SHLB Coalition, INCOMPAS, and NTCA, with support from Public Knowledge recently released a report on Reforming Universal Service Contributions Mechanism, which could also be called – how to save Universal Service and help keep more online at all incomes. They look at some options…

To ensure the enduring value of the USF program and America’s connectivity goals, we must have a smart and substantive conversation about the pro[1]gram’s future. At the request of INCOMPAS, NTCA – the Rural Broadband Association, and the Schools, Health & Libraries Broadband (SHLB) Coalition, this report analyzes several options for FCC reform of the current status quo that have been pending in FCC rulemakings dating back to the early 2000’s: (1) modifying the current revenues-based contribution methodology to assess broadband internet access service revenues, (2) assessing connections, or (3) assessing telephone numbers.

They make recommendations…

Reforming the current revenues-based system to include broadband internet access service revenues is the preferred approach, both as a matter of policy and ease of implementation. Doing so would reduce the contribution factor to less than 4%.

First, it is appropriate as a matter of public policy to assess broadband internet access service revenues because all four programs in the USF promote universal broadband. The revenues from broadband internet access services that are increasingly used by Americans today should contribute to the USF programs that support the expansion of such services to all. This will better reflect the value of broadband internet access service in today’s marketplace for both consumers and businesses.

Second, broadband internet access service revenues are expected to be stable in the future, with the potential for some modest growth. This would stabilize the funding mechanism and stop the death spiral in the current USF contribution methodology.

Third, it is a solution that can be implemented more quickly than the alternatives. It would be far less uncertain than seeking congressional intervention and can be done by the FCC pursuant to its current statutory mandate. FCC reform of the USF contribution mechanism now is an important first step in stabilizing the current system.

Fourth, there is a significant advantage to retaining the current revenues-based system because most of the revenues reported to the FCC for USF purposes come from publicly traded companies that are audited and subject to stringent financial

reporting standards for their revenues. This external financial scrutiny would provide an additional level of assurance that the metric used to assess USF contributions is accurately reported.

Fifth, assessing both broadband internet access service and voice services removes the incentives of providers to arbitrarily allocate revenues from bundled services to one service and not the other. This creates an inequitable situation where some end users continue to pay into USF, while others do not, yet everyone benefits from the positive network externalities of universal connectivity made possible from the four USF programs that support broad[1]band-capable networks and service.

Reform of the current system of financing universal service is long overdue. The FCC has sought comment multiple times on various permutations of the options analyzed in this report and has the ability to move forward to assess broadband internet access service revenues without congressional action. The rapid increase in the contribution factor over the last decade and potentially in the future puts the stability of the entire USF at risk. While other proposals to help finance universal broadband may warrant further examination, the FCC should reform the current contribution methodology now to assess broadband internet access service revenues.