Broadband subsidies from the Federal Communications Commission are paid for out of the Universal Service Fund" (USF) which, in turn, gets its money from taxes on telephone bills. The FCC runs four programs that way: the Rural Digital Opportunity Fund (formerly known as the Connect America Fund), the e-rate program that pays for broadband service to schools and libraries, the rural health care program, which does the same for hospitals, and the Lifeline program, which buys down service costs for low income households.
Altogether, $11.4 billion was collected for the four accounts last year. The FCC’s republican majority believes “capping the Fund overall will strike the appropriate balance between ensuring adequate funding…while minimising the financial burden on ratepayers”. The next step would be “prioritizing the funding among the four universal service programs and…evaluating the tradeoffs associated with these funding decisions”.
Right now, budgets and priorities for the four programs (and the taxes imposed) are set individually. Instead, the FCC wants to lump together all the broadband (and legacy telephone) subsidy programs, set a limit on the total funding and then direct the money according its own priorities. That would provoke mortal combat according to democratic commissioner Jessica Rosenworcel who said it would “unleash a fight for support between connecting kids in schools and hooking up hospitals” and called the proposal “the universal service hunger games”.
The FCC is taking reply comments from interested parties about its proposal. On Thursday, the California Public Utilities Commission went on record opposing it. Directly or indirectly, California backstops those programs with money from state taxpayers, and limiting or shifting federal dollars could raise costs here.
Another problem with USF that the CPUC points out is that it’s funded by taxes on old school voice service, but the money mostly goes towards broadband…
The FCC has explicitly declined to assess surcharges on broadband Internet access service even though almost all the USF programs subsidize only broadband services…The FCC should address this discrepancy by expanding the base of services to fund the USF, rather than continuing to rely inequitably on a shrinking number of ratepayers who purchase the assessed services that fund the USF.
On top of that, the FCC claims that broadband is an “information” service, rather than a “telecommunications” service. Continuing to subsidise it with taxes collected via telephone bills could become problematic.
Final reply comments are due on 26 August 2019.