Universal Service Fund budget cap promotes efficiency, sustainability

Four different universal service initiatives, each aimed at solving a different problem, are funded by a single surcharge on interstate and international telecommunications revenue. Over the past two decades, each program has grown independently without much regard to cost, or to the activities of the fund’s other programs. As a result, the surcharge has risen from 3 percent in 1998 to a whopping 24.4 percent today. The Federal Communications Commission is currently considering whether to impose a hard cap on the Universal Service Fund (USF). While it has taken steps recently to rein in costs of each individual program, the fund-wide cap represents the agency’s first effort to assess universal service in a more holistic fashion. The proposed cap can improve universal service policy by promoting greater efficiency, encouraging coordination among USF programs, and ultimately assuring the long-term sustainability of the fund in the face of rising costs and a declining revenue base.

As a short-term fix, a hard budgetary cap will help promote efficiency and extend the life of the universal service program. But in the long run, America’s universal service needs will outgrow its existing programs, while the declining revenue base makes the current funding mechanism unsustainable. Ultimately, Congress must redesign its universal service program, breaking it out of its landline-telephone-era box and subjecting it to the same budgetary process and congressional oversight as most other safety net initiatives. A hard budget cap can help us get there by highlighting to Congress the flaws in the current design, while also helping the FCC set a more holistic universal service policy that yields results greater than the sum of its parts.

[Daniel Lyons is a visiting fellow at the American Enterprise Institute and a professor at Boston College Law School, where he teaches telecommunications, administrative, and cyber law, among other courses.]