet service providers are again urging the Federal Communications Commission to impose new fees on Big Tech firms and use the money to subsidize broadband network deployment and affordability programs. If approved, the request would force Big Tech firms to pay into the FCC’s Universal Service Fund (USF), which in turn distributes money to broadband providers.

The request was made on June 6 by USTelecom, a lobby group for AT&T, Verizon, CenturyLink/Lumen, and smaller telcos. USTelecom has made similar arguments before, but its latest request to the FCC argues that the recent death of a broadband discount program should spur the FCC to start extracting money from Big Tech.

“Through focusing on the Big Tech companies who benefit most from broadband connectivity, the Commission will fairly allocate the burden of sustaining USF,” USTelecom wrote in the FCC filing last week.

The USF spends about $8 billion a year. Phone companies must pay a percentage of their revenue into the fund, and telcos generally pass those fees on to consumers with a “Universal Service” line item on telephone bills.

The money is directed back to the telco industry with programs like the Connect America Fund and Rural Digital Opportunity Fund, which subsidize network construction in unserved and underserved areas. The USF also funds Lifeline program discounts for people with low incomes.

USTelecom cites death of discount program

FCC Chairwoman Jessica Rosenworcel hasn’t stated any intention to expand USF contributions to Big Tech. Separately, she rejected calls to impose Universal Service fees on broadband, leaving phone service as the only source of USF revenue.

The USTelecom filing came in response to the FCC asking for input on its latest analysis of competition in the communications marketplace. USTelecom says the USF is relevant to the proceeding because “the Universal Service Fund is critical for maintaining a competitive marketplace and an expanded contributions base is necessary to sustain the fund.” No changes to the USF would be made in this proceeding, though USTelecom’s comments could be addressed in the FCC’s final report.

Some people have called for the USF to be expanded in order to revive the Affordable Connectivity Program (ACP), which provided $30 monthly discounts until Congress allowed funding to lapse. That program reduced the price of broadband for people with low incomes while providing more revenue to ISPs. USTelecom’s request for payments from Big Tech argues that the ACP’s lapse is a reason to impose fees on Big Tech.

“Expanding the contributions base to include Big Tech would not only sustain the current USF programs, but would also fund affordability efforts like the ACP long term,” USTelecom wrote. Payments from Big Tech could “enable a permanent Affordable Connectivity Program,” the group said.

In other news related to the Universal Service Fund, the US Supreme Court today rejected a challenge to the fund’s legality that was brought by the conservative Consumers’ Research group. The group challenged the FCC’s authority to raise revenue for the fund but previously lost at the appeals court level, and the Supreme Court declined a petition to take up the case.

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FCC chair rejects call to impose Universal Service fees on broadband

federal communications commission, Policy, Universal Service Fund / /
Ethernet cables connected to the ports in a wireless router

Getty Images | BernardaSv

The Federal Communications Commission chair decided not to impose Universal Service fees on Internet service, rejecting arguments for new assessments to shore up an FCC fund that subsidizes broadband network expansions and provides discounts to low-income consumers.

The $8 billion-a-year Universal Service Fund (USF) pays for FCC programs such as Lifeline discounts and Rural Digital Opportunity Fund deployment grants for ISPs. Phone companies must pay a percentage of their revenue into the fund, and telcos generally pass those fees on to consumers with a “Universal Service” line item on telephone bills.

Imposing similar assessments on broadband could increase the Universal Service Fund’s size and/or reduce the charges on phone service, spreading the burden more evenly across different types of telecommunications services. Some consumer advocates want the FCC to increase the fund in order to replace the Affordable Connectivity Program (ACP), a different government program that gives $30 monthly broadband discounts to people with low incomes but is about to run out of money because of inaction by Congress.

The Universal Service funding question is coming up now because, on April 25, the FCC is scheduled to vote on reclassifying broadband as a telecommunications service in order to re-impose the net neutrality rules scrapped during the Trump era.

Chair fears “major upheaval”

Imposing Universal Service charges on broadband would likely result in ISPs adding those costs to monthly bills and would make the net neutrality proceeding even more of a political minefield than it already is. FCC Chairwoman Jessica Rosenworcel’s net neutrality proposal takes the same stance against requiring Universal Service contributions that the FCC took in 2015 when it first imposed the net neutrality rules.

“We conclude that forbearing from imposing new universal service contribution requirements on BIAS [Broadband Internet Access Service] is in the public interest,” Rosenworcel’s proposal says. “For one thing, we agree with commenters who warn that suddenly and unnecessarily imposing new fees on broadband service could pose ‘major upheaval in what is actually a stable and equitable contribution system.’ Rather than risk this upheaval, we believe it in the public interest to proceed cautiously and incrementally.”

The deferral of action on Universal Service funding is welcome news to cable lobby group NCTA-The Internet & Television Association, even though it opposes the net neutrality plan overall. The NCTA has urged the FCC “to resist calls for immediate action and instead defer to Congress on the complex and controversial issues surrounding contribution reform.” Assessments on broadband “would almost certainly result in new passed-through fees not previously assessed on these services” and “may harm broadband adoption,” the NCTA says.

Broadband industry lobby group USTelecom has called for Big Tech firms to pay into the Universal Service Fund, an argument that has also been made repeatedly by Republican FCC Commissioner Brendan Carr.

Rosenworcel may be inclined to let Congress tackle broadband contributions to Universal Service. Her draft plan also raises the possibility of the FCC addressing the issue on its own in a separate proceeding:

Contrary to the assumption of some commenters, Commission efforts remain ongoing in this area. Congress has also been actively deliberating on legislative proposals to reform the USF contribution and funding mechanisms. USF contribution reform is an immensely complex and delicate undertaking with far-reaching consequences, and we believe that any decisions on whether and how to make BIAS providers contribute to USF funding are best addressed holistically in those ongoing discussions of USF contribution reform, on a full record and with robust input from all interested parties, rather than in this proceeding.

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