This “latest and greatest” update may not be the greatest, but we do have some important updates to explain. As many of you know, the Healthcare Connect Fund program (HCF) provides the discounts for our services. We’re going to look at the source of HCF, the Universal Service Fund (USF). The USF supports all the Federal Communications Commission (FCC) programs including High Cost, Low Income, Rural Healthcare, Connected Care Pilot, and E-Rate. If you can keep the acronyms straight, you’re halfway there! The USF was established in 1934 with the Telecommunications Act to make sure everyone, particularly those in rural America, had access to telephones. Today the USF continues to make telecommunications discounts available, supporting all the FCC discount programs including High Cost, Low Income, Connected Care Pilot, E-Rate, and Rural Healthcare.
We’ll be reviewing two USF-related issues that we think you should know about, USF reform and a USF lawsuit that challenges the constitutionality of the program. USF reform is needed to have a stable and sustainable funding source for all the FCC discount programs. A solution is available and would be relatively easy to implement. However, the outcome of a pending lawsuit could negatively affect the stability of the USF.
Universal Service Fund (USF) Reform
Today, the fees that fund the USF discounts are based on reported end user (retail) telecommunications revenues of wireline and mobile providers, cable operators and others providing interconnected Voice over Internet Protocol (VoIP). Contributors are required to pay the assessment based on their reported revenues, and they typically pass those fees along to consumers and businesses. The FCC does not assess wholesale (provider-to-provider) service revenues, nor does it assess information services, retail fixed broadband internet access or retail mobile data services that provide internet access
The USF fee percentage, which has been as high as 33%, is expected to continue to increase due to a declining contribution base. The most dramatic decline in reported retail revenues has been for mobile services. Mobile voice declined 66% between 2010 and 2019; most mobile service revenues are attributed to data service, which is not assessed. Local service revenues, which include both traditional landline telephone service and interconnected VoIP, declined 36% over this period, while toll (long-distance) revenues declined 35%.
Meanwhile, revenues that aren’t assessed (such as broadband internet access) have grown dramatically, more than doubling in the last decade, from $173 billion to $361 billion. Service providers that bundle voice service with broadband internet access service are allocating only a small portion of the monthly rate to the assessable service (voice telephony). Reforming the current revenues-based system to include broadband internet access service (BIAS) 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%.
Where We Are Today
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.
The information above comes from the USForward Report Executive Summary, which was commissioned by SHLB. NCTNA supports the proposed fee assessment on BIAS revenues and will continue to work with SHLB to advocate for USF reform.
Consumer’s Research, communications provider Cause Based Commerce, and five individual consumers alleged in the Fifth Circuit that the Federal Communications Commission’s universal service contribution factor is an illegal delegation of congressional taxing authority to a private company. The lawsuit states the FCC’s approval of the universal service tax exceeds its statutory authority and violates the Constitution as well as other federal laws. . A best guess of lawyers familiar with the case is that the final ruling will occur in the Spring of 2023
Where We Are Today
NCTNA is an active member of the Schools, Health, & Libraries Broadband Coalition (SHLB) which is an advocacy group promoting broadband access for community anchor institutions like our healthcare organizations. SHLB has established a workgroup, which includes Dave Kirby and Tracy Olson from NCTNA, to discuss possible outcomes and any next steps that should be taken to secure funding for the programs supported by the USF. NCTNA will follow the lead of the SHLB workgroup and determine next steps and timing after their recommendation is completed. If Consumer’s Research wins this lawsuit, the existing source of funds for the Healthcare Connect Fund will no longer exist. One possible remedy is that funds would be appropriated through Congress. Or Congress may explicitly authorize the FCC to apply fees to selected telecommunications services to support USF. If this is the recommended route, we would work to draft that legislation and look for supporters. Let us know if you are interested in signing a letter of support in the future.
You can contact us at Info@NCTNA.org