Federal Universal Service Fund

The House Appropriations Committee’s proposed report on the Financial Services Subcommittee-cleared measure to fund the FCC and FTC in FY 2022 seeks further work on changes to USF contribution rules and wants additional study of how municipal broadband can expand connectivity access. The committee was still considering the underlying bill late Tuesday afternoon. Dueling panels of telecom policy officials disagreed on how lawmakers should translate into legislation the $65 billion broadband component in a bipartisan infrastructure package framework President Joe Biden endorsed last week (see 2106240070).

FCC acting Chairwoman Jessica Rosenworcel welcomed Commissioner Brendan Carr’s proposal to make Big Tech pay into USF (see 2105240037). The idea is “intriguing,” Rosenworcel said in a statement to us Friday, and the commission “should be open to new ideas.” The funding mechanism is “hopelessly outdated” and the program is “on the verge of collapse,” Carr wrote last week. Under his proposal, Congress would pass legislation that “ensures Big Tech contributes an equitable amount” to USF, he said. Rosenworcel agreed it’s “clear that this would require action from Congress.”

Big Tech should be required to pay into USF, said FCC Commissioner Brendan Carr Monday in Newsweek. It would “secure a funding model that can support the long-term investments needed to close the digital divide,” Carr wrote. “Big Tech has been enjoying a free ride on our internet infrastructure while skipping out on the billions of dollars in costs needed to maintain and build that network.” He said it would take .009% of Amazon, Apple, Facebook, Google and Netflix's 2020 combined revenue to “eliminate entirely the unsustainable 30 percent tax that currently hits consumers on their monthly bills.” USF is “on the verge of collapse,” Carr added, saying he's discussing his proposal with other members of the Federal-State Joint Board on Universal Service. “We hope the FCC will take a common-sense approach and not punish innovative, high-quality streaming services that are fulfilling consumer demand,” said Internet Association CEO Dane Snowden in a statement.

Groups representing smaller carriers emphasized the importance of giving carriers with fewer than 2 million subscribers priority as the FCC establishes rules to pay for ripping and replacing network gear from Chinese vendors. Huawei protested any requirement that equipment be removed from networks and said the program should be voluntary. The FCC should be aware that a global shortage of chipsets (see 2104120057) could complicate replacement, USTelecom warned. Comments were posted Tuesday in docket 18-89.

Telecom and technology are finally converging, but the FCC has been slow to keep up with the change, Commissioner Brendan Carr said Tuesday at FCBA's first “all chapter” virtual event, with members watching from across the U.S.

Big wireless carriers sounded the alarm about California considering a connections-based USF contribution mechanism. Some wireline companies and consumer advocates supported the change, in Monday comments at the California Public Utilities Commission. They highlighted ways to mitigate possible regressive impacts of moving from a revenue-based mechanism for California’s public purpose programs (PPPs). Oklahoma and Nebraska commissions may soon adopt state USF contribution changes, said agency officials in those states.

A federal court agreed with CTIA that a Kentucky 911 law conflicts with the 2018 federal Wireless Telecommunications Tax and Fee Collection Fairness Act. Responding to that federal statute, the 2020 state law made Lifeline providers directly liable for 911 fees and barred them from passing the charge to users. In an opinion (in Pacer) entered Tuesday, U.S. District Court in Frankfort, Kentucky, granted an injunction and restraint against the Kentucky 911 Service Board in case 3:2020-cv-00043. Judge Gregory Van Tatenhove agreed with industry that the Kentucky law is preempted by Section 1510 of the Fairness Act, which limits states from requiring someone out-of-state from collecting state or local fees. “Though the Board alleges that Kentucky’s intention” with the 2020 law “was to comply with Section 1510, the state has failed to do so,” wrote Van Tatenhove. The judge disagreed with CTIA that the law violated two sections of the Communications Act, and he didn’t address the association’s constitutional claims. Section 254(f) on USF doesn’t preempt the Kentucky charge because the fee “has no relation to the manner by which Kentucky operates its universal service fund,” he said. Section 332(c)(3) stopping states’ from regulating wireless provider rates and entry can’t “be read so broadly as to prevent any incidental effects on entry or rates that a [statute] might impose,” he said. The judge disagreed with the state board that CTIA lacks standing as an association representing affected carriers and that Communications Act Section 616a-1(f)(1) exempts state 911 charges from preemption. Such a “broad reading ... would allow states to impose extreme requirements, like the taking of large portions of the service providers’ subsidies, in the name of ‘collecting fees for 911 services,’” he wrote. CTIA is glad the court recognized that the Kentucky law "discriminated against Lifeline providers serving low income consumers," said General Counsel Tom Power. "We are committed to working with policymakers at all levels to ensure all Americans benefit from wireless connectivity and ensure that 9-1-1 systems are appropriately funded." The Kentucky board didn’t comment.

NARUC's Telecom Committee unanimously agreed the FCC should closely review Rural Digital Opportunity Fund long-form applications to ensure RDOF providers have what's needed to deliver on promises. The committee cleared that proposed resolution Wednesday at NARUC's virtual meeting. Earlier, an analyst raised concerns about young companies winning bids. Committee Chair Karen Charles Peterson urged the new FCC to revisit broadband reclassification and net neutrality rules, revamp USF contribution and restore Lifeline voice support.

Rural Digital Opportunity Fund auction winners must follow through on broadband promises, NARUC Telecom Committee members said in interviews last week. NARUC plans to vote at its Feb. 4-5 and 8-11 meeting on a draft resolution urging the FCC to scrutinize RDOF long-form applications (see 2101260033). Some commissioners raised doubts about fixed wireless and said they’re unfamiliar with entities that won federal dollars.

USF is reaching a tipping point, industry experts said in recent interviews. Revenue continues to decline, and the contribution factor is expected to reach a record 31.8% (see 2012150018). As President-elect Joe Biden prepares to take office, there's some hope among broadband advocates that he will nominate someone to the FCC who brings the political will to tackle USF revisions.