How the Universal Service Fund Can Better Serve Consumers While Spending Less

The Universal Service Fund, operated by the Federal Communications Commission in conjunction with the Universal Service Administrative Company, has grown old, expensive, and ineffective. It is past time for Congress to shrink, modernize, and retool it to address today’s broadband ecosystem. While the Supreme Court recently upheld the legal legitimacy of USF’s funding mechanism, the need to reform the program persists. The goal of many USF programs has been to close the deployment gap in America. But thanks to ongoing investment from private Internet service providers, the Broadband Equity, Access, and Deployment program, and USF programs’ past success, the future of USF will be in a country that has achieved universal broadband deployment. Therefore, the first step toward reform should be distribution changes to focus funding on the remaining, and more pressing, causes of the digital divide, particularly broadband affordability. While programs such as E-Rate and Rural Healthcare need to be scrutinized to ensure that they are effective and targeted, this report focuses on the parts of USF that are most in need of reform: sunsetting the High-Cost program and reforming and augmenting the Lifeline program. Once policymakers have determined updated spending priorities, they should also turn to contribution reform to make USF sustainable without undue burdens on consumers.