For Immediate Release
Contact: Carolyn Just, 703-351-2015, [email protected]
Arlington, Va. (May 7, 2020)—As national attention increasingly turns to improving connectivity in rural America, a paper commissioned by NTCA–The Rural Broadband Association examines assertions that broadening the base of contributions to the Universal Service Fund (USF), which is essential to promote the availability and affordability of critical communications services, would undermine broadband adoption and retention.
The analysis conducted by Michael Williams, Ph.D. and Wei Zhao, Ph.D. of Berkeley Research Group, LLC, explores from an economic perspective the effects of modifying and expanding the “contribution base”—the supply of financial resources for the USF—to include both voice and broadband connections. While the FCC has wisely updated the way universal service funds are distributed to orient them more toward support of both voice and broadband services, the contributions system that pays for the FCC’s mission-critical USF initiatives continues to rely precariously upon a dwindling pool of revenues from legacy services.
In particular, as it currently stands, despite the promotion of broadband representing a key universal service objective today, broadband is not included within the services that are in turn assessed to support the USF. As a result, the burden of supporting the broadband-focused USF falls disproportionately (and somewhat ironically) on consumers buying traditional telecommunications services like “plain old telephone service.” And, as more Americans migrate away from such services and toward broadband, the “contributions base” used to fund the USF continues to decline—placing an even greater inequitable strain on the remaining contributors and putting at potential risk the sustainability of the very programs that are doing the most to promote access to broadband now.
The analysis by Dr. Williams and Dr. Zhao proceeds from a survey of consumers to assess preferences when it comes to the procurement of communications services. After taking account of survey results and economic analysis of demand for broadband, the paper concludes that the impacts of including a USF-related contribution surcharge equal to a 1% increase in the price paid for broadband could reduce broadband demand by 0.08%. This would mean, for example, that for every 1,000 consumers spending $80 per month on broadband, an $0.80 USF contribution surcharge might cause one consumer at most to reduce his or her broadband purchase in some way. The paper also observes that this estimated potential reduction in broadband purchases does not take account of any potential gains in adoption realized and sustained as a result of programs supported by a more stable USF.
“Our nation depends upon policies that both advance and sustain critical communications services for all Americans, and for this reason, the long-term viability of the Universal Service Fund is essential,” said NTCA Chief Executive Officer Shirley Bloomfield. “Even as such great things are being accomplished leveraging the FCC’s universal service programs, the good work done to date could be at risk if we keep ‘kicking the can down the road’ on addressing the shaky foundation of an ever-escalating and volatile contributions mechanism. The economic analysis in this paper indicates that one of the barriers some have raised to more meaningful discussions about reform—that including broadband in the contributions base could suppress adoption—is in fact no concern at all. With a robust economic review confirming this is the case, NTCA hopes that we can now turn back to a discussion of the best means by which to ensure the viability of the FCC’s important universal service programs and the importance of ensuring that all those that make use of our nation’s networks contribute equitably to the cause of universal service.”