Economic Impact of the Imposition of a Universal Service Fund Obligation on Cloud Services in the United States

The expansion of the Universal Service Fund contribution structure to include cloud service providers is rumored to be one of the options being considered by policymakers. This study demonstrates that imposing USF fees on cloud computing services will harm US consumers and economic growth across national and state economies. Highlights include: 

• Assuming a hypothetical imposition of a 5 percent USF fee on cloud service revenues that is entirely passed through to cloud customers, the impact on national GDP is expected to range from a decrease of $58.88 billion to $148.18 billion
• The inflationary impact of a 5 percent price increase for cloud services resulting from the imposition of a USF fee could yield a 0.13 percent increase in the overall inflation rate in the US
• Based on an estimate of annual capital spending level of cloud service providers of $54.48 billion per year in the US, the imposition of a 5 percent USF fee will lead to a decrease of $7.63 billion in capital investment by these providers