By Daniel Lyons

Congress is finally demanding action on the Universal
Service Fund.

For well over a decade, a growing chorus of voices have criticized the Federal Communications Commission’s (FCC) universal service program. Scholars, the Government Accountability Office, and the commission itself have examined the murky, off-budget program’s reputation for waste, fraud, and abuse. In many ways, the program is trapped by its telephone-era roots and, shackled by an arcane statutory funding mechanism, has struggled to adjust to the broadband era.

Last year’s Infrastructure Investment and Jobs Act (IIJA) marks an inflection point in this debate. The bill included the single largest federal appropriation ever for broadband investment — $65 billion, designed to promote build-out and mitigate affordability issues. Coupled with this commitment, Congress ordered the FCC to produce a report on the future of universal service. The report, due later this year, represents an opportunity to fundamentally reconsider the program in light of modern developments, including last year’s game-changing appropriation.

Declaring ‘mission accomplished’ on build-out

The IIJA should allow us to close the broadband availability gap once and for all. A 2017 FCC study estimated that it would cost $40 billion to assure that fixed broadband networks reach 98 percent of the American population. In the years since, Congress and the commission have more than met this challenge. The IIJA alone provided $42.45 billion to build broadband networks in unserved areas. And that’s on top of the billions previously made available under the American Rescue Plan Act, the Connect America Fund, the Rural Development Opportunity Fund, and other initiatives at the state and federal level.

Given this influx of government capital, our future universal service efforts should pivot away from additional funding of build-out efforts, instead focusing on making sure that the money already allocated is spent efficiently to build networks to people who lack broadband access. This means using reverse auctions to allocate subsidies to companies, with limits on how much can be spent on general or administrative costs rather than network deployment; setting realistic construction benchmarks and monitoring progress to assure compliance; and prioritizing unserved areas over so-called underserved areas (which, as I discussed earlier, is a key provision in the IIJA).

Once these existing appropriations are spent, it is unlikely we should continue funding network construction going forward. Some argue that the FCC’s current 25-megabits-per-second service threshold is too low to meet the demands of modern society, meaning the true cost of “future proof” networks is higher and will be ever changing. This is, of course, an empirical question, which the commission can address by studying consumer activity and network capacity (a study that, to my knowledge, has not yet been produced by advocates of higher benchmarks). But even if a higher threshold is warranted in the future, breakthroughs in 5G, satellite, and other technology may obviate the need for future public subsidies. The case for future subsidies should not be assumed; it should be proven by data.

Solving affordability
by increasing low-income families’ purchasing power

The IIJA also changed the contours of broadband affordability. As I wrote about earlier, the act’s Affordable Connectivity Program (ACP) provides $30 per month, plus equipment subsidies, to help low-income families pay for broadband service. This reflects a significant upgrade from Lifeline, the telephone-era assistance plan that offers $9.25 per month toward a smaller suite of qualifying plans.

Unlike build-out, affordability is an ongoing universal service concern. But future reforms should continue the ACP’s trajectory of empowering low-income families. Like America generally, low-income consumers are diverse and have heterogeneous needs. An elderly grandmother on a fixed income requires a different broadband plan than a working-class family with three children. The ACP provides the flexibility to choose the plan that suits each recipient individually, rather than forcing recipients into a handful of government-approved plans. Ideally, this assistance should be given directly to recipients through a voucher system — a proposal I and others have previously endorsed — rather than to broadband providers. Direct aid is more portable and allows recipients to participate in the telecommunications marketplace like any other consumer.

Improving accountability
through appropriations

Any discussion about the future of universal service must address the byzantine funding mechanism. The 1996 statute requires universal service to be funded by a surcharge on certain telecommunications revenue, a system that almost no one defends. Going forward, universal service should be put on budget through the appropriations process, like most other aid programs. A hard budget requires efficient practices and subjects the program to congressional oversight, which can reduce the risk of waste, fraud, and abuse — issues that have dogged the incumbent program.

The IIJA’s reporting requirement is an opportunity to look with fresh eyes at our approach to the digital divide. This assessment is long overdue and will help shape a better program going forward.

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