Rural Telco Trade Group: Cable ISPs Need To Support USF Program

Feb 08, 2024

By Ted Hearn, Editor of Policyband

Washington, D.C., Feb. 8, 2024 – The Federal Communications Commission’s planned Net Neutrality rules include a financial break for broadband Internet Service Providers (ISPs). And that’s not sitting so well with a trade association for rural telephone companies that views the FCC's approach as nonsensical and discriminatory.

Under the FCC’s plan, cable ISPs would be classified as telecommunications service providers. Current law requires entities so classified to contribute to the $8.5 billion Universal Service Program (USF), which subsidizes broadband networks in rural high-cost areas and Internet access in school and libraries across the country

If the FCC’s proposed rules are adopted unchanged, cable ISPs would not be required to contribute to the USF under a temporary waiver that the agency calls forbearance.  

According to the Western Telecommunications Alliance (WTA) ­– which represents about 400 rural local exchange carriers (RLECs) – because the modern USF program is designed to support broadband deployment and access, “it makes no sense to exempt broadband services from USF contributions.”

USF derives its funding from a tax on the interstate and international end-user revenue of telecommunications carriers. These funding sources include wireline and wireless companies, and interconnected Voice over Internet Protocol (VoIP) providers. According to the FCC, 82 percent of USF contributors pass through their USF costs to customers, representing 40% of the program’s revenue.

WTA said in a Feb. 5 filing that the FCC needed to expand the USF contribution base to include cable ISPs rather than contain it with a forbearance policy of unknown duration.

“It appears to be unduly discriminatory to impose USF contributions upon other telecommunications service providers and their customers while exempting the broadband service providers and customers that benefit the most from current USF programs,” WTA said.

The FCC’s decision to forbear regarding cable ISPs was apparently tied to concerns about potential rate shock.

Last month, FCC Chair Jessica Rosenworcel said in a letter to Sen. Ben Ray Luján (D-N.M.) that although including broadband ISPs revenue would expand the USF contribution base from $33 billion today to $250 billion, it nevertheless would also “increase consumer broadband bills by $5.28-$17.96 per month.”

WTA said the FCC could address affordability issues by exempting low-income consumers. It also urged the agency to ask Congress to pass a law that would “impose USF contributions on the customer and/or advertising revenues of the large edge service providers that benefit substantially from broadband deployment and that impose major costs upon broadband networks.”

In her letter to Lujan, Rosenworcel said USF assessments on digital advertising would expand the contribution base by $250 billion and would have the smallest impact on consumers.

“This is because the nature of the digital advertising market makes it less likely that an assessment could be passed on to consumers, particularly in comparison to consumer-facing edge providers, such as streaming video, music, or gaming providers with subscription-based revenue models,” she said.