Universal Service – Sustainability and Business Cases for Rural Connectivity

The federal Universal Service Fund (USF) helps to ensure telecommunications and broadband services are available and affordable for all Americans, supporting critical access for schools, libraries, rural health care, low-income households and rural high-cost areas. Without the USF, it is difficult to make a business case to invest in many rural areas, to sustain networks once they are built, or to keep service rates affordable.

• Without high-cost USF support, the sustainability of existing rural networks and services would be called into question. If USF support were eliminated, operating margins associated with the delivery of services over existing networks built in fulfillment of universal service would become unsustainable. Moreover, once the costs of maintaining and upgrading networks over time to keep pace with consumer demands are factored in, negative cash flows would pose even greater risks to ongoing service delivery and affordability. For example, a 40% reduction in USF support would prevent operators from sustaining operations on existing networks, threatening the long-term viability of broadband access in rural areas.
• High labor costs present a substantial challenge. Labor costs make up about 50% of network operating expenses. With rural labor costs rising faster than inflation, operator margins will continue to shrink, especially where support fails to help address such impacts.
• Funding cuts would threaten rural connectivity and put local economies at risk. Because USF support is targeted to the areas that need it most, the loss of USF support could force operators to discontinue or scale back services being delivered today. This could have a significant impact on essential services, education and commerce, exacerbating the digital divide and leaving many communities unserved or underserved.