Reforming the Universal Service Fund for the Digital Age
Communications Law and Policy in the Digital Age, Chapter 7, pages 123-135, Carolina Academic Press, 2012
11 Pages Posted: 8 Sep 2013
Date Written: 2012
The federal Universal Service Fund program is in crisis.
This observation is neither exaggerated nor controversial. Congress overhauled the program in 1996, ostensibly to assure that as the telecommunications industry transitioned from monopoly to competition, providers would continue to assist those who could not afford basic service. But in the fifteen years since, the fund has doubled in size to $8 billion annually, much of which is spent on projects having little to do with the traditional goals of universal service. The Federal Communications Commission has admitted that the system distorts investment in myriad ways, while the Government Accountability Office has criticized the program for an appalling lack of oversight. At the same time, advances in technology mean that the fund’s cost is drawn from a shrinking base of interstate and international telecommunications revenue, which has caused the USF surcharge paid by consumers on all interstate calls to skyrocket from 3% in 1998 to 17.9% at the beginning of 2012.
To the Commission’s credit, it adopted a sweeping 750-page order in late 2011 that brought much-needed reforms to the High-Cost Fund, the biggest and most problematic portion of the Universal Service program. The Commission also began shifting the program’s focus from ordinary telephone to broadband service, recognizing the importance of high-speed Internet access to modern society. But as significant as those reforms are, and as difficult as they will be to achieve, they represent only the first step toward the transformation needed. Over the next five years, the Commission should refocus the Universal Service program on what ought to be its renewed core mission: assisting consumers who cannot afford broadband access, through market-based, consumer-empowering initiatives that befit an increasingly competitive broadband marketplace. And it should abandon the antiquated and rickety contribution mechanism currently in place, by funding these initiatives instead from the general treasury.
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