Closing the digital divide requires a coalition on reform of the Universal Service Fund

COVID-19 has exacerbated the digital “haves” and “have nots” through remote work, learning, and telehealth, yet our government’s main agency to support greater access and adoption is inadequately funded and functioned to meet this moment. AT&T recently published a blogpost lamenting the rise in contributions to the Universal Service Fund (USF) and arguing for funding reform. The USF funds a series of subsidy programs aimed at ameliorating the digital divide. It is bankrolled by contributions from telecommunication companies in the form of a levy on telephone bills. That amount has risen to 26 percent, up from 14 percent a decade ago. This means that 26 percent of profits earned on interstate and international phone calls goes to the USF. These contributions are passed down to consumers’ bills as an additional surcharge.

AT&T is not wrong to argue for “USF reform.” We levy an increasingly-outdated communication medium — telephony — to subsidize deployment of broadband technologies and subscriptions. Worse, a decline in landline use means a decline in USF funds, necessitating a rise in contribution percentages. The equation is untenable, and reform is needed.

At the same time AT&T cannot shirk its obligations and should contribute to build partners for an “all of the above” strategy to fund and support the USF. We need to build a coalition around reform that puts communities and stakeholders at the forefront. A connected America is too important to leave to the largest corporations alone.

USF contributions go to supporting four key programs managed by the Universal Service Administrative Company:

• Connect America Fund: $5 billion — Funds broadband deployment in rural areas. Will be replaced by the $20.4 billion Rural Digital Opportunity Fund next year;
• E-Rate: $1.98 billion — Subsidizes connectivity for schools and libraries. In the midst of COVID-19 participants have petitioned the FCC to expand the eligible expenses for E-Rate to include hotspots and wi-fi expansion to parking lots and neighborhoods;
• Lifeline: $981 million — Subsidizes voice or broadband subscriptions for low income people through a discount of $9.25. Jonathan Sallet of the Benton Institute argues that Lifeline needs to be increased to at least $50/month to offset the entirety of a monthly broadband subscription;
• Rural Health: $251 million — Subsidizes connectivity for rural health centers. It received a much-needed capital injection when the CARES Act provided an additional $200 million.

The COVID-19 pandemic has painfully demonstrated the extent of the digital divide, and in turn, has demonstrated how the USF is woefully underfunded and its programs too antiquated to meet today’s needs. In its op-ed, AT&T argued the USF program is fatally flawed and that only Congress is capable of marshaling the necessary funds through appropriation.

While proposals have been made in Congress to allocate up to $100 billion for broadband deployment and adoption, the USF should not be abandoned nor should we allow private entities to abandon their responsibilities towards the un- and under-connected. Congressional appropriations will serve capital expenses, while a recurring operating expense fund remains crucial for the day-to-day work of rural providers and the lives of low-income communities. We can’t let high bandwidth companies off the hook for supporting broadband deployment.

Suggestions for USF funding reform include shifting the fund towards broadband services, rather that voice telephony, and a levy on high-bandwidth platforms like video streaming services. This is akin to cultural production requirements by Canada and the EU on streaming platforms like Netflix. Another approach could be a tax on digital technologies like smartphones, tablets, and laptops. The important takeaway is that we must act to both save and reform the USF. In doing so, all options should be considered and debated.

COVID-19 has demonstrated how important universal broadband is to the future of a healthy and stable America. Increasingly, we will be asked to work, study and shop from home — activities only possible with “high performance broadband.” The USF will continue to play a decisive role in the digital divide. Its fate is too important to leave to the machinations of “big telco” who all too often cherry pick the best locations to serve — and, even then, have failed to deliver.

We must develop a coalition of stakeholders to develop a plan that will actually meet the goal of “universal service.” This includes regulators, USF contributing companies, receiving companies, and the rural and marginalized communities USF is designed to serve. Broadband, after all, is not about technology, money and policy: Broadband is about people.

Christopher Ali, is an Associate Professor in the Department of Media Studies at the University of Virginia and Faculty Fellow with the Benton Institute for Broadband & Society.

Harin Contractor was the former Economic Policy Advisor to the U.S. Secretary of Labor. He also founded the Data Analytics team at the Universal Service Administrative Company (USAC).