FCC Begins Rulemaking to Establish Universal Service Cap

June 6, 2019 | by Andrew Regitsky

FCC Begins Rulemaking to Establish Universal Service Cap

No one can say the Republicans at the FCC are cowards. In an action that will bring tremendous criticism from Democrats, the media, and consumer advocates, the three Republican FCC commissioners have released a Notice of Proposed Rulemaking (NPRM) in Docket 06-122 to create an overall dollar cap for the four programs that make up the Universal Service Fund (USF). Industry comments are due 30 days after the NPRM appears in the Federal Register, probably by the end of the Summer.

The Universal Service Fund consists of four separate programs:

  1. Connect America Fund (CAF) - provides support for the deployment of broadband-capable networks in rural areas. The CAF helps make broadband—both fixed and mobile—available to homes, businesses, and community anchor institutions in areas that do not or would not otherwise have broadband. The annual CAF budget is $4.5 billion.
  2. Schools and Libraries Fund - called the E-Rate program, it provides discounts to schools and libraries to ensure affordable access to high-speed broadband and telecommunications necessary for digital learning. The annual budget is $4.06 billion.
  3. Rural Health Care (RHC) Program - provides funding to eligible healthcare providers for telecommunications and broadband services necessary for the provision of health care services. The annual budget is $477 million.
  4. Lifeline Program - provides subsidies for voice and broadband services to qualifying low-income households. The annual budget is $2.25 billion.

In the NPRM, the Commission notes that each of the four USF programs have “working budgets,” but there has never been an overall cap for the fund “holistically.” It states that:

A cap could promote meaningful consideration of spending decisions by the Commission, limit the contribution burden borne by ratepayers, provide regulatory and financial certainty, and promote efficiency, fairness, accountability, and sustainability of the USF programs. (NPRM, at para. 1).

In other words, the Commission believes that a cap could enable it to spend USF dollars more wisely.

We initiate this proceeding mindful of our obligation to safeguard the USF funds ultimately paid by ratepayers, and to ensure the funds are spent prudently and in a consistent manner across all programs. Although the creation of a topline budget will not eliminate the Commission’s ability to increase funding for a particular program, a cap would require us to expressly consider the consequences and tradeoffs of spending decisions for the overall fund, and more carefully evaluate how to efficiently and responsibly use USF financial resources. We take this action to preserve and advance universal service, to increase access to telecommunications services for all consumers at just, reasonable, and affordable rates, to meet our obligation to protect against Fund waste, and to ensure that the universal service programs are funded appropriately. (Id., at 3).

The agency requests the industry to respond to specific questions, including:

  • What should the overall USF cap be set at?
  • How should the cap change as inflation changes?
  • How should the cap be implemented?
  • How should expenditures be reduced if the cap is exceeded in a given year?
  • Should any of the programs in the fund be changed so they operate more efficiently?

In a highly unusual move, the two Democratic FCC commissioners immediately dissented from the release of the NPRM. Normally commissioners will dissent from an actual order and not a proposal made as part of a rulemaking. The fact that they have gone on record already, is a clear sign of the volatility of this proceeding.

As she does so often, Commissioner Jessica Rosenworcel perfectly encapsulated the dangers of this proceeding in her dissent.

This is a rulemaking that proposes to limit universal service efforts at the Federal Communications Commission. It is fundamentally inconsistent with this agency’s high-minded rhetoric about closing the digital divide. It is also at odds with our most basic statutory duty to promote and advance universal service. That’s because it suggests a course that could cut off broadband in rural areas, limit high-speed internet access in rural classrooms, shorten the reach of telehealth, and foreclose opportunity for those who need it most. Worse, it proposes unleashing a fight for support between connecting kids in schools and hooking up hospitals for telemedicine. I do not support an approach that fosters the universal service hunger games. I dissent.