FCC chair rejects call to impose Universal Service fees on broadband

The Federal Communications Commission chair decided not to impose Universal Service fees on Internet service, rejecting arguments for new assessments to shore up an FCC fund that subsidizes broadband network expansions and provides discounts to low-income consumers.

The $8 billion-a-year Universal Service Fund (USF) pays for FCC programs such as Lifeline discounts and Rural Digital Opportunity Fund deployment grants for ISPs. Phone companies must pay a percentage of their revenue into the fund, and telcos generally pass those fees on to consumers with a “Universal Service” line item on telephone bills.

Imposing similar assessments on broadband could increase the Universal Service Fund’s size and/or reduce the charges on phone service, spreading the burden more evenly across different types of telecommunications services. Some consumer advocates want the FCC to increase the fund in order to replace the Affordable Connectivity Program (ACP), a different government program that gives $30 monthly broadband discounts to people with low incomes but is about to run out of money because of inaction by Congress.

The Universal Service funding question is coming up now because, on April 25, the FCC is scheduled to vote on reclassifying broadband as a telecommunications service in order to re-impose the net neutrality rules scrapped during the Trump era.

Chair fears “major upheaval”

Imposing Universal Service charges on broadband would likely result in ISPs adding those costs to monthly bills and would make the net neutrality proceeding even more of a political minefield than it already is. FCC Chairwoman Jessica Rosenworcel’s net neutrality proposal takes the same stance against requiring Universal Service contributions that the FCC took in 2015 when it first imposed the net neutrality rules.

“We conclude that forbearing from imposing new universal service contribution requirements on BIAS [Broadband Internet Access Service] is in the public interest,” Rosenworcel’s proposal says. “For one thing, we agree with commenters who warn that suddenly and unnecessarily imposing new fees on broadband service could pose ‘major upheaval in what is actually a stable and equitable contribution system.’ Rather than risk this upheaval, we believe it in the public interest to proceed cautiously and incrementally.”

The deferral of action on Universal Service funding is welcome news to cable lobby group NCTA-The Internet & Television Association, even though it opposes the net neutrality plan overall. The NCTA has urged the FCC “to resist calls for immediate action and instead defer to Congress on the complex and controversial issues surrounding contribution reform.” Assessments on broadband “would almost certainly result in new passed-through fees not previously assessed on these services” and “may harm broadband adoption,” the NCTA says.

Broadband industry lobby group USTelecom has called for Big Tech firms to pay into the Universal Service Fund, an argument that has also been made repeatedly by Republican FCC Commissioner Brendan Carr.

Rosenworcel may be inclined to let Congress tackle broadband contributions to Universal Service. Her draft plan also raises the possibility of the FCC addressing the issue on its own in a separate proceeding:

Contrary to the assumption of some commenters, Commission efforts remain ongoing in this area. Congress has also been actively deliberating on legislative proposals to reform the USF contribution and funding mechanisms. USF contribution reform is an immensely complex and delicate undertaking with far-reaching consequences, and we believe that any decisions on whether and how to make BIAS providers contribute to USF funding are best addressed holistically in those ongoing discussions of USF contribution reform, on a full record and with robust input from all interested parties, rather than in this proceeding.