A Discussion About the State of Universal Service
Friday, May 12, 2023
A Discussion About the State of Universal Service
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Round-Up for the Week of May 8-12, 2023
All people in the United States shall have access to rapid, efficient, nationwide communications service with adequate facilities at reasonable charges. This is Congress' original mandate for the Federal Communications Commission (FCC), a mandate known to many as "universal service."
On May 11, the Senate Commerce Committee's Subcommittee on Communications, Media and Broadband convened a hearing to discuss the current state of universal service as demand for connectivity in all aspects of American life continues to grow. The hearing examined the need for connectivity in rural and insular areas, for health professionals in providing telemedicine and telehealth, for low-income households that otherwise could not afford internet access, and for access to broadband in our nation’s schools and libraries.
The subcommittee is chaired by Sen. Ben Ray Luján (D-NM) who opened the hearing saying the purpose of the discussion was to reflect on lessons learned during the COVID-19 pandemic and the accomplishments made possible by COVID relief packages and the Infrastructure Investment and Jobs Act. Although those legislative efforts allocated funding for new investments in broadband access, adoption, affordability, and application, Chairman Luján believes there is still work to be done to achieve universal broadband in the U.S. Chairman Luján announced that the hearing would kick off a series of information gathering discussions of a new, bipartisan Universal Service Working Group composed of six senators interested in the long-term prospects of universal service.
Some of the primary goals of the Federal Communications Commission (FCC) are universal deployment, affordability, adoption, availability, and equitable access to broadband throughout the United States. To ensure everyone in the U.S. has the broadband needed to succeed and thrive, the FCC collects and disperses support through the Universal Service Fund (USF). The FCC provides universal service support through four "mechanisms" (or programs, if you will):
- High Cost Support Mechanism provides support to certain qualifying telephone companies that serve high cost areas, thereby making phone service affordable for the residents of these regions.
- The High Cost Mechanism provides support through more than a dozen separate legacy and modernized funds (all under the Universal Service Fund umbrella) to eligible telecommunications carriers (ETCs)(1) to deliver affordable voice and broadband service in rural areas that would otherwise be unserved or underserved. The legacy funds support voice service and the modernized funds that make up the Connect America Fund (CAF) and Rural Digital Opportunity Fund (RDOF) to help support building broadband infrastructure in rural America.
- Low Income Support Mechanism assists low-income customers by helping to pay for monthly telephone charges as well as connection charges to initiate telephone service.
- In 2016, the FCC made changes to shift the focus of Lifeline toward enabling low-income consumers to obtain and use broadband. As of March 2022, approximately 94% of Lifeline consumers subscribe to a rate plan that includes broadband service.
- Rural Health Care Support Mechanism allows rural healthcare providers to pay rates for telecommunications services similar to those of their urban counterparts, making telehealth services affordable.
- The Rural Health Care Support Mechanism consists of two component programs: 1) the Telecommunications (Telecom) Program and 2) the Healthcare Connect Fund (HCF) Program. Under the Telecom Program, eligible rural health care providers can obtain rates on telecommunications services in rural areas that are reasonably comparable to rates charged for similar services in corresponding urban areas. The HCF program provides a flat 65% discount on an array of advanced telecommunications and information services such as internet access, dark fiber, business data, traditional DSL, and private carriage services.
- Schools and Libraries Support Mechanism, popularly known as the "E-Rate," provides telecommunication services (e.g., local and long-distance calling, high-speed lines), internet access, and internal connections (the equipment to deliver these services) to eligible schools and libraries.
- In 2014, the FCC focused the E-Rate program on providing funding for high-speed broadband connectivity and set as its first goal to ensure “affordable access to high-speed broadband sufficient to support digital learning in schools and robust connectivity for all libraries."
As part of the Infrastructure Investment and Jobs Act, Congress directed the FCC to report on options for improving its effectiveness in achieving the universal service goals for broadband in light of the new law. That report was delivered to Congress in August 2022 and includes many recommendations for the FCC to consider, but the commission has not launched any proceedings to consider those recommendations as of yet.
On Thursday, the subcommittee heard testimony from Tim Chavez of the Cuba Independent School District in New Mexico, INCOMPAS President Angie Kronenberg, Boston College Law School Professor and American Enterprise Institute Senior Fellow Daniel Lyons, Golden West Telecommunications Cooperative CEO Denny Law, and Greg Guice, the Director of Government Affairs at Public Knowledge.
Mr. Chavez testified about the work he and his staff have done to connect schools through the E-Rate program and students at their homes via the Emergency Connectivity Fund established by Congress through the American Rescue Plan Act of 2021. The Cuba Independent School District covers a total of 120 square miles and has three schools: Cuba Elementary, Cuba Middle, and Cuba High School. The district enrollment has increased greatly from 489 students in 2019 to 769 students in 2023—and the graduation rate has increased sharply in recent years, reaching 95 percent in 2021, significantly higher than the national average. Over 70 percent of the district's students are Native American from the Eastern Navajo Nation and 25% of the students are Hispanic.
"Cuba is a prime example of a rural community stuck on the 'wrong' side of the digital divide," Chavez testified, but the E-Rate has enabled the community to make real progress to close the digital divide. He called for expansion of the program "so that school districts like ours can access more resources to meet modern challenges and give our students the education they deserve."
INCOMPAS is the leading trade association advocating for competition and innovation in the communications marketplace. Ms. Kronenberg testified about the importance of USF for INCOMPAS members. And she noted that even with Infrastructure Investment and Jobs Act support for rural networks, three out of the four USF programs focus on affordability of service to households and community anchor institutions. "We must continue to ensure that communities can afford to subscribe to these essential services," she said.
Kronenberg spoke about the USF's funding crisis as it relies on fees on telephone charges (which are shrinking). INCOMPAS has been working with the USForward Coalition—which consists of over 340 diverse organizations including civil society, trade associations, and broadband providers—that agree that the funding base should be broadened to include broadband service revenues.
Professor Lyons voiced his support for the USF but was very critical of the Lifeline program. He said it is clear that the goal of the program is to help low-income families who would otherwise lack access get voice and broadband service in a cost-efficient fashion—but added, "Unfortunately, it is far from clear whether Lifeline actually helps achieve that goal."
Lyons was also generally positive on the Infrastructure Investment and Jobs Act's Affordable Connectivity Program, but concluded that "one finds the same fundamental flaw that infects Lifeline: It gives a monthly subsidy to a wide range of recipients based on income or participation in other federal programs, on the unproven assumption that these payments will improve broadband adoption rates among low-income families."
He called on the FCC to identify and survey low-income households that currently lack broadband, to identify the characteristics of these families and ascertain the barriers to adoption. "With the results of this study," he said, "the agency then could design eligibility criteria that targets low-income non-adopters in particular, rather than continuing Lifeline’s scattershot program of aiding all low-income households broadly."
The Golden West Telecommunications Cooperative, a member of NTCA–The Rural Broadband Association, serves over 32,000 locations across 24,500 square miles—a geographic area larger than the states of Maryland, New Jersey, Connecticut, and Delaware combined—which equates to fewer than 2 customers per square mile. CEO Denny Law told the subcommittee that ongoing support from the USF's high-cost programs is critical for providers like Golden West to make the business case for investing in and then sustaining broadband for the benefit of rural communities.
"The high-cost USF programs help providers to keep rates more affordable and to justify either use of a provider’s own cash or obtaining financing from the few lenders that tend to serve rural internet service providers on a widespread basis—the Department of Agriculture’s Rural Utilities Service, the Rural Telephone Finance Cooperative, and CoBank," he said. He pointed to three high cost programs that he said are particularly successful: 1) the Connect America Fund-Broadband Loop Support (“CAF-BLS”); 2) the Alternative Connect America Cost Model (“ACAM”); and 3) the “Alaska Plan.”
Mr. Law said he believes the high-cost programs can be summarized as four essential components: availability, capability, affordability, and sustainability. He said any USF reforms should preserve and strengthen those four components.
Mr. Guice's testimony focused on affordability, deployment, and funding reform. On affordability, he stressed the success of the FCC's Affordable Connectivity Program and suggested the commission should reform its Lifeline program with the clear lessons of ACP in mind. Those lessons include expanded eligibility, additional monthly support for subscribers, and flexibility allowing additional broadband providers to participate in the program, which results in more choices for consumers.
On deployment, he noted that Infrastructure Investment and Jobs Act funding will relieve some stress on the FCC's high cost programs, but maintenance, upgrades, and other operating expenses will necessitate continuing support for some rural broadband networks. He said, " Networks do not run themselves; they require people, equipment, maintenance, and upgrades. These are the operating expenses a provider will incur in delivering service to their community. These expenses will still play a critical role in ensuring rural and Tribal communities remain served."
On USF contribution reform, he echoed the USForward Coalition recommendation to include broadband service revenues as part of the support mechanism.
During questioning, each of the panelists—and, frankly, all of the senators—made it clear that the preservation of the Universal Service Fund is important. The contours of a debate around who should pay for USF and how much the USF should pay out became apparent, but no one questioned whether or not the fund should continue.
Sen. Roger Wicker (R-MS), a former chairman of the full committee, and Sen. J. D. Vance (R-OH) both asked panelists to weigh in on mandating that "edge providers" and/or "Big Tech"—companies like Netflix, YouTube, Hulu, Amazon Prime, Facebook, and Microsoft—pay their "fair share" towards universal service. The panel seemed to agree that such a mandate is, for now, outside the FCC's jurisdiction. And Ms. Kronenberg cited Analysys Mason research that found that the world’s largest online content companies invested $883 billion in global digital infrastructure including hosting, transport, and delivery networks, and in 2018-2021, these companies increased their investments by over 50% and invested over $120 billion in digital infrastructure annually. This is in addition to the billions of dollars these companies spend annually on content and applications for consumers. In all, these companies may actually already save broadband providers over $5-6.4 billion annually in network and transit fees.
Senators and panelists raised a few areas where additional USF support may be needed:
- Commerce Committee Chairwoman Maria Cantwell (D-WA) identified the importance of middle-mile networks.
- Sen. Gary Peters (D-MI) asked about including support for cybersecurity for schools and libraries through the E-rate program.
- Sen. Jon Tester (D-MT) discussed poor cell phone coverage in rural areas.
- With the Emergency Connectivity Fund being depleted, Sen. Ed Markey (D-MA) explored the possibility of extending E-rate support to make home broadband connections and devices more affordable for students in low-income families.
- State utility commissions must certify that carriers under their jurisdiction are eligible to receive High Cost support in their states and use all support only to provide, maintain, and upgrade the facilities for which the support was intended.
- How the FCC National Broadband Map Impacts the BEAD Program, Part 1 and Part 2 (NTIA)
- FCC Seeks Comment on Modifying the Calculation of Broadband Benchmarks (FCC)
- New York Attorney General James Secures $615,000 from Companies that Supplied Fake Comments to Influence FCC’s Repeal of Net Neutrality Rules
- Newton N. Minow, FCC Chairman Deemed TV a ‘Vast Wasteland’ (New York Times)
Weekend Reads (resist tl;dr)
- 2022 Federal Broadband Funding Report: Investing in Internet For All (NTIA)
- 2022 Office of Internet Connectivity and Growth Annual Report (NTIA)
- ‘Rip and Replace’: The Tech Cold War Is Upending Wireless Carriers (New York Times)
ICYMI from Benton
- The Future of Universal Service is Still in the Future
- House Commerce Committee Continues Oversight of Federal Broadband Programs
- Reimagining Lifeline: Universal Service, Affordability, and Connectivity
- Broadband Benefit Programs are Helping to Close the Digital Divide
- Keiki to Kupuna, All Hawaiʻi's Residents Need Broadband
May 16—Protecting Critical Infrastructure from Cyberattacks: Examining Expertise of Sector Specific Agencies ( House Commerce Committee)
May 17—AI, emerging technologies, and the division of domestic labor (Brookings)
May 17—Broadband Guidance for Tribal Governments (Department of the Treasury)
May 18—May 2023 Open FCC Meeting
May 18—Delivering the infrastructure decade: Addressing implementation challenges at the state and local level (Brookings)
May 18—Broadband Technical Assistance Webinar (USDA)
May 18—Fiber Workforce Development Guidebook – Workforce Development for BEAD (Fiber Broadband Association)
May 22—Indigenous Connectivity Summit 2023 (Connect Humanity)
May 25—The Intersection of Research & Education Networks and Sustainable Digital Equity Initiatives (Marconi Society)
June 5—RightsCon Costa Rica (AccessNow)
June 5—UTC Telecom & Technology Conference (Utilities Technology Council)
June 8—June 2023 Open FCC Meeting
June 26—Smart Rural Community (NTCA—The Rural Broadband Association)
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