Rural Telcos and Related Organizations Push for BIAS USF Contributions

Rural telephone companies, trade organizations and a long list related government and industry organizations declared this week that the FCC’s Universal Service Fund (USF) contribution system is out of date and needs immediate reform. The readiest solution, they say, is to expand the list of contributors into the system to include broadband internet access services (BIASs).

“The existing system is inequitable and discriminatory because some consumers pay a disproportionate amount compared to others, even when using similar services,” the groups say in an open letter (PDF) to “broadband policymakers” earlier this week.

Congress created the current USF contribution system through the Telecommunications Act of 1996. The aim was to ensure that rural consumers had access to landline telephone service at prices comparable to urban consumers. The Act based USF contributions on certain revenues from local exchange carriers and long-distance companies. In the years since 1996, the goals of the USF system have shifted from landline service affordability to mostly broadband affordability. However, landline carriers continue to have the contributions burden.

“The USF fee has spiraled from about 7 percent [of interstate revenues] to around 30 percent over the last two decades and could exceed 40 percent in the near future,” the groups said. Landline carriers usually pass those increased expenses to their subscribers.

The letter cites a study by former FCC Wireless Competition Bureau Chief Carol Mattey finding that BIASs’ USF contributions would reduce the rate to less than 4 percent. The letter also claims that adding BIAS contributions “would have no material impact on broadband adoption and retention.”

The groups claim that the FCC currently has the authority to expand the contribution pool without waiting for Congress to act. The day after the groups distributed their open letter, Senators Amy Klobuchar (D-MN), John Thune (R-SD) and others introduced the Reforming Broadband Connectivity Act with USF contribution provisions. The bill would require the Commission to release a study examining USF contributions within 120 days of enactment and complete a rulemaking to reform the contributions system within one year.