Pros and Cons of Funding USF Through Appropriations
There is a principled debate about the modernization of Universal Service, a foundational principle in telecommunications policy designed to ensure that all people, regardless of location or income, have access to essential communications services, like telephone and broadband, at reasonable and affordable rates. The Universal Service Fund (USF), established in 1996 in the US, is administered by the Federal Communications Commission and collects revenue from legacy telephony providers to fund internet connectivity in rural areas, schools, libraries, low-income households, and for healthcare providers. At current rates, the fund will likely exhaust before the end of the decade.
Some suggest that USF should be funded through the appropriations process in Congress, the legal authorizations to allow federal agencies to spend money from the government budget for specific programs or activities. This post examines arguments for and against this solution.
| Pros | Cons |
| Congressional Control and Oversight Congressional appropriations would make USF funding part of the annual federal budget process, subject to public debate, hearings, and votes. Increases transparency and accountability over how funds are allocated and spent. | Uncertainty and politicization Investment in networks occurs over many years versus the 2-year Congressional cycle, a mismatched time horizon. Competing budget priorities could lead to reduced funding, cutting access for low-income or rural communities. |
| Reduce cost burden on telephone customers The USF assessment–borne largely by poor and elderly users—would end. This achieves the statutory and social goal of affordability of connectivity. | Corporate welfare for largest internet beneficiaries The top 8 internet brands account for as much as 80% of total US internet traffic. These companies earn $200 billion annually from USF connections but don’t contribute to the fund. They face no discipline to use networks responsibly. |
| Lower rate of assessment The rate of contribution would fall significantly, from 40% on current parties to 1% or less. | Cost distortion spread across all taxpaying households Already two-thirds of general US revenues are raised from households, which would bear a new financial distortion on top of existing burdens. The traffic generators which control internet costs are shielded from responsibility, a government failure to incorporate market based models to address the shortfall. |
For more information, check out Roslyn’s analysis of USF and broadband economics.