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Thursday, May 13, 2010

Universal Service Fund: Background and Options for Reform

Angele A. Gilroy
Specialist in Telecommunications Policy

The concept that all Americans should be able to afford access to the telecommunications network, commonly called the "universal service concept" can trace its origins back to the 1934 Communications Act. Since then, the preservation and advancement of universal service has been a basic tenet of federal communications policy, and Congress has historically played an active role in helping to preserve and advance universal service goals. The passage of the Telecommunications Act of 1996 (P.L. 104-104) not only codified the universal service concept, but also led to the establishment, in 1997, of a federal Universal Service Fund (USF or Fund) to meet the universal service objectives and principles contained in the 1996 Act. According to Fund administrators, from 1998 through end of year 2009, over $65.7 billion was distributed, or committed, by the USF, with all 50 states, the District of Columbia and all territories receiving some benefit. 

The Federal Communications Commission (FCC) is required to ensure that there be "specific, predictable and sufficient ... mechanisms to preserve and advance universal service." However, changes in telecommunications technology and the marketplace, while often leading to positive benefits for consumers and providers, have had a negative impact on the health and viability of the USF, as presently designed. These changes have led to a growing imbalance between the entities and revenue stream contributing to the fund and the growth in the entities and programs eligible to receive funding. The desire to expand access to broadband and address what some perceive as a "digital divide" has also placed focus on what role, if any, the USF should take to address this issue. The FCC's national broadband plan, Connecting America: The National Broadband Plan, calls for a major restructuring of the USF to enable it to take a major role in achieving the goal of nationwide broadband access and adoption. 

There is a growing consensus among policy makers, including some in Congress, that significant action is needed not only to ensure the viability and stability of the USF, but also to address the numerous issues surrounding its appropriate role in a changing marketplace. How this concept should be defined, how these policies should be funded, who should receive the funding, and how to ensure proper management and oversight of the Fund are among the issues framing the debate. 

The current policy debate has focused on five concerns: the scope of the program; who should contribute and what methodology should be used to fund the program; eligibility criteria for benefits; concerns over possible program fraud, waste, and abuse; and the impact of the Antideficiency Act (ADA) on the USF. 

The House Subcommittee on Communications, Technology, and the Internet held a hearing, March 2009, on reforming the USF High Cost Fund as well as a November 17, 2009, hearing on draft legislation addressing comprehensive USF reform. The House Communications Subcommittee and the Senate Commerce Committee are among the Committees that have held hearings on the FCC's national broadband plan. Legislation (H.R. 3646, H.R. 3101, H.R. 4619, S. 2879) to expand the role of the USF has been introduced. The FY2010 Consolidated Appropriations Act, which was enacted into law (P.L. 111-117) contained a provision to extend the USF ADA exemption until December 31, 2010. S. 348, introduced January 29, 2009, by Senate Commerce Committee Chairman Rockefeller, and H.R. 2135, introduced April 28, 2009, by Representative Rehberg, provide for a permanent ADA exemption for the USF.

Date of Report: May 6, 2010
Number of Pages:32
Order Number:RL33979
Price: $29.95

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